Thursday, December 31, 2009

HR 4321 – Analysis of the Gutierrez Comprehensive Immigration Reform Bill and the impact on skilled workers

I have had a long break from blogging, and wanted to take some of my spare time over the holidays to write about the immigration bill recently introduced.  This 643 page bill tackles many immigration issues outside the purpose of this blog; as such I will focus solely on the provisions that impact the IT industry.

I reveal my support or lack of support further down.  Please read my analysis so that you understand why I came to the conclusion that I did.

As I have stated for years, the H-1B and L-1B visas are disproportionately harmful towards the IT workforce.  This is mainly because of a few factors: 

  • First, the lion’s share of H-1B and L-1B visas go companies who sponsor IT workers.  The concentration of workers in our profession impacts us more than any other.  To make matters worse, in 2006 six of the top ten sponsoring companies of H-1B visas were Indian offshore outsourcing firms.  Studies have shown that staff augmentation firms, or “body shops” are the worst offenders of the program and involved in high levels of fraud.
  • Second, many sponsors of H-1B workers are not paying market wages to their employees.  Although the law requires “prevailing wages” to be paid, the legal definition of “prevailing wage” is well below market wage.  As a result, a program originally created to fill labor shortages is now used to lower the cost of labor.  The L-1B visa does not require any market test at all.
  • And the third (and last point) I will make is that H-1B workers aren’t able to participate in the free labor market.  Because they are “sponsored” by a company, it is difficult for them to change jobs or find another sponsor.  Workers seeking a permanent residency (a green-card) must reset their long and tedious process if they change jobs.  This factor makes these workers exploitable, and less likely to bargain for market wages.  Many are intimidated by their employers and fear being forced to leave the country.  L-1B visa holders face a similar dilemma.  This factor is why I often refer to H-1B and L-1B visa holders as “indentured servants” given their lack of mobility.

Although that is not a comprehensive list of problems with the H-1B and L-1B visas, it highlights some serious issues I have with the program.  If you want more information on these programs and general concerns, a great resource is Wikipedia.  Hopefully this short explanation is enough to set the stage for my analysis.

Instead of a verbose explanation of the impact, see the two tables below.  In it I have a comprehensive list of H-1B and L-1B visa problems and correspond that to how this bill addresses each.  I also indicate what I believe the impact on the IT profession will be (either positive, negative, or undecided).  The first table is specific to the H-1B program and the second is specific to the L-1B visa program.  Although I don’t agree with the politics of Greg Siskind and wouldn’t nominate him for “Person of the Year” he is one of the most respected attorneys in his field; as such I relied mainly on his analysis which can be found here:  Although I’m no legal scholar, I could find no discrepancy between Siskind’s analysis and the parts of the legislation I am discussing below.

The full text of the legislation is posted on Greg Siskind’s blog:

Table 1.0 – HR4321 H-1B visa reform impact on IT professionals

Issue Impact Explanation
Distribution of workers throughout occupations image Section 501 (described in more detail below) provides a commission to recommend the limits and characteristics of workers to be admitted in various employment-based visa categories.

The effectiveness of this provision in the bill depends on what recommendations the commission makes, what methodologies they use to make such decisions, and of course who is appointed to the commission.  Results may vary from administration to administration.
Numerical limits of H-1B visas image Section 501 of the bill calls for the creation of a new federal agency called the Commission on Immigration and Labor Markets.  This commission will include 7 voting members with no more than 4 from each party, each to serve five year terms.  Members are appointed by the President with the consent of the Senate. 

This commission will be responsible for delivering an annual report to Congress which will amend quotas based on their findings of market needs for immigrant workers.  Congress will have 90 days to vote down their findings, or they will be automatically approved.

It is unclear what will happen to the 65,000 visa cap established in trade agreements.  I believe that exemptions from the cap could be rolled into that count for the purpose of satisfying our trade obligations established it GAT.

Although I support a market based solution, the problem with this solution is that the members of the commission are political appointees.  The current administration is more friendly than the last towards labor, and we have no idea what to expect from the next administration.  Our labor market needs stability and shouldn’t shift every four to eight years when the political winds shift.

