Introduction to the Effect of Modular Container Systems on Labor Certification

In 1991, the Board of Alien Labor Certification Appeals (BALCA) decided an important case titled Matter of Modular Container Systems Inc [PDF version].1 The case deals primarily with situations where a petitioner for an employment visa is seeking labor certification [see category] for a person with a significant stake in the petitioner or a family member of an owner or shareholder of the petitioner. These situations call into question whether labor certification can be granted, both because labor certification cannot be granted for self-employment and because there must have been a bona fide job offer for U.S. workers in order for labor certification to be granted. BALCA created a test Modular Container Systems for adjudicators to apply in determining whether an individual labor certification application with one of these petitioner-beneficiary relationships is approvable.

The rigorous standards set forth in Modular Container Systems gained widespread acceptance among immigration adjudicators since the decision was rendered, and its approach was subsequently codified in Department of Labor (DOL) regulations [PDF version].2 The test established in Modular Container Systems limits the utility of employment-based immigrant visa categories [see category] that require labor certification for investors [see article], entrepreneurs, and any beneficiary of an employment-based petition who either has at least a significant ownership stake in the petitioner or a particularly close (generally family-based) relationship with the petitioner. This article will discuss the effect of Modular Container Systems on labor certification adjudications.

The Totality of the Circumstances Test in Modular Container Systems

Modular Container Systems established that the “totality of the circumstances” should be examined in determining whether a job was clearly open to U.S. workers prior to the filing of the petition. BALCA created a non-exhaustive list of factors that immigration adjudicators should consider.

Whether the alien:

is in the position to control or influence hiring decisions regarding the job for which labor certification is sought;
is related to the corporate directors, officers, or employees;
was an incorporator or founder of the company;
has an ownership interest in the company;
is on the board of directors of the company;
is one of a small number of employees;
has qualifications for the job that are identical to specialized or unusual job duties and requirements stated in the labor certification application; and
is so inseparable from the sponsoring employer because of his or her pervasive presence and personal attributes that the employer would be unlikely to continue in operation without the alien.

BALCA adds that this “totality of the circumstances” standard includes a consideration of:

the employer’s level of compliance and good faith processing of the claim.

Furthermore, BALCA stated explicitly that the business cannot have been established for the sole purpose of obtaining immigration status for the alien (i.e., a “sham business” or “shell business”).3

These factors, both individually and collectively, point toward ascertaining whether the alien’s relationship to the company renders it improbable that the job was ever open to U.S. workers.

Under the totality of the circumstances, no single factor is necessarily determinative. The alien may have individual negative factors, but be found to be eligible for labor certification approval based upon the totality of the circumstances. The situation in question in Modular Container Systems is in fact an example of this exact scenario. The decision described the alien as:

being the sole member of Modular’s board of directors at the time of its incorporation;
maintaining his position as director of Modular and president of a different company with which Modular had a “royalty/support” agreement while he was abroad in France;
having purchased an “indirect” majority share in Modular the year before the labor certification application;
having resigned from the company with which Modular had a “royalty/support” agreement in order to come to the U.S. to manage Modular, based upon the stated belief that managerial incompetence had caused Modular’s failure to develop into a highly profitable enterprise.

Despite multiple negative factors, a careful consideration of the facts of the case led BALCA to conclude that labor certification was improperly denied, and BALCA consequently remanded the case for further proceedings.4

Cases Incorporating the Totality of the Circumstances Test

The totality of the circumstances test in Modular Container Systems has been applied broadly to labor certification cases since the case was decided. Let us review five examples to see how the test has been applied in other cases involving similar factors that call into question the existence of a bona fide job opportunity.

Matter of Altobeli’s Fine Italian Cuisine [PDF version] applied the totality of the circumstances test to a case where the alien had a family relationship to two of the employer’s board members and shareholders.5 However, the alien did not fail any prong of the totality of the circumstances test aside from the family relationships, and BALCA reversed the denial of labor certification and ordered that labor certification be granted. In Matter of MMB Stucco LLC [PDF version], BALCA reversed the denial of labor certification based upon the assertion that the alien, who was the brother of the sole principal of the employer, had an ownership stake in the employer.6 BALCA reached this decision based upon the finding that the determination that the alien had an ownership stake was not based on evidence in the record, and that additional reasons for denial were presented after the employer had already responded to evidentiary requests.

