In our recent e-mail magazine (which can be viewed at www.visaserve.com) it was reported that Congress passed the Omnibus Appropriations Bill for Fiscal Year 2005. On December 8th, 2004, President Bush signed the consolidated spending package containing numerous business immigration-related measures. The most salient of the provisions of the Bill make significant changes to the present H-1B and the L nonimmigrant visa categories.

The provisions of the law offer new opportunities and considerations for strategic immigrant (“green card”) and nonimmigrant planning for HR Professionals, House Counsel and other Business Professionals responsible for the immigration or recruiting function in various business organizations.

The following is a non-exhaustive overview of the provisions of the new law. The information provided in this overview is not offered as either legal advice or as our firm’s legal opinion.

New Considerations For H-1B Nonimmigrant Visa Processing:

A. Reinstatement of the Department of Labor Training Fee with Modifications: The new law sets forth additional fees for employers beyond the presently designated fee of $185.00 which is the filing fee for the Petition for a Nonimmigrant Worker (Form I-129).

-Reinstatement and increase of the additional fee imposed by the American Competitiveness and Workforce Improvement Act of 1998 (“ACWIA”). (The ACWIA fee sunset on October 1, 2003).

-The Omnibus Appropriations Act reinstates the Department of Labor (“DOL”) Training Fee originally implemented pursuant to ACWIA. The fee is raised to $1,500.00.

-Employers that employ no more than 25 full-time employees (determined by taking into account an organization’s affiliates or subsidiaries) shall be able to submit a reduced DOL Training Fee in the amount of $750.

-Under ACWIA, there were certain types of petitions that were exempt from the DOL Training Fee. Pursuant to the provisions of the new law, it appears that those exemptions are still in effect and that if the exemption applies the employer need not pay the new $1,500.00/$750.00 fee.

-Employers who are exempt from the $1,500.00 or $750.00 Training Fee are: institutions of higher education, primary or secondary education institutions, nonprofit entities related to an institution of higher education, nonprofit research organizations, nonprofit entities engaging in an established curriculum-related clinical training, and governmental research organizations. Also exempt from the new training fees are second or subsequent requests for extensions of stay filed by the same employer (regardless of whether the employer was or would be required to pay the training fee for the initial petition or first extension), and amended petitions not containing a request for an extension of stay or to correct a CIS error.

-The new $1,500.00 and $750.00 fee appears to apply to all petitions filed with the CIS after December 8, 2004.

B. Establishment of a New Fraud Fee: The new law creates a Fraud Prevention and Detection Fee of $500.00 to help the government finance fraud investigations.

-Pursuant to the terms of the new law, the $500.00 Fraud Fee must be paid by petitioners seeking either an initial or a transfer of either an H-1B or an L nonimmigrant visa.

-According to the provisions of the new law, any petition to amend or extend made for a beneficiary for the same organization is exempt from the Fraud Fee.

-According to the provisions of the new law, the Fraud Fee applies to petitions filed with the CIS either on, or after, March 8, 2005.

C. There are new H-1B Cap Considerations under the new law: The provisions of the new law create new and important exemptions from the annual H-1B cap (established at 65,000 by IMMACT ’90).

-The new law makes available an additional 20,000 H-1B nonimmigrant visas on a fiscal year basis for beneficiaries who have earned a Master’s Degree (or a higher degree) from a U.S. institution of higher education.

-According to the new law, once these newly prescribed 20,000 visas have been used, the CIS is required to count additional cases against the cap for the fiscal year.

-The new law permits the CIS to accept petitions on behalf of up to 20,000 beneficiaries who have earned a Master’s Degree (or higher) from a U.S. institution of higher education for FY 2005.

New Considerations For L-1 Nonimmigrant Visa Processing:

A. Establishment of a New Fraud Fee: The new law creates a Fraud Prevention and Detection Fee of $500.00 to help the government to finance fraud investigations.

-Pursuant to the terms of the new law, the $500.00 Fraud Fee must be paid by petitioners seeking either an initial or a transfer of either an H-1B or an L nonimmigrant visa.

-According to the provisions of the new law, any petition to amend or extend made for a beneficiary for the same organization is exempt from the Fraud Fee.

-According to the provisions of the new law, the Fraud Fee applies to petitions filed with the CIS either on, or after, March 8, 2005.

B. Reinstatement of one year of work for qualification under L-1A/L-1B.

-Pursuant to the new law, L-1 temporary workers must have worked for a period of one full year outside the United States for an employer with a qualifying relationship to the petitioning employer.

-This change applies to petitions for initial L-1 classification filed with USCIS on or after June 6, 2005.
B. Changes/Modifications for L-1B “specialized knowledge” worksite placement.

