Tag Archive for: IT Consulting

Cyrus Mehta

PUTTING DISNEY AND H-1B VISAS IN PERSPECTIVE

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By Cyrus D. Mehta

Most who read Julia Preston’s New York Times article on Disney laying off its qualified programmers to be replaced with Indian  programmers on H-1B visas at HCL America are understandably outraged. The fact that Disney axed its employees – an iconic American  company that has promoted happiness, gentleness  and well being– has let down people even more. There have been more than 3,000 mostly angry comments to the article.

If we put aside the Indian H-1B worker for a minute, no one will doubt that it is business reality for companies to contract out many of their functions, such as IT, accounting or human resources. This practice is not limited to employers using foreign labor, and it is a widespread practice for companies to cut costs by reducing overhead such as payroll and benefits. Would there be similar outrage if an American law firm contracted away its human resources functions and stopped hiring additional HR personnel? Or if an entrepreneur wanted to sell a newly designed stroller with interesting gizmos in the US market, but arranged to have the manufacturing done in China? While we all feel badly for the American workers who may have been laid off, this is an unavoidable part of the quantum advances that have been made in globalization and the information technology revolution, which does not just involve access to foreign skilled labor (even if outside the United States) but even automation and robotics. Tom Friedman once famously said this in his NYT column “Average is Over”:

In the past, workers with average skills, doing an average job, could earn an average lifestyle. But, today, average is officially over. Being average just won’t earn you what it used to. It can’t when so many more employers have so much more access to so much more above average cheap foreign labor, cheap robotics, cheap software, cheap automation and cheap genius. Therefore, everyone needs to find their extra — their unique value contribution that makes them stand out in whatever is their field of employment. Average is over.

This is not to suggest that the laid off American workers in the Disney episode were average, but it is fervently hoped that the benefits that accrue in contracting away functions in this new era of globalization will allow companies to engage in innovations that will  ultimately benefit consumers, which in turn will create more, albeit different, jobs in the United States. Even Disney said that after its reorganization that allowed it to focus on more innovations, it had a net gain of 70 jobs and has created 30,000 new jobs in the past decade.

While the media highlights the cases of Disney and SoCalwhere US workers are laid off and replaced by H-1B workers of an IT consulting company, most employers hire H-1B workers to supplement their workforce and not to replace their workforce. The H-1B visa cap is too small with only a total of 85,000 annual slots, and I personally have represented employers and  talented H-1B workers who can no longer be employed because they were not selected under the H-1B visa lottery. It is unfortunate that US employers lost talented foreign workers, many of whom have been educated at US universities. Lower costs, as is commonly believed,  is not the driving factor in hiring H-1B workers . The employer has to pay the higher of the prevailing wage or the actual wage it pays similarly situated workers, and so it is generally difficult for an H-1B worker to replace a US worker because they are cheaper. The employer has to also pay filing fees ranging from upwards of $2,325 to $5550, plus lawyers’ fees, besides the mandated prevailing wage.

Contrary to how the H-1B visa program is portrayed in the media, an employer does not have to first find a US worker before hiring an H-1B worker, or be concerned about displacing American workers at client locations such as Disney,  unless the employer is dependent on H-1B workers or has been found to have been a willful violator. See INA 212(n)(1)(E), (F) and (G) & INA 212(n)(3)(A). But even a dependent H-1B employer or willful violator need not recruit for a US worker first, or be concerned about displacement,  if it pays the H-1B worker over $60,000 or the worker has a Master’s degree. See INA 212(n)(3)(B).  The employer has to pay the higher of the prevailing or the actual wage among the workers that it employs and not which Disney employs. The replacement H-1B worker relating to the skill needed for Disney’s new technology platform need not have 10 years of experience, but probably less experience, and can be paid accordingly but still at the prevailing wage.