I have suggested a methodology based on unemployment and employment rates in each occupation.  This methodology would rely on statistics and things that can be measured – not people influenced by powerful politicians with a variety of agendas.  Instead of creating yet another federal agency, I would invest money into the Bureau of Labor Statistics and make sure they have the resources to accurately measure the state of our labor market.  Those improved statistics could automatically adjust numerical caps.

I would point out that labor groups, such as the AFL-CIO, approve of this measure and requested that it be included.  I agree with their motivations, however I don’t see how it is a sustainable solution given the influence of politicians (who are influenced by lobbyists).  The appointees to this agency may start out with good intentions and be loaded with pro-labor members, but that can easily change.  How would we be protected from anti-labor members of the commission appointed by future administrations?

I cannot fully support this measure because it seems short sighted.  I would like to know how Congress plans to address my concerns before I support this part of the legislation. 
Outplacement of H-1B workers image
Employers may not place, outsource, lease, or otherwise contract for the services of placement of H-1B workers unless they get a waiver from DHS.  I would like to see the waiver provision removed from the bill because that looks like a possible loophole.  Otherwise, this is a real victory for IT workers. 

This provision is one we must fight to preserve because the biggest violators in the IT field are the body shops.  They are driving down our wages and displacing American workers.  This is a huge slap in their face.  It will put many body shops out of business – especially the ones that only pushed H-1B workers. 
Fraud prevention and enforcement of the law image Fraud will now be easier to detect and prosecute.  Section 541 extends the length of time the Department of Labor has to launch an investigation once a complaint has been filed to 24 months instead of 12 months.

The DOL will conduct annual compliance audits of H-1B employers.  1% of employers must be audited each year and 100% of employers with over 100 employees and more than 15% on H-1b visas must be audited.  In reality, this is probably limited to some of the larger consulting and offshoring firms that almost exclusively hire H-1B workers (Like Infosys, Tata, and Wipro).  Very few firms fall into the category that must be audited each year.  Fortunately, this law will apply to most of the top sponsors of H-1B visas.  Findings must be made public.

image I believe the law should also include the number of L-1B visa holders to determine if a company employs more than 15% or not.  Otherwise, they might simply shift to another visa category as a loophole.

The bill also eliminates “good faith” defense for employers found the have violated LCA rules so they can’t plead ignorance.  Also, the USCIS must now report to the DOL information showing that an employer is not complying with labor laws.
Below market wages image

This bill requires that the employer certify that they will pay the employee the highest of the following: Locally determined prevailing wage, median average wage for all workers in the occupational classification, or the median wage for skill level 2 in the OES wage survey. 

This is an important change to the law that will help reduce the number of workers being paid below market wages.  In a recent study by John Miano, there were more H-1B workers in the lowest tier of the wage survey (level 1).

Additionally, employers must offer H-1B workers the same benefits as offered to US workers.  This includes insurance plans, retirement plans, cash bonuses, and noncash compensation.  Fines are $2000 per violation.
Mobility of workers image I could find no change to the law that makes it easier for H-1B workers to acquire another job.  The lack of mobility is one reason that H-1B workers are easily exploited.  American workers at least have the ability to “talk with their feet” and not worry about their status as a legal worker in this country.
Lottery system as opposed to merit based system image imageThe intent of the H-1B program was to place the best and brightest into positions that cannot be filled by qualified American workers.  Although I dispute the notion that “Americans can’t be found”, at the very least we should reserve these visas for the best applicants and not the random order in which the applications are processed.

This bill does not change the lottery based selection process.
Foreign worker protections image Prior to hiring a foreign worker, employers are responsible for detailing the terms of employment to include location, compensation, job description, period of employment, transportation and housing benefits that will be provided, existence of labor disputes at the place of employment, insurance, education benefits, and information from the DOL about their rights.

Recruitment fees would be barred, and and employers could not violate the terms of a working arrangement without “justification”.  It’s not clear what would “justify” terms to be changed.

Employers are now responsible for all transportation costs.  This includes from the H-1B worker’s home to the worksite and then back to their residence in their home country when their employment is finished.

