The most important thing to know about the DHS Press Release and press conference of August 2, 2011 on Initiatives to Promote Startup Enterprises and Spur Job Creation, the published USCIS Fact Sheet of the same title of August 3, 2011, the USCIS FAQ Regarding Entrepreneurs and the Employment-Based Second Preference, and the related Entrepreneurs Stakeholder Engagement conference call of August 11, is that all these initiatives are largely window-dressing, despite excited coverage in the Wall Street Journal. They represent no substantive changes in the Service’s occasionally contorted interpretations of the law.
For all the lip service to the Administration’s laudable goals of helping entrepreneurs spur the growth of new businesses, for now, USCIS is not changing any of its interpretations of law. The Service is not in any way relaxing its insistence on the US sponsoring company having to demonstrate a “right to control” the foreign worker, and offers no policy guidance loosening the Service’s unduly restrictive definition of who can be considered an “employee” under the Immigration & Nationality Act, per a Donald Neufeld memorandum of January 8, 2010, (the Neufeld memo) – which does not have the force of law, nor even regulation – nor will they instruct officers to restrict that memo and its definitions to the H1B context. There is no policy guidance loosening the Service’s narrow, literal-minded geographic reading of the phrase “national in scope,” with respect to job creation as a benefit to the United States under the EB-2 National Interest Waiver. There is no promise of a path for E-2 Treaty Investors to transition to permanent residence. In fact, these initiatives for entrepreneurs herald no real increase in the availability of any type of visas for employee-owners or owner-directors, either of foreign-owned startups under the H-1B or O-1 visa category, or E-2, or EB-2 green cards for entrepreneurs under the National Interest Waiver, or for director-owners of privately held multinational companies under the L-1A or multinational manager or executive visas.
The attitude embodied in the January 2010 Neufeld memo is an obsession with a “right to control” the H1B worker, a single factor weighted far more heavily than all other factors combined. It has prompted a relentless drive among adjudicators to pierce the corporate veil at will, and to start by assuming that all owner-beneficiary scenarios are somehow “fraudulent.” Its treatment of any employee with an ownership stake as ‘not a real employee’ is deeply damaging to all manner of entrepreneurial businesses seeking visa benefits for their workers.
The Neufeld memo on its face does not apply to the O-1 visa, nor to L-1 or multinational manager immigrant visas – those categories were never intended to be unavailable to owners who happen to be employees of the US business – but the Service has become enamored of applying its new, narrow definition of “employee” across all visa categories. To date, USCIS offers no concrete authority for combating persistent misapplication of the “right to control” standard at the individual case level, except for a non-binding suggestion that it may be possible for an owner-employee to demonstrate “control” over his or her employment by a Board of Directors.
The Neufeld memo has spread throughout all areas of employment-based visa adjudications, encouraging adjudicators to zealously apply a restrictive interpretation of the “employer-employee” relationship drawn from the Darden  and Clackamas  cases. These cases on which the Service relies for its definition of “employee” did not involve immigration law at all; they related to the definitions of “employee” with regard to eligibility for ERISA pension benefits and to applicability of access requirements under the Americans with Disabilities Act. In relying on those cherry-picked Supreme court decisions, USCIS elected to ignore an array of long-standing precedents providing guidance on the definitions of the employer-employee relationship that were specific to immigration law, and which had been followed by the agency for decades , as well as more recent Supreme Court case law . The legal deficiencies in the Neufeld memo and its strained definition of “employee” are numerous, but they are laid out in magnificent detail in the American Immigration Lawyers Association memo to the director and chief counsel of USCIS of January 26, 2010, so I will not attempt to recreate or paraphrase those arguments here (the AILA memo is 24 pages long). This paragraph is intended as a mere CliffsNotes®-style summary of some major flaws in the Neufeld memo, for those unfamiliar with its contents and AILA’s response.
When asked during the August 11 Stakeholder Engagement call on Entrepreneurs if there will be any attempt to clarify or limit application of the Neufeld memo to H1B adjudications, Service representatives ignored the question and offered no response. However, during the California Service Center Stakeholder Engagement call of Wednesday, August 10, USCIS representatives explicitly said that the Entrepreneur initiatives do not represent any substantive changes in USCIS interpretation of the law, regulations, and applicable legal standards. They intend to stand by their current interpretation of who can be an “employer” under the Immigration & Nationality Act, tacitly acknowledging that they have no plans to scale back inappropriate mission creep of the Neufeld memo into the realm of O-1s, L-1s, and beyond.
