When Self-Employment as an "Investor-Manager" Does Not Constitute "Unauthorized Employment"

Unauthorized Employment, myattorneyusa.com


Introduction: When Self-Employment as an Investor is not Unauthorized

The Immigration and Nationality Act (INA) provides for stiff penalties for those who engage in unauthorized employment. For example, section 245(c) of the INA bars an individual who engaged in or is in engaging in unauthorized employment from being granted adjustment of immigration status [see article]. There are limited exceptions from this bar for certain employment-based adjustment of status applicants [see article] as well as for certain immediate relatives or VAWA self-petitioners [see article].

An interesting question arises with regard to whether work by a non-immigrant visitor as an “investor-manager” constitutes “unauthorized employment.” In some cases, for purpose of the bar to adjustment of status in section 245(c)(2) of the Immigration and Nationality Act (INA) or for certain other issues where the definition of “unauthorized employment” may be at issue, the answer may be no. In this article, we will examine two very important decisions addressing this question. The first of these decisions is the Board of Immigration Appeals (BIA) decision in the Matter of Lett, 17 I&N Dec. 312 (BIA 1980) [PDF version]. The second of these decisions is the published decision of the United States Court of Appeals for the Ninth Circuit in Bhakta v. INS, 667 F.2d 771 (9th Cir. 1981) [PDF version]. We will examine the facts and procedural history of these cases, the analyses and decisions of the Board and the Ninth Circuit, and the effect of the precedents set by these decisions on non-immigrant investor-managers in the United States.

Matter of Lett: Management of Investment by Qualified Investor not Unauthorized Employment

The Matter of Lett concerned a nonimmigrant visitor who was found to be deportable (under the-then existing statutory scheme) for having been inadmissible at the time of entry. The respondent in the case filed an application for adjustment of status in conjunction with an application for determination as an investor (under the then-existing rules for permanent resident investors) seeking an exemption of the labor certification requirement under the then-8 U.S.C. 212(a)(14). This application was treated as a motion to reopen proceedings.

The immigration judge (IJ) in the case denied the motion to reopen because he ruled that the respondent's management of an entity that he had invested in constituted unauthorized employment and, thus, a bar to adjustment of status under section 245(c)(2) of the INA. In so doing, the IJ relied on the Board's decision in the Matter of Tong, 16 I&N Dec. 593 (BIA 1978) [PDF version], wherein the Board held that a beneficiary of a family-sponsored (non-immediate relative) petition who had engaged in self-employment without authorization had engaged in unauthorized employment.

However, the Board of Immigration Appeals held in Matter of Lett that the IJ erred in applying Tong. First, the Board agreed with the respondent that the definition of self-employment without prior authorization is not coextensive with the definition of unauthorized employment. Specifically, the Board explained that the unauthorized employment bar to adjustment of status does not apply to a qualified non-preference investor (under the statutory scheme for non-preference investors at the time). The Board noted that, while an investor found to have engaged in self-employment managing what is determined to be a non-qualifying investment would run the risk of being found to have engaged in unauthorized employment, self-employment managing what is found to be a qualifying investment does not constitute employment. For these reasons, the Board held that the respondent had not engaged in unauthorized employment for managing a qualifying investment.

Although the Board ultimately held on other grounds that the IJ had properly denied the motion to reopen, its finding that self-employment in connection with managing a qualifying investment is not the same as unauthorized employment constituted a precedent decision.

Distinguishing Lett

In 1984, the Board distinguished the Matter of Lett in the Matter of Bennett, 19 I&N Dec. 21 (BIA 1984) [PDF version]. The Matter of Bennett concerned a nonimmigrant visitor who, without the permission of the Immigration and Naturalization Service (INS) (would now be the United States Citizenship and Immigration Services (USCIS)), engaged in purely religious activities on behalf of a church for compensation. The Board found that the respondent in this case, unlike the respondent in the Matter of Lett, had engaged in unauthorized employment. The Board compared the two cases at 19 I&N Dec. at 23 fn. 4. The Board explained that in the Matter of Lett, it had held only that management of an investment by a qualified investor who is exempt from the labor certification requirements of the INA does not constitute employment under the meaning of the INA. The Board explained that the investor regulations created a “special exception to the immigration laws' general rules regarding employment.” While the respondent in the Matter of Lett was managing only his own investment, the Board distinguished the Matter of Bennett by explaining that the respondent in that case was “in the employ of a church” and “filling a position which could have been filled by an American worker.”

A careful study of these two cases reveals that managing a qualifying investment does not, as found by the Board, qualify as “employment” where the alien managing the investment is not collecting a salary and where the alien would be exempt from the INA's labor certification requirements.

