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Is H-1B Reform On Its Way?

Two bipartisan bills to reform professional-level visa classifications were introduced into Congress this past July. Given the charged nature of the national discourse on immigration issues this election year, it seems unlikely either bill will be enacted before the presidential election. The bipartisan nature of both bills, however, suggests Congress may be able to coalesce, in the near future, around new H-1B legislation. If these or similar reforms are enacted under a new administration, the information technology (IT) sector, specifically, and all employers who rely on outsourced labor or who contract with H-1B dependent employers may face significant changes to their operations.

Overview of the H-1B program

Through the H-1B program, U.S. employers can sponsor up to 85,000 new foreign workers each fiscal year for employment in “specialty occupations.”1 Generally speaking, a “specialty occupation” is a professional-level position that requires a bachelor’s level education (or higher) in a specific field of study. Common specialty occupations include white-collar professions such as accountants, teachers, doctors, engineers and numerous IT positions including software developers, computer programmers and systems analysts. With the exception of H-1B workers whose employers are sponsoring them for legal permanent residence (green cards), H-1B workers are allowed to remain in the U.S. for up to six years of employment.

The H-1B program has been heavily oversubscribed the last few years. In fact, in each of the last two years, employers filed approximately 230,000 petitions against the 85,000 H-1B visas available. Because extension petitions for employees who have already been granted H-1B status are not counted against the numerical cap, the total number of H-1B workers in the U.S. at any given time is estimated to be around 600,000.2     

IT workers constitute the bulk of H-1B employees in the U.S. For fiscal years 2013 and 2014, for example, U.S. Citizenship & Immigration Services (USCIS) reports that close to two-thirds of workers in each fiscal year were employed in computer-related occupations.3 The significance of the H-1B program to the IT sector and entrepreneurship is such that over the years many leading entrepreneurs and IT innovators, including Michael Bloomberg, Mark Zuckerberg and Bill Gates have vocally called for increases in the number of annual H-1Bs available, among other reforms.4

The H-1B program is regulated by both the U.S. Citizenship & Immigration Services (USCIS) and the Department of Labor (DOL). The program requires, among other elements, that the employer make a binding promise to pay the sponsored H-1B worker the higher of the actual wage the employer pays to similarly-situated workers or the prevailing wage for the occupation in the area of intended employment.  

In addition, an employer who relies significantly on H-1B workers, called an “H-1B dependent” employer,5 must attest to having tried to recruit a U.S. worker for the position and must promise that the intended H-1B employment will not displace a U.S. worker within 90 days before and 90 days after the employer files the H-1B petition in support of the H-1B worker.6 An H-1B dependent employer, however, can exempt itself from the U.S. recruitment and non-displacement limitations for petitions in which the company pays the H-1B worker at least $60,000 or for petitions in which the employer files on behalf of an H-1B worker with at least a master’s degree in the specialty occupation.

The potential displacement of U.S. workers by H-1Bs has been a periodic concern since the beginning of the modern H-1B program. Displacement has recently been brought back into the spotlight by allegations some U.S. employers replaced several hundred U.S. IT workers with foreign nationals.7 The U.S. workers are also alleged to have been forced to train their foreign-worker replacements as a precondition to receiving a severance package.8 A subsequent investigation by the DOL into allegations of H-1B program violations related to at least one of those U.S. employers, Southern California Edison, appears to have been resolved in favor of the company and its IT consulting vendor.

H.R. 5801: Limiting U.S. worker displacement by H-1B dependent employers

On July 14, 2016, Representative Darrell Issa (R-CA) introduced H.R. 5801, the “Protect and Grow American Jobs Act,” which has been referred to the House Judiciary Committee. The bill proposes to reduce H-1B dependent employers’ ability to avoid U.S. worker recruitment and non-displacement provisions. Under this bill, H-1B dependent employers would be bound by the provisions unless they promised H-1B workers a salary of at least $100,000 (increased from the current $60,000). The bill would also eliminate the Master’s degree exemption. The bill has bipartisan support and is co-sponsored by Rep. Peters (D-CA), Rep. Polis (D-CO), Rep. Vargas (D-CA), Rep. Farenthold (R-TX), Rep. Smith (R-TX), Rep. Hunter (R-CA) and Rep. Davis (D-CA).