Critics of the H-1B program seize upon INA 212(n)(1)(A)(ii), which  states that an employer “will provide working conditions for such [an H-1B] nonimmigrant that will not adversely affect the working conditions of workers similarly employed.”  They argue that it is this provision that renders what happened at Disney to be in violation of the spirit of the law, if not the letter of the law.  But this is hardly the case. INA 212(n)(1)(A)(ii) represents the second of four attestations that a non-dependent employer makes on a Labor Condition Application. 20 CFR 655.732(b) defines “working conditions” to “include matters such as hours, shifts, vacation periods, and benefits such as seniority-based preferences for training programs and work schedules.” The first attestation is that the employer agrees to pay the higher of the prevailing or actual wage. The third attestation that the employer makes is that there is no strike or lock-out in the occupational classification at the place of employment. The fourth and final attestation requires the employer to provide notice to the bargaining representative, and if none exists, then it must be posted at the place of employment for 10 days.

INA 212(n)(1)(A)(ii) does not mandate that the employer has to first recruit US workers. Elsewhere in INA 212(n) it is clear that only a dependent employer or one found to be a willful violator, who has no exempt H-1B workers, is required to recruit US workers and be concerned about displacing American workers at client sites. See INA 212(n)(1)(E), (F) and (G). While it intuitively makes sense for the employer to be required to test the US labor market before hiring all H-1B workers and be concerned about displacing a US worker, the H-1B visa is a temporary visa, and there is also the countervailing policy interest for employers  to be able to expeditiously hire foreign national workers to urgently execute projects. If they wish to sponsor them for permanent residence, there is an elaborate procedure for the employer to first certify that there was no willing or qualified worker for the position. H-1B workers have to also be paid the higher of the prevailing or actual wage, and at times the prevailing wage mandated by the Department of Labor seems to be higher than what it is in reality in many occupations.

The use of IT consulting companies is widespread in America (and even the US government contracts for their services), and was acknowledged by Congress when it passed the American Competitiveness and Workforce Improvement Act of 1998 (AVWIA) by creating onerous additional attestations for H-1B dependent employers. The current enforcement regime has sufficient teeth to severely punish bad actors.  IT consulting employers who hire professional workers from India unfortunately seem to be getting more of a rap for indiscriminately using up the H-1B visa. However, it is this very business model has provided reliability to companies in the United States and throughout the industrialized world to obtain top-drawer talent quickly with flexibility and at affordable prices that benefit end consumers and promote diversity of product development. This is what the oft-criticized “job shop” or “body shop” readily provides. By making possible a source of expertise that can be modified and redirected in response to changing demand, uncertain budgets, shifting corporate priorities and unpredictable fluctuations in the business cycle itself, the pejorative reference to them as “job shop” is, in reality, the engine of technological ingenuity on which progress in the global information age largely depends.  Such a business model is also consistent with free trade, which the US promotes vehemently to other countries (including the protection of intellectual property rights of its pharmaceutical companies that keep life saving drugs high), but seems to restrict when it applies to service industries located in countries such as India that desire to do business in the United States through their skilled personnel. US companies and IT consulting companies should engage in more public relations efforts to highlight the overall benefits of their collaborations, which in the case of the Disney episode was admittedly not enough.

By continuing to limit and stifle the H-1B program, US employers will remain less competitive and will not be able to pass on the benefits to consumers. We need more H-1B visa numbers rather than less. We also need to respect H-1B workers rather than deride them, even if they work at IT consulting company, as they too wish to abide by the law and to pursue their dreams in America.  The best way to reform the H-1B program is to provide more mobility to H-1B visa workers. By providing more mobility, which includes being able to obtain a green card quickly,  H-1B workers will not be stuck with the employer who brought them on the H-1B visa, and this can also result in rising wages within the occupation as a whole. Mobile foreign workers will also be incentivized to start their own innovative companies in America, which in turn will result in more jobs. This is the best way to reform the H-1B visa program, rather than to further shackle it with stifling laws and regulations, labor attestations and quotas.

Cyrus Mehta

The Ambiguous B-1 Visa: Lessons Learned From the Infosys Settlement

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Infosys is one of India’s most storied IT companies with a roster of impressive clients in the US, including named Wall Street Banks, Silicon Valley companies, retail chains, insurance companies and manufacturers. With a footprint all over the world and known for its integrity and probity, it thus came as a surprise that the United States accused Infosys of malfeasance in procuring visas for its foreign national employees to come to the US.

The US Attorney’s Office for the Eastern District of Texas, in conjunction with the Department of Homeland Security, launched an investigation in 2011 into Infosys’s alleged misuse of B-1 business visas. The investigation was spurred by a whistleblower’s law suit that made similar allegations, which got dismissed. On October 30, 2013, Infosys reached a settlement agreeing to pay a civil fine of $34 million to the US government, the biggest fine ever paid for an immigration case, but did not admit to the allegations of fraud and malfeasance.