-In response to numerous complaints, the new law mandates that L-1B temporary workers can no longer work primarily at a worksite other than with the petitioning employer if the work will be “controlled and supervised” by a different employer or if the offsite arrangement is essentially to provide labor for hire, rather than service related to the specialized knowledge of the petitioning employer.

-This provision will apply to all L-1B petitions filed with USCIS on or after June 6, 2005

-This new provision of the law shall apply to all extensions and amendments for individuals currently in L-1 status.

New Considerations For DOL Regulatory and CIS Nonimmigrant Compliance:

The provisions of the new law re-establish the audit powers of the DOL in connection with previously designated investigations concerning violations of the law by employers under ACWIA. The new law permits the DOL to investigate non-compliant employers under a host of circumstances. Employers are reminded that it is unlawful to retaliate against employees who complain about employer’s violations of the laws.

New Considerations For H-1B Prevailing Wage Levels:

Of particular interest are the changes that the new law makes to the prevailing wage rules and regulations. Beginning on March 8, 2005, the salary offered on all H-1B petitions must be 100% of the prevailing wage or the actual wage, whichever is higher. Prior to the new law, employers could pay H-1B workers 95% of the prevailing wage. In an improvement over the way the DOL calculates the prevailing wage, new rules require the DOL to revise its wage surveys to reflect at least four levels of wages commensurate with experience, education and level of supervision, rather than the two levels currently used.

The foregoing information is very general in nature as there are presently no regulations that interpret the new law. For additional information about the new law or its potential implications, please feel free to contact us at info@visaserve.com.

The dot-coms’ demise has filled the news recently. Every day brings new reports of layoffs, CEO resignations and, inevitably, bankruptcies and liquidations.

Those who never forgot that profits, a positive bottom line and a business plan really do matter may simply shrug, “Too bad!” Perhaps it’s as natural to dance on the hoods of repossessed Porsches of twenty-something former paper millionaires as for warriors to dance on their enemies’ graves.

But what if that failing tech firm is your customer? Before explaining to your banker how you plan to collect your receivables, let’s review a few guidelines for doing business in troubled times.

Tech firm or not, the first rule is simple: trade creditors lose. According to a prominent bankruptcy, attorney, “The trade creditor should take whatever money he can get, whenever he can get it.”

In a bankruptcy, unpaid supplier bills get paid only if cash is left - after paying taxes, secured lenders, and (to a limited amount) employees. Only the owners do worse.

Diligent collections in the months before bankruptcy may even be worthless. Payments on pre-bankruptcy receivables may have to be paid back to the court, under the rules of “preferences”. Creditors who got paid recently can only keep what they would have gotten in a fair division of remaining assets.

Unfortunately, failing tech firms often have few assets that can be sold for cash to pay bills. Out of date computers often have only salvage value, and rapidly emerging privacy concerns may prevent any sale of customer data.

Perhaps old-fashioned receivables management - cutting off credit and stopping shipments - offers the best protection against new economy risks . Just don’t allow more credit than you are willing to write off.

Of course, COD always remains another option. There’s no law against discriminating against those who don’t pay bills, and “deadbeat” isn’t a protected class like race, age or sex. Some utilities are even demanding large security deposits from tech firms, rather than gamble by financing new high-volume facilities for customers with a life expectancy equal only to their current cash balance.

Yet none of these desperate measures builds long-term customer relationships. Nothing creates loyalty like standing behind a client in a crisis.

Fortunately, the law helps vendors keep doing business. To encourage credit to struggling firms, the right of “reclamation” lets sellers demand back unpaid goods shipped immediately before bankruptcy.

However, swift action is critical. Inventory gets used quickly, particularly in today’s “just in time” tech economy. Only a few days’ shipments can be stopped, so the quicker you act the more inventory you can reclaim.
However, reclamation isn’t a solution, only a last-chance at cutting losses. Reclamation also doesn’t defeat the bank lender, and doesn’t help a service provider, a more common tech vendor.

Instead, protect yourself before a bankruptcy. Converting a conventional trade account into a secured line of credit takes little work. Also, first-lien bank lenders will often accept second position behind new credit - from someone else - to keep a troubled business afloat.

Yet don’t be fooled into over-extending credit by the often-illusory security of a UCC-1 filing. New economy receivables may yield little if your customer’s customers are themselves in trouble, and lenders may not have the expertise to properly market or service high-tech inventory.

Perhaps the best advice on doing business with the troubled tech firm is simply to make the best of each situation. Sophisticated creditors have long known that a voluntary, negotiated workout usually provides the greatest recovery from a failing company. The cost and delay of formal bankruptcy make it very expensive to go broke, for both debtor and creditor.