H.R. 5657: Limiting U.S. worker displacement by any H-1B employer

On July 7, 2016, Representative Bill Pascrell, Jr. (D-NJ) introduced H.R. 5657, the “H-1B & L-1 Visa Reform Act of 2016,” which has been referred to both the House Judiciary and House Education and the Workforce committees. This bill proposes largescale changes to the H-1B program, including eliminating H-1B dependent employers as a separate classification. This change would subject all H-1B employers to the U.S. worker recruitment and non-displacement provisions that currently apply only to H-1B dependent employers.10 The bill would also double the non-displacement window from the 90 days before and after filing the petition to 180 days on each side of the filing.  

In addition, under this proposal an H-1B worker would be authorized to perform services only at his or her employer’s work location unless the employer first obtained a waiver from the DOL.11 This provision would directly, and adversely, impact the business model of modern consulting companies and their clients; moreover, the new waiver requirement would seemingly prevent most staffing companies from accessing the H-1B program.12 

The bill is co-sponsored by Rep. Rohrabacher (R-CA).

What would these proposals mean?

For IT consulting companies and their corporate clients, these proposed changes could force significant changes. At a minimum, the cost to hire an H-1B worker would increase. And, if consultant-vendors are limited in placing H-1B workers at a client site, the end-client may need to scramble to fill positions that can no longer be filed by their consultant-vendor.


1 Universities and certain nonprofit research facilities are exempt from the 85,000 numerical limitation.
See, e.g., Immigration Reforms to Protect Skilled American Workers: Hearing Before the S. Judiciary Comm., 114th Cong. (2015) (testimony of Professor Ron Hira).
3 U.S. Citizenship and Immigration Servs., Characteristics of H-1B Specialty Occupation Workers: Fiscal Year 2014 Annual Report to Congress 12, Table 8A (2015).
4 Matthew DeLuca, Tech Demands More H1-B Visas as Critics Cry Foul (Apr. 10, 2014).
5 For an employer with at least 51 workers, if 15% or more are H-1B workers, the employer is classified as H-1B dependent.  8 U.S.C. §1182(n)(3)(A)(iii).  There are separate calculations for smaller employers.  Id. §§1182(n)(3)(A)(i) and (ii).
6 8 USC §§1182(n)(1)(E) and (G).
See Matthew Thibodeau, Southern California Edison IT Workers ‘Beyond Furious’ Over H1-B Replacements, Computerworld (Feb. 4, 2015); Sara Ashley O’Brien, Disney Sued for Replacing American Workers with Foreigners, CNN Money (Jan. 26, 2016).
Id.
9 Press Release, Infosys, U.S. Dep’t of Labor Concludes Investigation, No Violations by Infosys Found.
10 H.R. 5657, sec. 101(d)(1).
11 Id. sec. 101(e).
12 See, id. sec. 113(a) (making the waiver dependent, in part, on a DOL finding that the “placement of the H-1B [worker] is not essentially an arrangement to provide labor for hire for the [third-party] employer with which the H-1B [worker] will be placed.”)

Copyright © 2020 Godfrey & Kahn S.C.National Law Review, Volume VI, Number 217

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About this Author

The firm's Labor, Employment & Immigration Law Practice Group has a long history of successfully representing businesses in labor and employment disputes. In addition to its strong background in providing labor and employment counseling, the practice group has the depth and breadth of resources to appropriately staff labor and employment litigation matters ranging from straightforward unemployment compensation hearings and grievance-arbitration matters to the defense of complex discrimination claims and multiparty employment litigation.

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