Matter of Nakano Warehouse & Transportation Corp [PDF version]. involved an alien who was an executive in the sponsoring employer and on E-2 (E2) status as an employee of an E2 treaty investor [see article].7 The alien was a senior manager for the company for over a decade prior to the application, on the board of directors, and senior within the company to the official of the company who signed the application. Taking into account that the alien met multiple negative prongs of the totality of the circumstances test and other factors that weighed against finding that a bona fide job opportunity existed, BALCA determined that the denial of labor certification was proper.

Matter of Step by Step Day Care LLC [PDF version] was another case involving an alien on E2 status, although in this case the alien and her husband had E2 visas as treaty investors [see article].8 BALCA noticed that in this case, the alien failed nearly every prong of the test established in Modular Container Systems. For example, the alien had a significant ownership stake in the company, was the wife of an owner of the company, and was one of a small number of employees. In upholding the denial of labor certification, BALCA held that the employer’s argument that labor certification was unnecessary for the alien to remain in the United States (because she had an E2 visa that she would presumably be able to renew indefinitely) was insufficient for demonstrating that the job was open to U.S. workers.

Matter of West End Publishing, LLC [PDF version]9 involved an application where BALCA found that the alien failed three prongs of the totality of the circumstances test established by Modular Container Systems:

Alien was an original incorporator and founder of the sponsoring employer;
Alien is involved in the management of the company;
Alien is one of a small number of employees.

In addition, the alien and his brother resigned as members of the LLC before the application was filed. In light of the negative factors, BALCA ultimately denied labor certification in this case.

DOL’s Incorporation of the Totality of the Circumstances Test

DOL adopted the majority’s approach in Modular Container Systems in the code of federal regulations (C.F.R.). In section 656.17(l) of title 20 of the C.F.R., the DOL requires that where:

the employer is a closely held corporation or partnership in which the alien has an ownership interest; or
there is a familial relationship between the stockholders, corporate officers, incorporators or partners, and the alien; or
the alien is one of a small number of employees.

The employer, in the event of an audit, must be able to demonstrate the existence of a bona fide job opportunity (defined as a job that was available to all U.S. workers). Furthermore, in accordance with the regulations, the employer must provide the following evidence in response to the audit:

(1) A copy of the articles of incorporation, partnership agreement, business, license, or similar documents that establish the business entity;
(2) A list of all corporate/company officers and shareholders/partners of the corporation/firm/business, their titles and positions in the business’ structure, and a description of the relationships to each other and to the alien beneficiary;
(3) The financial history of the corporation/company/partnership, including the total investment in the business entity and the amount of investment of each officer, incorporator/partner, and the alien beneficiary; and
(4) The name of the business’ official with primary responsibility for interviewing and hiring applicants for positions within the organization, and the name(s) of the business’ officials having control or influence over hiring decisions involving the position for which labor certification is sought.
(5) If the alien is one of 10 or fewer employees, the employer must document any family relationship between the employees and the alien.

These regulations clearly incorporate the factors listed in the “totality of the circumstances” test established in Modular Container Systems. The first set of points from the regulation give employers and beneficiary aliens an idea of which factors in an application may trigger an audit from DOL. The evidentiary requirements state explicitly the evidence that will be required in the event of an audit on one of the grounds listed in section 656.17(l). Understanding the possibility of an audit ahead of time (based upon one of the relationships described in the regulations) and the factors that DOL will use from the test established by Modular Container Systems will help employers and beneficiary aliens prepare evidence in advance to satisfy DOL of the existence of a bona fide a job opportunity.

