IMMIGRATION
AMERICA NEEDS TALENTSome companies still must look overseas for special skills.
Recruiting top talent from abroad is a perpetual challenge for American businesses that rely overwhelmingly on H-1B visas to employ foreign workers. Many U.S. businesses have been advocating an increase in work visas and, in particular, an expansion of the H-1B visa program. However, any hope of such immediate immigration reform has been dimmed by President Obama’s recent announcement that the government’s focus on health care reform and strengthening the economy will push back any immigration overhaul efforts until 2010, at the earliest.
The focus of much of the ire surrounding immigrant workers is the H-1B visa program, one of the main tools used to employ foreign workers. The H-1B is a non-immigrant visa that permits a sponsoring U.S. company to employ a foreign individual for up to six years. To qualify for H-1B status, a prospective employee must have at least a bachelor’s degree (or the equivalent) in a specialty occupation, such as engineering, accounting or mathematics. Employers may apply for H-1B visas beginning on April 1 of each year to be effective at the beginning of the fiscal year on October 1.
The biggest drawback to the H-1B visa, and the target of reform measures, is the annual cap. The United States Citizenship and Immigration Services grants only 65,000 H-1B visas to bachelor’s degree holders and an additional 20,000 visas to individuals with master’s degrees or higher. The visas are typically in such great demand that last year alone, more than 123,000 applications were filed within two days.
Though some critics believe that the H-1B program displaces American workers, the reality is that companies sometimes have no choice but to consider a broader pool of candidates. Several of my clients require employees with expertise in highly specialized areas of knowledge and would have a very limited selection if they were restricted to U.S. workers.
An expansion of the H-1B program would provide U.S. companies with more prospective employees in technical fields and more workers with coveted international experience. Immigration proponents argue that in a free market society, companies should have the right to choose the most qualified candidate for the job, regardless of nationality.
Until the government raises the cap on the H-1B visa program, there are several alternatives that may prove useful to employers. First is the L-1 visa, an option for companies operating both in the U.S. and abroad that want to transfer foreign workers to the U.S. for up to seven years. This visa is used mainly for executives/managers and employees with specialized knowledge; unlike the H-1B, there is no limit on the number of L-1 visas granted. The TN visa is another option, created as part of the North American Free Trade Agreement for Canadians and Mexicans to work in the U.S. in specific professions, most of which require a college degree. The TN visa can be renewed indefinitely in three-year increments.
Though some critics believe the H-1B program displaces American workers, the reality is that sometimes companies may have no choice but to
consider a broader pool of candidates.
Employers should also consider the O-1 visa, which was created for individuals with extraordinary ability in the arts, sciences, education, business and athletics. “Extraordinary ability” is demonstrated by sustained national or international acclaim. There is no cap on the number of O-1 visas, and O-1 status may be extended indefinitely. Another important aspect of O-1 visa status is its lack of a minimum education level requirement. While the standard may seem high, last year approximately 9,000 people came to this country on O-1 visas, so it is clearly not an impossibly high bar.
E-1 and E-2 visas, known respectively as “treaty trader” and “treaty investor” visas, are also attractive alternatives, but are limited to citizens of countries that maintain a treaty of navigation and commerce with the United States. Those seeking an E visa must fill supervisory, executive or highly specialized positions at U.S.-based operations owned by an individual or company from the same treaty country. E visas are not subject to a quota and can be renewed indefinitely as long as the qualifying relationships, job responsibilities, and levels of trade or investment continue.
Finally, those companies wishing to hire Australians may find the E-3 visa useful. The E-3 visa is similar to the H-1B, but is limited to Australians. To be eligible, an Australian citizen must possess a bachelor’s degree or higher (or its equivalent) in a specialty occupation and the occupation must require that specific degree. There is a 10,500 cap on the E-3 visa; however, unlike the H-1B cap, it has never been reached.
While I am hopeful that the H-1B cap will be raised eventually, we have no way of knowing exactly when this may occur. Until that time, employers should consider other viable options to hire the highly qualified foreign workers they need to remain competitive. 
Denise Vanison is a partner in Patton Boggs’ Immigration Practice.
EMPLOYMENT
BETTER SCHOOLS, BETTER ROADS—BETTER JOBSWe need to make a long-term investment not just in America’s infrastructure, but also in its most valuable asset: its workforce.
Private investment in public infrastructure is an idea whose time has certainly come. Roads, bridges, transit systems, schools, electric grids and waste treatment plants across this country are in urgent need of repair and improvement. All the while, our record unemployment rate means there is an army of skilled laborers out there who are ready to do that work. The problem is, cash-strapped local, state and federal governments—even with the benefit of stimulus funding—simply don’t have the money necessary to pay for these important projects.
Foreign financiers were the first to recognize the opportunity presented by this funding gap, pouring billions into American public infrastructure projects over the past several years in exchange for a healthy return for their investors. More recently, several of this country’s preeminent investment firms—Goldman Sachs, JP Morgan and the Carlyle Group—have gotten into the game as well.
The trend is a positive one if it means our children will learn in better-equipped school buildings and our homes and businesses will be powered by energy sources that do less harm to the environment. But if it also means that good public-sector jobs are replaced with private-sector ones that offer low pay and no benefits—as often happens when traditional government functions are privatized—then it will be as disastrous as allowing people to drive their cars over a crumbling bridge at rush hour or drink water that’s been processed at a dilapidated treatment plant.
We need to make a long-term investment not just in our country’s transportation, communications, education and utilities systems, but also in its most valuable asset: the American workforce.