Bhatka v. INS: Expanding on the Matter of Lett in the Ninth Circuit

The Matter of Lett addressed specifically a case where an alien sought preference as an immigrant investor and was found to have made a qualifying investment. In Bhatka v. INS, the Ninth Circuit was tasked with determining whether the Matter of Lett applied to an alien who had been denied status as an immigrant investor but had remained in the United States managing his investment.

The petitioner in Bhatka entered the United States as a nonimmigrant visitor in 1973. The respondent purchased a motel in California shortly after entering and he thereafter operated the motel. He was ordered to depart in 1977 after overstaying his visa. After being ordered deported, the petitioner's brother's Immigrant Visa Petition was approved, and the petitioner became the beneficiary of his brother's petition. The petitioner filed a Motion to Reopen Deportation Proceedings to apply for adjustment of status. However, the motion was denied by the IJ due to the respondent's having engaged in unauthorized employment as the operator of the motel. The petitioner appealed to the Ninth Circuit after the Board affirmed the IJ's decision.

The petitioner argued that his self-employment in managing his motel was not “unauthorized employment” for purpose of the bar to adjustment of status in section 245(c)(2) of the INA. He contended that the unauthorized employment bar is designed only to prevent aliens from filling jobs that would otherwise be filled by U.S. citizens or aliens authorized for employment. The petitioner argued that his self-employment as manager of his own property prevented no such thing, and that he had to the contrary provided employment for several U.S. citizen workers.

The petitioner pointed to the Matter of Lett in arguing that his management of his motel was not unauthorized employment. However, the petitioner's case was complicated by the fact that in 1974, the INS had denied his application for status as a business investor because he did not meet the then one-year experience or training requirement. However, the petitioner argued that his situation was analogous to the one in Lett because his management of his enterprise should nevertheless not be deemed “employment” under the INA.

The Ninth Circuit agreed with the petitioner's arguments. The Court put the emphasis on the fact that the then-INS “recognize[d] that certain types of activity for profit do not adversely affect employment opportunities for legitimate aspirants in the labor pool.” For this reason, the Ninth Circuit did not find it relevant whether the respondent was “a business investor under the applicable regulations.” Instead, the Ninth Circuit found that the respondent's operation of his enterprise did not reduce the number of jobs for U.S. citizens or aliens authorized for employment.

The Ninth Circuit distinguished Bhatka from its precedent decision in Yiu Tsang Cheung v. INS, 641 F.2d 666, 670 (9th Cir. 1981) [PDF version]. Yin Tsang Cheung concerned a self-employed optometrist who sought preference as an immigrant investor along with an exception from the labor certification requirements. The Ninth Circuitin finding in Yin Tsang Cheung that the alien was not eligible for preference as a business investor, distinguished the self-employed optometrist from an “investor-manager” who “competes with other entrepreneurs to sell goods and services, but does not compete directly in the market as skilled or unskilled labor.” In Bhatka, the Ninth Circuit held that the respondent was “much more like a business investor than a laborer, in that he has contributed 'financial ability, fiscal courage, economic awareness, leadership, business acumen and common sense'” to his investment enterprise. This was distinguishable from the self-employed optometrist in Yiu Tsang Cheung who competed “directly with all other professionals similarly employed in such practice.” The Ninth Circuit explained that the respondent in Bhatka was an entrepreneur, not a professional, and that his success depended on his management of his business in which he made a substantial capital investment rather than the value of his own professional services.

The Ninth Circuit held ultimately that, because the then-INS had already recognized that investor-managers do not cause the harm to the U.S. job market, management of a business enterprise is not “unauthorized employment” for the purpose of the unauthorized employment bar to adjustment of status under section 245(c) of the INA. Thus, under the precedent of the Ninth Circuit, managing a business enterprise is not unauthorized employment regardless of whether the individual was eligible for immigrant investor status.

Bhakta Applied to Other Situations

Bhatka was cited in the Sixth Circuit precedent decision in Wettasinghe v. INS, 702 F.2d 641 (6th Cir. 1983) [PDF version]. Wettasinghe concerned an F1 student who had purchased a fleet of six ice cream trucks, who stocked the trucks on a daily basis, and who drove the trucks only if a driver was unavailable. The petitioner in the case received rental fees from the drivers in addition to a portion of the sales. The issue was whether the petitioner had violated his F1 student status through engaging in unauthorized employment.

The petitioner argued that his conduct was akin to that of an investor and was not unauthorized employment in violation of his F1 student status. In evaluating the claim, the Sixth Circuit assessed Bhatka. Without issuing an opinion on the holding of Bhatka itself, the Sixth Circuit found that Bhatka was not applicable to Wettansinghe for four reasons:

1. The issue in Wettansinghe was whether the petitioner had violated his student status, not whether he was eligible for adjustment of status, as was the issue in Bhatka;
2. The purpose of the unauthorized employment prohibition for F1 students is different than the purpose of the bar to adjustment of status;
3. Regulations explicitly prohibit unauthorized self-employment for students; and
4. Even if the situation was analogous to that in Bhatka, there was evidence that suggested the petitioner participated in the day-to-day operation of the ice cream truck business and was therefore more than an “investor-manager.”