Totality of the Circumstances Test for Domestic Cooks

BALCA has applied the totality of the circumstances test for cases involving domestic cooks. BALCA first used the test in Matter of Uy [PDF version] in recognition of the fact that the bona fide nature of a domestic cook job is inherently in question because of the fact that few families can afford to hire an employee solely to cook.10 BALCA created a non-exhaustive list of factors that immigration adjudicators should consider in determining whether a job offer for a domestic cook is bona fide:

the percentage of the employer’s disposable income that will be devoted to paying the cook’s salary;
whether the employee will be engaged in cooking duties for a substantial portion of the day;
whether the employee will be required to perform non-cooking functions (and, if not, how the employer accomplishes those functions);
whether the employer employs other domestic workers;
whether the employer has retained domestic cooks in the past and, if not, what circumstances prompted the job offer;
the extent of the alien’s training and experience as a cook, and whether the training or experience involved cooking in a domestic situation;
general indicia of the employer’s credibility or lack thereof (e.g., employer’s good faith in the original job offer and subsequent application process);
general indicia of the position possibly being used to promote immigration;
special circumstances of the household (e.g., nutritional requirements).

The totality of the circumstances test as applied to domestic cooks gets to the heart of whether the position is actually for a domestic cook, or whether it is for a lesser job (or a different purpose entirely) but is being classified as a “domestic cook,” which is a skilled position, for purpose of bolstering the chances for approval.

Advice for Meeting the Totality of the Circumstances Test for Labor Certification

The regulations and case-law are instructive for determining when high scrutiny will be applied to a labor certification application. An employer and alien with a relationship that has the markings of situations addressed by Modular Container Systems should consult with an experienced immigration attorney in advance of seeking labor certification. An experienced immigration attorney will be able to analyze the case and help the employer and alien determine whether they have a realistic chance of being approved for labor certification, or whether an alternative immigration solution may be more appropriate.

In cases where the alien has an ownership stake or managerial stake in the employer, being approved for labor certification will be difficult. It will be incumbent upon the employer to demonstrate primarily that the job was legitimately open to U.S. workers and that the alien did not exercise influence over the hiring decisions for the position (among other things depending upon the facts of the case). It is important to note that even if the employer can demonstrate that labor certification should be approved, there are still other grounds under which the petition for an immigrant visa may be denied.

Similar factors to the ownership/executive scenario apply for aliens who are related to owners of the employer.

In both scenarios, the employer must demonstrate that the company does not exist for purpose of fraudulently obtaining an immigration benefit for the alien.

  1. Matter of Modular Container Systems Inc., 89-INA-228 (July 16, 1991) (en banc)
  2. 69 FR 77325, 77356 (Dec. 27, 2004); 20 C.F.R. § 656.17(l)
  3. see also Hall v. McLaughlin, 864 F.2d 868 (D.C. Cir. 1989).
  4. However, it is worth noting that two judges dissented in judgment, arguing that the totality of the circumstances test was improperly applied and that the facts of the case showed that the job was not clearly open to qualified U.S. workers.
  5. Matter of Altobeli’s Fine Italian Cuisine, 90-INA-130 (Oct. 16, 1991)
  6. Matter of MMB Stucco LLC, 11-PER-715 (May 7, 2012)
  7. Matter of Nakano Warehouse & Transportation Corp., 92-INA-337 (Nov. 23, 1993)
  8. Matter of Step by Step Day Care LLC, 2012-PER-00735 (Sept. 25, 2015)
  9. Matter of West End Publishing LLC, 11-PER-1046 (July 16, 2012)
  10. Matter of Uy, 97-INA-304 (Mar. 3, 1999) (en banc); see also Matter of Enrique and Adriana Viano, 02-INA-44 (May 25, 1999) [agreeing that the limited use of the totality of the circumstances test in Uy was appropriate]; Matter of Diane Simon, 02-INA-44 (Aug. 28, 2002) [also applying totality of the circumstances test to domestic cooks].

Resources and Materials:

Kurzban, Ira J. Kurzban’s Immigration Law Sourcebook: A Comprehensive Outline and Reference Tool. 14th ed. Washington D.C.: ALIA Publications, 2014. 1084-87, 1302-1303, Print. Treatises & Primers.