The definition of “employee” urged by the Neufeld memo is based on a factually false assumption that owner-directors seek to start a business in the US for the main purpose of getting themselves a visa, rather than to realize a business goal. It contradicts decades of specific, on-point guidance in precedent cases acknowledging the difference between a company and an individual; but most importantly, it seeks to disallow visa eligibility for entrepreneurs on every scale. The notion that if a worker has an ownership stake in a business, then any visa petition by that business on the worker’s behalf is a fraud, is not just an erroneous premise: it is inherently hostile to a broad array of new and start-up phase businesses, small businesses, privately-held multinationals, companies with partnership or employee-shareholder models for growth, and any company in which a foreign national has a hand in funding, starting or expanding the US business. As a matter of visa policy, this is economic suicide.
At the very moment in our history when the U.S. economy most desperately needs the services of those individuals willing to put their own money, as well as their time, effort, skills and intellectual capital, into starting and growing US companies, USCIS adjudicators are dreaming up an ever-expanding universe of reasons to say ‘no’ based on the size and age of a business and on the “right to control” the foreign worker. USCIS agency leadership has admitted it has no plans to rein them in, and does not even intend to issue guidance explicitly limiting application of the Neufeld memo or its definition of who is an “employee” to H-1B adjudications, which was its ostensible purpose when published. This makes their well-publicized “entrepreneur” initiatives ring hollow.
So, what could USCIS do to offer concrete improvements? Without making any changes to the statute or the regulations, USCIS could enhance visa opportunities for entrepreneurs and owner-directors by retracting some of its more onerous and tortured interpretations of law. Here are a few good places to start:
A) withdraw the Neufeld memo,
Or, at the very least,
B) issue an H-1B policy memo and officer retraining, limiting application of the Neufeld memo and the “right to control” definition of an employer-employee relationship to H-1B adjudications, and clarify that this narrow definition does not apply to O-1s, to L-1s, or to multinational managers;
C) issue an EB-2 policy memo and officer retraining on the second prong of NYSDOT for National Interest Waivers, noting that creation of a substantial number of jobs for US workers in even one location could be deemed to offer significant prospective benefit to national interests of the United States, if, for example, those jobs are in manufacturing, or in industries that have suffered significant layoffs in the past two years in the state or region where the business is located, or in industries where the US has lost significant market share to foreign competitors. Each of those provide a real, substantial benefit to our nation that could be documented with quantitative evidence.
** UPDATE: At the USCIS Stakeholder Engagement teleconference on August 23, discussing I-140 employment-based immigrant visa petitions, we learned a number of discouraging things about just how much they are not changing the status quo, particularly with respect to owner-beneficiaries being sponsored by companies in the United States.
Service representatives on the call offered no legal justification for the sweeping pattern of denials of EB-1(3) Multinational Manager/Executive petitions wherever the manager or executive has an ownership interest of 51% or more, parroting past statements that there must be a valid job offer, and thus tacitly asserting the Service’s position that no majority owner of a company may ever be considered an “employee” nor have a bona fide job offer from the U.S. company. They persist in totally ignoring the 12 equally-weighted factors for determining whether an employer-employee relationship exists that were laid out by the Supreme Court in Reid. They also made it clear that no changes at all have been made with respect to officer training or instructions for review of National Interest Waiver petitions in cases involving entrepreneurs and business owners, and refused to give any substantive response when asked whether, and under what circumstances, the creation of jobs in one location could be deemed to be a benefit that might be deemed sufficiently “national in scope.”
 Nationwide Mutual Insurance Company v. Darden, 503 U.S. 318 (1992)
 Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003)
 Matter of Aphrodite Investments Limited, 17 I&N Dec. 530 (Comm. 1980), Matter of Allan Gee, Inc., 17 I&N Dec. 296 (Acting Reg. Comm. 1979), and Matter of M–, 8 I&N Dec. 24 (BIA 1958, AG 1958)
 Raymond D. Yates, M.D., P.C. Profit Sharing Plan v. Hendon, 541 U.S. 1, 124 S. Ct. 1330 (2004)