Even if the customer fails, many firms have found opportunities in buying up inventory or sophisticated computer systems at deep discounts. Even with today’s privacy concerns, customer lists and marketing information may still be very valuable assets.

Helping a struggling customer through temporarily difficult times can build lifetime loyalty for those with the entrepreneurial spirit - and knowledge of the law - to brave the added risks of the techno-bankruptcy.

Copyright 2001 Stanley P. Jaskiewicz, Esquire
As a Member in the Business Law Department, Stanley P. Jaskiewicz assists and advises privately-held and family-held businesses on a wide range of legal matters, including contracts law, secured lending and negotiated acquisitions, Internet and technology law, corporate governance, intellectual property, regulatory counseling , fine arts law and foreign law. Well-respected for his knowledge of corporate law and regulatory affairs, Mr. Jaskiewicz has published articles in journals such as the UCC Bulletin, Trusts and Estates, American Banker, The Practical Real Estate Lawyer, Entrepreneurial Edge, Philadelphia and South Jersey Small Business Advisory, Focus, The Legal Intelligencer, Small Business News Philadelphia, and Lawyers Digest. He also publishes monthly columns on Internet and Technology law in the Eastern Pennsylvania Business Journal and ADV. Advertising in the Delaware Valley. Mr. Jaskiewicz frequently speaks to client and trade groups and continuing legal education classes on current topics of interest.

Article written based on California Law

As small business owners are well aware, we live in a time where anyone who feels that they have been wronged files a lawsuit. Now, more than ever, it is important that small businesses examine their options to determine the correct type of business entity in which to operate. Choosing the right type of business type can save your home and other personal assets being at risk if you are named in a business-related lawsuit.

Sole proprietorship

Most individual owners of small businesses operate what is called a sole proprietorship. For example: George, a printer, opens George’s Print Shop. This is the cheapest way to operate with no special state filing requirements to start the business. The major problem with operating as a sole proprietorship is, of course, the personal vulnerability of the owner’s assets.

Running as a sole proprietorship means that George, the owner, is personally liable for any and all debts and claims made against George’s Print Shop. Personal liability is something to be steadfastly avoided if possible. It is better to do avoid the potential for personal liability before any lawsuits have been filed against a business.

Partnership

A partnership is where two or more people operate a business in concert with a common goal, e.g. George and Fred, open George and Fred’s Print Shop. The partnership differs from the sole proprietorship in that there is more than one person that owns and is responsible for the business.

There are tax advantages to using a partnership in that income and losses of the partnership are generally passed through to the partners’ tax returns directly. However, a partnership carries the same potential for personal liability of each partner as a sole proprietorship, i.e., personal assets are at risk.

An additional potential problem is that each partner can bind the partnership and other partner(s) to contracts. Thus, a partnership carries the risk that your partner can put your personal assets at risk. If the print shop fails, both George and Fred’s personal assets are at risk for creditors to use to satisfy debts owed by George and Fred’s Print Shop. It is very important before entering into a partnership that you know AND trust your partner(s).

Limited partnership

Another type of partnership is called a “limited partnership”. A limited partnership has at least one “general partner” with full personal liability for all partnership debts. However, the limited partnership also has “limited partners” who have liability and participation in the business limited to their investment in the partnership.

Corporation

A Corporation is a separate entity such as George and Fred’s Print Shop, Inc. Use of a corporation limits the liability of all of the owners (stockholders) of the corporation. Provided the corporation is set up correctly and initially has adequate capitalization and maintains the separateness of the corporate entity there is no personal liability for the stockholders.

Formation of a corporation is not nearly as simple as with a partnership. There are specific filings that must be made with the State and certain corporate formalities that must be maintained in order to preserve the corporate status and limited liability. Additionally, a corporation is more expensive since yearly fees and taxes must be paid.

The major advantage to the corporate entity is, of course, its limited liability. With a limited partnership, only the general partner would still be liable for the damages to the injured party. In a corporation, generally only the corporation is liable, not the officers, directors or shareholders.

Limited Liability Company (LLC)

An LLC is a hybrid type of entity that has characteristics of both partnerships and corporations. An LLC has the “pass through” income and loss treatment of partnerships. However, an LLC also has liability limitations of corporations. An LLC can have fewer formal requirements such as regular meetings. However, the LLC, like the corporation has to pay yearly fees and taxes to the State making it more expensive than a partnership or sole proprietorship.

The LLC and small closely held corporations are typically two entities that have similar characteristics that should seriously be considered by the small business owner. Knowing what type of entity to choose to do business under is a very important decision for the small business owner. Most small businesses should consult with an attorney before making the decision on how to operate. However, speaking with an attorney to discuss the available options is very important.