Employers would be responsible for their foreign labor contractors and subject to civil remedies as if the employer had committed violations themselves.  This provision will make it more risky to outsource to body shops.

Foreign labor contractors known or believed to be involved with violations will be made publicly known in a list maintained by the DOL.  Workers seeking relief from violations of their employers will be protected from intimidation, threats, coercion, discharge, or any other discrimination.

Employees will not be able to “waive their rights” to protections under the law; employers could not get off the hook because the employee refuses to testify.

Overall I believe these protections are good.  There is room for some improvement such as clarifying what criteria permits changing the terms of employment and who would determine if changes are indeed justified.
American worker protections image Section 503 establishes an online “American Worker Recruit and Match” system for employers to post jobs listings on.  Employers must post on the web for 30 days a detailed description of each positions describing the wages, minimum requirements, and process for applying.

Employers must post the job notice in “conspicuous” locations at the place of employment (like the supply closet).  This one is always violated – when was the last time you saw an LCA posted?

The notorious “H-1B only” ads would become illegal and it would be illegal to give H-1B workers preference or priority in hiring.  I believe this part of the law would make it easier to demonstrate discrimination against American workers and make it easier for us to win a lawsuit against body shops.

Employers of 50 or more employees in the US will not be able to staff their companies with over 50% H-1B workers.  Personally, I find this provision useless in most cases except the offshoring firms who rarely hire American workers.  I believe the number should be 15% and apply towards all employers. 

Employers must offer the job to any qualified US worker who applies and is available for work.  Employers must also advertise the job in a publication with the highest circulation in the labor market for at least five consecutive days.  They must also advertise based on a recommendation from the local job services in professional, trade, or local minority and ethnic publications.

Most of us have seen the video below detailing how sleazy lawyers subvert the law will view this with some skepticism.  Why?  Because they will find bogus ways of disqualifying American workers.  Watch below and see.

I believe the one thing missing from this bill are penalties for immigration attorneys who behave like the one in this video.  The fact the he is still able to practice law today is concerning.

I’m not sure Congress can do anything about sleazy lawyers (after all, many of them were also sleazy lawyers).  I’m going to support the employer protections of this bill because they are still valuable worker protections.  If anything, the video above demonstrates why we need protections.
Penalties for violating the law. image Those knowingly violating the rules shall be fined and/or imprisoned for up to one year.  Multiple violators can be imprisoned for up to three years.  Fines are up to $5,000 for any person violating (chapter 2).  $10,000 fines may be imposed on employers based on the behavior of their contractors.  Employees (H-1B visa holders) may not “waive their rights”, thus letting the employer off the hook.

I find these penalties quite favorable.  Companies are no longer able to plead ignorance because they use contractors.  I believe these penalties will discourage violators.  It also has its sites on the greatest abusers of all – the body shops.

My only complaint here is that monetary damages are not high enough.  Although workers will have the ability to sue for damages, the fines are low enough that some companies may take a calculated risk.  Let’s face it – for a billion dollar company a $5000 fine is like getting a parking ticket.  Hopefully the additional threat of prison discourages violations of the law.  The true effectiveness hinges on prosecution of violations.
Recapturing of unused H-1b visas image Section 301 of this bill sets the world-wide level of employment-based immigrant visas (which includes unskilled workers on the H-2b visa) at 290,000 PLUS unused visas from 1992-2009 PLUS unused visas from any prior fiscal year going forward.

I believe this provision is incredibly dangerous and will create flows of workers that exceeds the natural demand.  Even if we have a commission as established in section 501, anti-labor commissions appointed by future administration could use these un-captured visas to flood labor markets and harm American workers while satisfying corporate demands.  Fortunately I believe there is a solution to this problem:

Section 501 should be amended so that the Congress must vote every year to approve recommendations by the Commission on Immigration and Labor Markets.  Currently the recommendations will automatically be adopted if Congress fails to vote.  Millions of American jobs are worth the consideration of Congress and will provide a check and balance on the commission.  We have virtually no cap on the H-1B visa because of recapture provisions and the last thing we want is a commission that runs on auto-pilot.