That’s why at ULLICO, we’re so excited about a new investment program we’ll be launching early next year that will help strengthen America’s infrastructure, while creating jobs that allow hard-working people to have a decent quality of life, and generating a reliable return for our investors.
For 32 years, we’ve run the J for Jobs Fund, which has helped finance $30 billion worth of private-sector construction projects—hotels, restaurants and residential communities— built by union workers. Our investments have created 500 million work-hours while yielding a long-term, steady profit for our clients, the vast majority of which are union pension funds.
Now we’ll be applying a similar model to the public sector as we establish our infrastructure program. The types of projects we’ll participate in will vary widely. It could be an existing toll bridge, where a private entity would pay the government a large lump sum up front and commit to a long-term lease that requires it to operate, maintain and improve the bridge. In exchange, the investors behind the private entity would benefit from the steady stream of toll revenue. Or, maybe we’ll be financing the construction of a new wastewater treatment plant, hospital or college dormitory that would then be leased back to a public body.
In all projects, though, the jobs created will pay fair wages and offer benefits such as training programs, whole-family health insurance and guaranteed pensions. The privatization of public works projects is one way to help improve our country’s backbone of infrastructure, but it does not need to be done on the backs of American workers.
I had the chance recently to hear President Obama speaking to a group of autoworkers in Orangetown, Ohio, about the current state of the economy and how tough the recession has been on working people. He told them that he would not rest until everyone who wanted to work had a job. Then he paused and said, “And I’m not talking about just any jobs. I’m talking about good-paying jobs with benefits.”
Let’s make sure that, when the private sector puts people to work upgrading America’s infrastructure, the jobs created are good jobs. Because that’s not just good for the labor movement, it’s good for America.
Ed Smith is the president of Washington, D.C.-based ULLICO, a union-owned insurance and financial services firm founded in 1925. More than 30 years ago he joined the Laborers’ International Union of North America as a member of the Local 773 in Cairo, Illinois, as a construction craft laborer.
INCENTIVE TRUSTS
Sound “Financial Parenting”Successful entrepreneurs are often concerned about the impact the wealth they have accumulated will have on their families. Innovative trusts can be structured to pass on values as well as wealth.
Trusts are appropriate vehicles for administering assets for future generations. Unfortunately, many families have experienced problems with the traditional trust. Descendants can become non-productive “trust fund babies” who contribute little to their families or society. Beneficiaries may anticipate that income from the trust will enable them not to work for a living. These individuals tend to avoid academic challenges, often drop out of school, and do not participate in business, leaving them unmotivated, unaccomplished and ultimately unhappy. Ironically, the entrepreneur’s success may well contribute to the failure of his or her descendants.
To avoid those problems, some successful businesspeople are turning to innovative “incentive” trusts. These trusts are designed to communicate and pass on the values that are important to the entrepreneur, such as education, productivity, integrity and accomplishment, thereby benefiting descendants without making them dependent on the family’s wealth.
Traditional trusts usually distribute assets to beneficiaries based on a timetable—typically one-third at age 25, another third at 35 and the balance at 40. Incentive trusts, by contrast, require that the beneficiaries achieve performance standards established by the grantor if they want to be entitled to trust distributions.
The incentive trust incorporates such standards in “distribution guidelines” adopted by the trustees. If the grantor considers education to be important, the trust might pay for college, but only if the beneficiary maintains a certain grade point average and makes steady progress toward earning a degree. The incentives do not have to focus on the traditional measures of academic or financial performance; they can also be designed to encourage qualities such as industriousness, risk-taking and giving back to the community. For example, incentives can be designed to reward socially valuable work—such as public service or special-needs counseling. The goal is to support and encourage family members to lead happy, productive lives and excel in whatever field they choose.
In the majority of cases, these incentives will take effect with the grandchildren, rather than the children. As a general rule, the entrepereneur’s children have grown up seeing their parents work hard to build their business and accumulate wealth. The grandchildren, however, are more likely to have grown up in a privileged environment, and thus see little connection between work and reward. Therefore, they are the ones who need the “financial parenting” of the incentive trust.
Large incentive trusts typically extend over a long period of time, so it is critical to build in flexibility to allow the trust to adapt to changing realities in the family and in society. This flexibility can be incorporated through two mechanisms:
A statement of purpose. This should be a high-level, brief statement—perhaps just one page—of the values that the grantor wants the trust to encourage. Rather than legal detail, it should provide a handful of principles to guide future decision-making about the trust—much like the U.S. Constitution provides broad guidance for courts.
A board of trustees. This board decides how the distribution guidelines should evolve over time, based on the principles laid out in the statement of purpose. The makeup of the board is key: the board should include representatives of the beneficiaries, any charities involved, the asset manager and the administrative trustee. Any changes to the distribution guidelines should require a unanimous vote, so that all stakeholder views are represented. Beneficiaries can submit proposals to the board asking for distribution adjustments, much like submitting a grant proposal. For example, in a recent case, a young beneficiary who had completed college wanted to accept a low-paying internship at a prestigious publishing firm in New York—a position that could not support her in the city. This type of post-college internship was not covered by the original distribution guidelines. However, the internship was clearly important to a successful career in the publishing field, and was in line with the spirit of the statement of purpose. Accordingly, the board revised the distribution guidelines to provide her a stipend.
Overall, the incentive trusts provide an effective vehicle for balancing the various interests of stakeholders, ensuring the sound stewardship of the family’s assets and promoting the values that are important to the grantor over the long run. Ultimately, such trusts can help entrepreneurs leverage the fruits of their own success in order to help future generations achieve and succeed in their own right.
James McNair is a partner in Patton Boggs’ Estate Planning and Wealth Preservation Practice.
