© Farhad Sethna, Attorney, 2024
In late December, 2023, the USCIS put out chapter 5, “Practical Training”, in its policy manual under volume 2, part F, “Students”. The entire practice manual can be found on the USCIS website. The complete citation is https://www.USCIS.gov/policy-manual/volume-2-part-f-chapter-5.
As I always say, this article is not intended to be legal advice, nor a substitute for the actual law or regulations. Please read the policy manual and the extensive footnotes attached to the PM entry in order to research the underlying law and regulations.
I am summarizing the crucial aspects of the policy manual as it pertains to students who are on optional practical training (OPT), but for some reason or another, are not able to find a “job” with an already established employer.
In a previous article, I had written about self-employment for students on OPT.
With the USCIS policy referenced above, it appears that USCIS has come to accept the idea that self-employment for an even longer term is permissible under OPT. In my earlier blog articles I noted that the first year of OPT under a STEM OPT three-year program could be fulfilled with self-employment by the foreign student.
However, years two and three became a problem, because it was unclear whether the self-employment option would continue to benefit such students.
The USCIS appears to have answered that question in the affirmative with their policy manual. Specifically, I refer to the policy manual, under the section “STEM OPT extension”.
Under the USCIS’s explanation, it seems that F1 students on OPT may be employed by a “new startup business” as long as the business meets all the necessary regulatory requirements. This includes that the business complies with the requirements of the USCIS OPT training program (as verified by Form I-983), the student completes certain self-reporting requirements, the employer completes certain job verification and evaluation requirements, the employer remains in good standing with E-Verify, the employer has the necessary resources to fulfill the training plan as attested to in form I-983, and the employer will – this is important – “provide compensation to the STEM OPT student commensurate to that provided to similarly situated US workers” (i.e. a “prevailing wage” test).
What does “compensation commensurate to US workers” mean?
In the policy manual, the USCIS states that such compensation includes – but is not limited to – “any ownership interest in the employer entity (such as stock options)” and that such compensation is equal to or on par with (commensurate) compensation provided to other similarly situated US workers.
This is a useful extension of the USCIS-USICE’s previous pronouncement that the first year of OPT could be fulfilled by self-employment. Since the “prevailing wage” requirement under the H1B does not kick in for F-1 students on OPT, a student may therefore be self-employed in their first year. The second and third years, were the tricky ones.
With the above pronouncement and the publication of their chapter on practical training in the policy manual, the USCIS-USICE have seemed to embrace the idea that even a startup organization, including one in which the student has an ownership interest, may be an appropriate vehicle for employment under the two additional years granted to a STEM graduate on OPT. Of course, this is subject to the conditions summarized above.
Conclusion
With the promulgation of this policy manual, it is clear that the F-1 student on STEM OPT may start at their own company, get that company off the ground in the first year with no requirement to be paid a particular prevailing wage, and from year two, may become an employee of that company, even though he or she has an ownership interest in that company, as long as the F-1 student is receiving compensation which would be equal to compensation paid by that company to any other similarly situated individual.
That’s a tall order for anyone starting up a new business, but given the incredible success of foreign-born entrepreneurs in the USA, not only in the technology sector but in other fields as well, it is certainly a challenge to which many foreign students have risen and successfully achieved!
© Farhad Sethna, Attorney, 2024
Farhad Sethna has practiced law for over 30 years. He was awarded his JD in 1990 and his MBA in 1991, both from the University of Akron. Since 1996, he has also been an adjunct professor of Immigration Law at the University of Akron, School of Law, in Akron, Ohio, where he wrote and continues to use his own immigration textbook. Attorney Sethna is a frequent speaker at Continuing Legal Education and professional development seminars on various immigration-related topics. His practice is limited to immigration and small business. He has won awards for excellence in teaching and for pro-bono service. With offices in Cuyahoga Falls, Ohio, Attorney Sethna represents clients in all types of immigration cases before federal agencies and the immigration courts nationwide. A private pilot, it is Farhad’s goal to fly to each of Ohio’s 88 county airports. Our number is: (330) 384-8000. Please send your general immigration questions to farhad@sethnalaw.com. We will try to answer as many questions as possible.