Despite what most high-tech employers think, California courts are extremely reluctant to enforce a non-compete agreement that an employee signs as a condition of his/her employment.

California Business and Professions Code Section 16600 provides that subject to certain limited exceptions “every contract by which anyone is restrained from engaging in a lawful profession, trade or business of any kind is to that extent void.” Thus, the general rule is that a non-compete agreement is void as a matter of law and California courts will not enforce it. The reason is a public policy against contracts preventing people from earning a living.

A non-compete agreement IS enforceable under certain, limited conditions

In determining whether an exception to non-compete agreements being void the California courts apply a balancing test with the courts being willing to uphold reasonable limited restrictions.

Exceptions

California law provides for certain limited exceptions to the rule that non-compete agreements are void. California Business and Professions Code Section 16601 provides that a person who sells substantially all of his/her interest in a company or all the assets thereof may have a valid non-compete agreement that will be enforced by California courts. The statute does not permit a non-compete agreement where the shareholder sells less than substantially all of his shares. Thus, where an employee signs an agreement not to compete against his/her employer after the employment has ceased, there is no sale of his/her ownership interest in the company and a non-compete agreement will not be enforceable.

Limited scope in order for the non-compete agreement to be valid.

Despite the fact that Business and Professions Code Section 16601 permits non-compete agreements, there are still other requirements in order for such a non-compete agreement to be valid. In order to be valid, the non-compete agreement must, in addition to being part of a sale of substantially all of the person’s interest in the company, be limited in terms of both time and geography.

Time Limitation

Since there is a general policy against preventing a person from earning a living, the Courts are reluctant to uphold these agreements in general. Where a non-compete agreement fits within the exception of the sale of substantially all of a person’s interest in the company, there still must be a limitation on the length of time that the non-compete agreement is valid. If the non-compete agreement provides that the seller will not compete with the purchaser for 50 years it is almost certain that California courts will void such an agreement as being too great a limitation on the seller’s ability to earn a living.

California courts generally permit non-compete agreements for only relatively short-term duration, usually not to exceed two to three years. A non-compete agreement with a two to three year limitation on competition is likely to be enforceable. Any longer period of time and the courts will look with a skeptical eye towards enforcement. Here too, however, there may be circumstances that justify a longer term. Consultation with an attorney in this area is essential to drafting an enforceable non-compete agreement.

Geographical limitation

The limitation on competition must also be restricted by geographical area. Whether a geographical limitation is reasonable will depend upon the particular facts involved. There are some basic guidelines to determining whether a non-compete agreement will be enforceable. However, an attorney should be contacted to review and properly research your particular case.

Let’s look at an example: If I sell an Italian Restaurant in Moorpark and sign an agreement not to compete with the Restaurant, the non-compete agreement must have a reasonable limitation in the geographic area in which I am agreeing not to compete.

In other words, if the agreement provides that I cannot set up an Italian restaurant in Ventura County, California courts are likely to enforce this non-compete agreement since it has a reasonable geographic limitation on competition. If, on the other hand, the agreement provides that I cannot compete against my Moorpark restaurant anywhere in the United States, the courts are unlikely enforce such a non-compete agreement as being overbroad and an unreasonable restraint on trade.

However, if I sold a chain of Italian restaurants that operated throughout most of the major cities in the United States, it is much more likely that the courts would uphold such a non-compete agreement. The idea being that a person that purchases a business will only do so if the person that they are buying from cannot open up a new competing business across the street.

The Internet and the New Economy

The rise of popularity of the Internet and b2b (business-to-business) commerce has contributed to a worldwide economy. Businesses now sell products and services exclusively over the Internet. Thus, when a person sells their business the question of geographical limitations on non-compete agreements is a more open question.

The courts can now enforce non-compete agreements on a much larger geographical basis since sales and income can be generated over the Internet worldwide. Thus, non-compete agreements relating to Internet commerce and large geographical areas are increasingly likely to be enforced by the courts.

Non-compete agreements while employed are valid.

It is important to note that while only post-employment non-compete agreements are void, non-compete agreements during employment are quite enforceable. This is true for several reasons. Business and Professions Code 16600 applies only to post-employment non-compete agreements.

Additionally, every employee owes to his/her employer a duty of loyalty. If an employee goes into competition with the employer while continuing to be employed by that employer is likely to be in violation of his/her duty of loyalty. Further, if the employee is using any information obtain from his employer for the employer’s competitor, both the employee AND the competitor may have liability for unfair competition/unfair trade practices.

There are too many legal pitfalls for the unwary. Therefore, it is vitally important that a business consult with an attorney when hiring and when purchasing or selling a business.