Many of the H-1B provisions apply to L-1B visa holders so the next section focuses on provisions specific to the L-1B visa.

Table 2.0 – HR4321 L-1B visa reform impact on IT professionals

Issue Impact Explanation
L-1B visa holders are not subject to prevailing wage requirements. image Employers hiring L-1B visa holders for more than a year must follow the same prevailing wage requirements as H-1B visa holders.  That would be the highest of the three: local prevailing wage, median average wage for all workers in the occupational classification in that area of employment, and the Level 2 OES wage.

image Although this is a drastic improvement over no prevailing wage requirement, I believe that this provision will result in some employers rotating workers out every year in order to avoid paying prevailing wages.  I believe the law should apply to all workers irrespective of how long they will work in the United States.
Outplacement of L-1B visa holders image Previous reforms made it more difficult for body shops to place L-1 visa holders onsite.  The law allowed third party workers onsite as long as the worker was controlled by their employer and was not essentially temporary hire under the management of the unaffiliated employer.

This bill prevents L-1B visa holders from working at a third party site without a waiver from the DOL.
Compliance image This bill seems to have protections for the employer from investigation, such as requiring prior notice so that they may respond to allegations before an investigation begins.  I find this troubling because the element of surprise is lost and the employer has time to cover their tracks. 

image After a further search, H-1B visa violations are investigated by the DOL and the L-1B violations are investigated by the DHS.  It seems odd that two different agencies are responsible for the same type of investigation.  This is exactly the type of arrangement that will make it easy for companies to game the system. 
Penalties image Willful misrepresentation of fact in an L-1B petition will result in fines of up to $10,000 per violation, employers can be debarred for up to two years, and they may be liable for paying lost wages and benefits.
Displacement of American workers image The L-1B visa was designed to allow company management to work temporarily in the United States.  It was originally an executive visa.  Today, it is being used as a means of importing cheap labor into the United States.

I believe the criteria for the L-1B visa should limit the program to upper level managers and executives within the organization.  There are many computer programmers with no management responsibilities at all who are admitted under the L-1B visa program.  Many are “managers” in title only, having no direct reports and no ability to make hiring or purchasing decisions.


So the million dollar question: “Do I support this bill?”  The answer is yes, but we must work to make it better.  I believe that we should support the overall bill as it pertains to non-immigrant workers but seek two major changes and four minor changes:

  • Must Have
    • Section 501 should be amended so that the Congress must vote every year to approve recommendations by the Commission on Immigration and Labor Markets.
    • The L-1B visa should be used for only managers or executives in an organization as it was originally intended.  Computer programmers and “managers in name only” should not be approved for L-1B visas.  This visa has become a backdoor to the H-1B visa because it is less restrictive.
  • Should Have
    • The DOL should be responsible for investigating L-1B complaints as opposed the the DHS.
    • The L-1B visa should have the same prevailing wage requirements as the H-1B visa.
    • Congress should change the law so that it is easier for H-1B workers to change jobs (mobility).
    • End the H-1B “lottery”.  The H-1B visa should be merit based as opposed to a random selection of applications.


At 2:23 PM, Blogger Binil Thomas said...

Thanks for a great summary!

I am curious why your "indentured servant" point does not come up in the Should/Must Have sections. If the law does not help employees on H-1B to change jobs easily, they will collaborate to save the skin of their employer and many of the provisions of the bill will become hard to enforce. It might even be impossible to prove violations in a court of law.

At 6:28 PM, Blogger R. Lawson said...

"I am curious why your "indentured servant" point does not come up in the Should/Must Have sections."

I did list mobility as something that "should" be in the legislation.

That said, I don't believe it is possible to make the H-1b visa anything but an "indentured servant" visa given the nature of employer sponsored visas.

It makes me just a bit sick arguing how to make the H-1b and L-1b visas "better". In my mind, it would be akin to abolitionists in the day of slavery trying to make slavery more humane.

I must make this argument because from a political perspective I don't see politicians discussing the end of H-1b and L-1b visas.

I will be delighted when everyone working in this country - immigrant or citizen - works on the free labor market and nobody is subjected to corporate "sponsorship".


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