Proving the Ability to Pay Wages

At the I-140 stage, USCIS requires documentation that the employer can afford the employee's proffered wage and will be able to continue doing so in the foreseeable future.  In this regard, employers must prove that: (1) the employer’s taxable income is equal to or greater than the proffered wage; or (2) the employer's net current assets are equal to or greater than the proffered wage; or (3) credible verifiable evidence that the employer is not only employing the beneficiary but also has paid, or is currently paying, the proffered wage.

For categories requiring labor certification, documentation must establish employer’s ability to pay employee’s wage from the date of filing the labor certification.  On the other hand, for categories not requiring labor certification, ability to pay must be established as of the date of filing the preference petition (such as Form I-140). 

USCIS requires strict compliance with these rules.  Consequently, cases in which the priority date is established by filing the labor certification, USCIS will reject the petition if the employer lacked the ability to pay from the date of filing.  There are no exceptions to this rule.  The rationale for this view is that an employer must make a realistic job offer at the time of filing the labor certification, and an inability to pay the proffered wage at that time means that no realistic job offer existed in the first place.

Establishing Ability to Pay Proffered Wage

USCIS uses three tests in determining an employer’s ability to pay.  Any of these tests, if satisfied, conclusively demonstrates ability to pay.

1. Net Income Test: This is the standard test used in determining whether “the petitioner’s net income is equal to or greater than the proffered wage.”
2. Net Current Assets Test: If the employer’s financial reports indicate net losses, it can still demonstrate ability to pay by submitting evidence indicating that the “petitioner’s net current assets are equal to or greater than the proffered wage.”  In this regard, net current assets have been defined as “a corporate taxpayer’s current assets less its current liabilities.”  Current assets include liquid cash, inventories, and receivables converted to cash within one year.
3. Actual Payment Test: This test determines whether the “petitioner not only is employing the beneficiary but has also paid or is currently paying the proffered wage.”  This test is based on the assumption that if the employer has been paying employee’s wages in the past, then he will continue doing so in the future.

Employer’s ability to pay can be established by copies of audited annual reports, federal tax returns, or audited financial statements.  Additional evidence such as payroll records, W-2 forms, profit/loss statements, bank account records, or personnel records may also be requested by USCIS to verify ability to pay.  The most important document that USCIS requires in order to verify a net income sufficient to cover the employee's proffered wage is the corporate or business tax returns for the year starting when the labor certification was filed.

Furthermore, if the employer’s business is running at a loss, then evidence that the employee was already working for the employer at the time of filing the labor certification and that employer was able to cover employee’s proffered wage during this time can be important in establishing ability to pay.  That the employee’s proffered wage was paid even though the business was running a loss may not be persuasive evidence, however, unless the employer can produce evidence indicating that the company has since become profitable. 

The net income test is an onerous one, particularly given the propensity of most businesses to minimize net income for tax purposes.  When net income will not cover the proffered wage, however, the employer must substantiate his ability to pay in other ways, including market research studies showing the potential for future profitability or the availability of substantial investment capital from a parent company or new investor.  Significantly, however, courts have upheld USCIS’s decision to solely consider the federal tax returns for the year of filing the labor certification without regard to additional evidence.

USCIS may accept a statement from a financial officer of a medium or large employer, defined as any organization employing over a hundred (100) employees, evidencing the employer’s ability to pay, and this may serve as a substitute for other documentation such as federal tax returns.  For large employers, a statement from the financial officer and a copy of the organization’s annual financial report can be useful in establishing ability to pay.

Specific Factors Considered by USCIS

In evaluating an employer's ability to pay, USCIS employs the following guidelines:

• When the employer hires several employees, the ability to pay must be established for the beneficiary, as well as all other employees, for whom a petition (both immigrant and non-immigrant) has been filed.
• When the employer's taxable income is at least as large as the proffered wage, USCIS generally assumes employer’s ability to pay.
• When the employer's taxable income is negative, or less than the proffered wage, and the employee is not already working for the petitioner, but the employer's balance sheet shows a sufficiently favorable ratio of total current assets to total current liabilities, USCIS generally assumes employer’s ability to pay.
• When the employer's tax return shows a taxable income before net operating loss, and a net operating loss deduction followed by taxable income, USCIS considers the taxable income before the net operating loss number to evaluate ability to pay.
• If the employer is a sole proprietor, USCIS will consider the sole proprietor's personal assets and liabilities in adjudicating the ability to pay.
• If the employer asserts that the hiring of the beneficiary will cause the employer's income to increase, and that beneficiary will be paid from that increased income, USCIS will consider whether the employer has made a credible argument based on the projected figures (such a contention does not automatically overcome the problem of a presently unprofitable company).
• A positive retained earning does not automatically lead to favorable finding regarding ability to pay.
• Depreciation can be added to the taxable income and USCIS will consider the sum of these two figures to evaluate the ability to pay.

USCIS also advises employers to provide an explanation in the company support letter as to how the evidence demonstrates an ability to pay.  The employer should highlight the relevant figures and explain these figures, if necessary, by using the guidelines listed above.

Ability to Pay Wages - Examples

A)    The employee has been working with the sponsoring employer since 2007, earning a salary of $80,000 per year.  The labor certification was filed 06/01/2008 with a proffered wage of $79,000.  As the employer is already paying the proffered wage to the applicant, ability to pay wages has been demonstrated.

B)     The employee has been working with the sponsoring employer since 2007, earning a salary of $60,000 in 2007, $70,000 in 2008, $80,000 in 2009, and $90,000 in 2010.  The labor certification was filed 02/20/2007 with a proffered wage of $80,000.  The employer paid a salary to the beneficiary equal to or exceeding the proffered wage in 2009 and 2010.  Therefore, in 2007 and 2008, since the employer has not paid the proffered wage to the applicant, the employer must be able to show ability to pay the difference in the wage.  In 2007, the employer must show at least $20,000 net profit or net current assets in their federal tax returns to show ability to pay wages.  In 2008, the employer must show $10,000 net profit or net current assets to show ability to pay.

C)    The employer sponsored a green card for a future employee who is not currently working with the company.  The labor certification was filed in February 2008 with a proffered salary of $70,000.  Then the applicant joined the employer in April 2009 and earned a salary of $50,000 in 2009 and $70,000 in 2010.  Therefore, for 2008, the employer must show the full amount of $70,000 in their net profits or net current assets to show ability to pay wages.  Then for 2009, the employer has to show only $20,000 net profits or net current assets to show ability to pay wages for 2009.  For 2010, ability to pay wages has been met based on the salary paid.

D)    The employer filed five green cards in 2009 for five employees.  Each employee was being paid $60,000 and each green card had a salary of $75,000 as the proffered wage.  Therefore, the employer must be able to show $75,000 [($75,000 - $60,000) * five employees] net profits or net current assets in the 2009 federal tax returns.