In Patel v. INS, 811 F.2d 377, 383 fn. 15 (7th Cir. 1987) [PDF version], the Seventh Circuit noted in a footnote that “[m]anagement of the business which forms the basis for an investor application ordinarily is not considered to be unauthorized employment for purposes of the statutory bar.” In this footnote, the Seventh Circuit cited to Bhakta. While this does not mean that the Seventh Circuit follows Bhakta as binding precedent, it is an interesting recognition that the reasoning in Bhakta had gained acceptance with immigration adjudicators subsequent to its publication.

The final precedent we will examine is Lauvik v. INS, 910 F.2d 658 (9th Cir. 658) [PDF version]. Lauvik concerned an E2 nonimmigrant investor who had been denied an extension of status in part because he had performed occasional menial tasks in the maintenance of his investment property, a motel/trailer park. The Ninth Circuit referenced Bhakta in finding that, despite performing such menial tasks, the petitioner in Lauvik was competing with other entrepreneur business owners for the sale of rooms rather than with other laborers.

Finally, let us examine an interesting unpublished (meaning this decision is not precedent) decision of the Administrative Appeals Office (AAO) in the Matter of ___, (AAO, Bangkok, Mar. 8, 2011) [PDF version]. The respondent in this case was a native and citizen of Australia who obtained a B1/B2 nonimmigrant visa to enter the United States. Upon entry, he began a surf school in San Diego (meaning the case arises under the jurisdiction of the Ninth Circuit). The respondent was accused of having misrepresented his intent in procuring a B1/B2 visitor visa when he had actually intended to obtain the visa in order to start a business in the United States. The respondent cited to Bhatka, Lauvik, and the Matter of Lett in arguing that he had not engaged in unauthorized employment in violation of his B1/B2 visitor status, and that the menial tasks he had performed for his surfing school did not render him an investor. However, the AAO found the instant case distinguishable from Bhatka, Lauvik, and Lett in that the respondent was a B1/B2 visitor and not a treaty investor or qualified nonpreference investor. The limitations on activities on B1 [see article] and B2 [see article] nonimmigrants, in the opinion of the AAO in this specific case, rendered Bhakta, Lauvik, and Lett inapplicable. The AAO also found that even if those three cases were applicable, the record indicated that the respondent had in fact taken wages from and provided labor to his company.


In the precedent of the Ninth Circuit, certain types of self-employment that involve only managing an investment do not constitute a bar to adjustment of status under section 245(c) of the INA. It is important to distinguish Bhakta from the case of an “investor” who is also competing in the labor market, as seen in Yin Tsang Cheung.

However, as we see in the AAO decision, the fact that certain types of self-employment in the entrepreneurial context do not trigger the bar to adjustment of status does not necessarily mean they may not constitute other immigration violations. For example, such self-employment is not a permissible activity under B1/B2 visitor status, and a person who obtained a B1/B2 visa and then proceeded to engage in such management of an investment would likely to be found to have violated status, and possibly to have committed fraud or misrepresentation of a material fact to procure immigration benefits [see article]. The Sixth Circuit decision in Wettansinghe provides another example of this phenomenon. In that case, even had the F1 student been found to have managed an investment in the same way as the petitioner in Bhatka, the Sixth Circuit would have still found that he had violated his F1 student status due to the differences in the unauthorized employment bar for F1 students compared to adjustment of status applicants.

There are two important things to note with Lett and Bhatka. First, both of these cases only apply to the unauthorized employment bar to adjustment of status, and not to the maintenance of any nonimmigrant status. Second, Bhatka is only binding precedent in the Ninth Circuit. This means immigration adjudicators and courts are only bound by it in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington (State), Guam, and the Commonwealth of the Northern Mariana Islands. Although it has been cited to by the Sixth and Seventh Circuits, immigration adjudicators and federal courts are not bound to follow it outside of the Ninth Circuit.

It is important to remember that every case is unique. If an individual is unsure whether his or her activities managing an investment would adversely affect either his or her current nonimmigrant status or the ability to subsequently adjust status, the individual should consult with an experienced immigration attorney before engaging in any activity managing the investment. Simply put, it is always better to be safe than sorry. This is true both in and outside of the Ninth Circuit. If an individual is prohibited from adjusting status due to having engaged in unauthorized employment, the individual should consult with an experienced immigration attorney for guidance on whether any relevant caselaw, regulations, or administrative guidance may offer a path toward overcoming the bar.

Please see our website's section on Investment Immigration to learn about nonimmigrant and immigration options for investors [see category].