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U.S. Department of Labor/Jacob Sweeney-Samuelson, Medill

Total H-1B visa applications in 2012 compared with those applied for by firms who predominantly employ workers on H-1B visas.

H-1B visa traffickers under fire

by Jacob Sweeney-Samuelson
Jun 12, 2013

As an overhaul of U.S. immigration law goes before the Senate this week, one of the most hotly contested topics will likely be how to reform the system of temporary residency and work permits for skilled foreign workers, known as H1-B visas.

Companies ranging from Microsoft Corp. to engine maker Cummins Inc. sponsor these visas for employees with the skillsets they need, presumably when there are no Americans available who meet the same requirements. But the system has come under fire because of the emergence of firms whose only apparent purpose is to obtain quantities of H-1B visas to deploy foreigners to U.S. firms, where they gain skills and experience which, on their return home, they use to continue their work for the same companies, undercutting U.S. aspirants for the same work. 

The number of applications for H-1B’s approved for use by these "outsourcing" companies dramatically outpacing the applications made by U.S. companies who actually intend to employ the workers they sponsor, according to Department of Labor data.

The share of the yearly cap of H-1B’s awarded to these outsourcing firms has gone from 20 percent a few years ago to more than 60 percent in 2012.

Since the visas are awarded by lottery, the more visas a firm applies for the more it tends to be awarded. Under current law, there is no requirement to show that there is actually a job available for each application.

Those companies are abusing a system meant to attract and retain skilled workers from other countries, according to the Institute of Electrical and Electronics Engineers. Others see the system as necessary to fill the shortage of American engineers.

The problem, according to IEEE-USA senior legislative representative Russell Harrison, is that outsourcing companies have found several ways to game the system to facilitate the relocation of U.S. jobs to countries such as India.

“What we’ve seen in the last five to six years is that outsourcers have gone from being one of the users of the H-1B to the predominant users,” Harrison said. “It’s gone from sometimes to always, and that trend is both remarkably clear and very strong, and it’s accelerating.”

Harrison described three scenarios that he said go against the intent of the law.

The first, he said, is exemplified by the case of a Nielsen Co. facility in Florida in 2008. Nielsen had hired over 200 Americans for skilled jobs in their facility, then abruptly replaced most of those workers with temporary workers who were employed by the Indian company Tata Group, according to reporting by the Tampa Bay Times. The Americans who remained trained the foreign workers to do the necessary work, after which Nielsen shut down the facility, laying off the remainder of the Americans, and relocated the facility to India, where it continued to serve the same purpose for the company.

A second scenario, Harrison said, is outsourcing “within the U.S.,” where an IT department, for example, can be outsourced to a company that hires only workers on H-1B visas, who on average are paid significantly less, reducing expense for the American company. When the visas expire and they return home, a “revolving door” of new foreign workers replaces them.

Finally, Harrison continued, there is a system that uses “liaison” workers, just three or four foreign workers employed in the U.S., to communicate with many more employees located in another country to facilitate a complicated task and minimize the confusion in translation due to the distance between the workers and their task.

“We need laws that promote U.S. job growth, not encourage it to leave our shores,” IEEE-USA President Marc Apter said in a statement.

On the other hand, the need is real.

Scott Cooper, a partner at Fragomen, a New York City-based corporate immigration law firm, said, "as U.S. firms – tech firms like Intel, Motorola, HP – as they compete more and more on a global scale, they need to locate talent. The unfortunate dearth of engineer graduates at our own schools makes the use of the H1-B necessary for them,” he insisted.

Fragomen was involved in over 20,000 of the approximately 140,000 H1-B visa sponsorships filed in the first week of April when applications opened, according to Cooper.

The demand for foreign engineers and the visas that allow them to work here continues to rise. The current version of the immigration overhaul bill wouldl increase the cap on the program to 110,000 from the current 65,000--although both limits are subject to increase depending on demand for the visas. 

The demand for engineers isn't confined to Silicon Valley. Cummins Inc., the Columbus, Ohio-based engine maker, hires a significant number of engineers on H1-B visas, and the company supports legislation that gives it more flexibility to attract the employees they want from anywhere around the globe.

“Cummins is expected to hire thousands of engineers in the next five to 10 years and it is possible that many of these individuals will have been born outside of the United States,” a spokesperson communicated in an email. “Added flexibility in the law would reduce uncertainty for employers and enable us to be more competitive in the global economy”

The companies that take advantage of this process range from multinationals like Microsoft and IBM, for which H1-B workers are only a small fraction of their total employees, to smaller companies that exist essentially because of the H1-B visa, with most of their employees using the temporary work papers. Some of these smaller firms, like Syntel, based in Troy, Mich., are providers of IT services with many functions “outsourced” to the company’s office in India.

Cooper rejects the idea that foreign workers are hurting American’s job prospects.

“Some people like to portray H1-B as a cheap foreign worker visa,” Cooper stated. “But if you look responsibly at the data, you see that the foreign workers get paid on average more than a similarly situated American worker.”

Cooper also noted that all employers who use the visa are supposed to pay the prevailing wage for the job or the wage of similarly-skilled workers at the same location, whichever is higher.

Additionally, Cooper went on, the fees and lawyer costs involved in hiring a single foreign employee can run about $5,000, and the rules dictate a waiting period of several months from the first application for the visa before the employee can begin work. Employers are also required to keep public documentation on file that proves that a good-faith effort was made to hire a qualified American worker before the application was filed.
Cooper contends that these factors mean that U.S. companies do attempt to hire Americans first.

Speaking generally of his firm’s clients, Cooper said: “If they find the American worker with the right skillset, they’ll hire them. They don’t want to pay the fees, the lawyers. They don’t want to wait for months.”

IEEE-USA’s Harrison said he agrees that the H-1B has a place in the economy, and that firms with specific hiring needs should be able to pluck promising foreign-born graduates from American universities. But he hopes that the reforms to the H1-B system in the immigration bill can put the companies he sees as abusing the system out of business.