There are plenty of lessons one can take away from the Settlement Agreement upon an objective review. Despite the seriousness of the allegations, Infosys did not incur any criminal liability. For instance, the government accused, among other things, the IT giant for bringing its employees on B-1 business visas to the United States to actually perform work. The government further accused Infosys of generating invitation letters to US consular officials indicating that their purpose of travel was for “meetings” and “discussion” when the true purpose was to work in the US, which can only be performed under the more onerous H-1B visa, such as coding and programming. Infosys, on the other hand, countered that it has always used the B-1 visa for legitimate purposes and not to circumvent the H-1B visa. Infosys also stated that the Department of State’s Foreign Affairs Manual permits other activities under the B-1 visa provided that they are incident to international trade or commerce, including those alleged by the US to be improper, such as coding and programming. The government also accused Infosys of directing its employees to misrepresent that they would be performing work at the location stated on the Labor Condition Application (LCA) underlying the H-1B visa petition, when they would actually be going to work at another location. Infosys also denied this accusation. Infosys, however, admitted to violations concerning its obligations to verify employees on form I-9. Still, despite the denial of any fraud or malfeasance, Infosys paid a humongous fine of $34 million.

It was indeed the ambiguity in the B-1 rules that snared Infosys and it was the same ambiguity in the B-1, which ultimately saved it from criminal liability. This is evident in the statement of the lead prosecutor in the case, Shamoil Shipchandler, who is quoted in a Wall Street Journal article:

“It’s not 100% clear what someone who holds a B-1 visa can actually do,” he said. For example, placing someone within a company for six months to do in-house tech support is an improper use of a B-1 visa. But if a consultant helps refine software during a meeting with a client, as part of a larger project, that could be seen as an appropriate use of a visitor visa, Mr. Shipchandler said. “It’s a murky area, but for our purposes they misled consular officials.”

As we noted in a prior blog on the B-1 category, the B-1 business visa remains one of the “most ill-defined” visas but plays a very important role in providing flexibility to business travelers. While the B-1 visa is associated with visiting the US to participate in meetings and negotiate contracts, it can have broader purposes. For example, the “B-1 in lieu of H-1B” was created to facilitate travel to the US of individuals who would otherwise qualify for an H-1B visa, but only needed to come to the United States for a limited period of time. In the current controversy over the B-1 visa, scant attention has been paid to the “B-1 in lieu of the H-1B,” which permits broader activities than the regular B-1 visa, albeit for a short period of time. Indeed, many of the activities that have been alleged to be outside the scope of the B-1 may be permissible under the “B-1 in lieu of the H-1B.” The case law with respect to business visitors only adds to the confusion over the definition of “business” in the US.  In Matter of Hira, 11 I. & N. Dec. 824, the Board of Immigration Appeals (BIA) held that the term “business” does not include ordinary labor for hire, but is limited to intercourse of a commercial character. The BIA concluded that an alien entering with a B-1 visa to “study the US business market”, who on behalf of his employer (a Hong Kong based manufacturer of custom made men’s clothing), took orders from, and the measurements of, prospective customers in the United States whom he did not solicit; and who then sent the orders, together with the purchase price, to his employer overseas, was engaged in “intercourse of a commercial character,” and was eligible for B-1 visitor for business classification. The BIA specifically stated that Hira’s sojourn in the US was of a “temporary character” and he clearly intended to continue his foreign residence at the termination of his authorized stay. The profits of Hira’s B-1 activities also accrued to the foreign entity. The BIA, however, also clarified that the nature of the business activity itself need not be temporary. The BIA held that for B-1 purposes, the business relationship may be of a continuing or long standing nature. The only condition in this respect is that each visit be temporary in duration. While applicants can make their best case under the ambiguous standards of the B-1 visa in a forthright manner, deception and malfeasance can never be tolerated.

Even though Infosys is allowed to continue to access US visas in the future under the settlement, which also expressly ensures that past investigations  or alleged wrongful conduct will not be used to prejudice future applications, this episode is a wakeup call for others to ensure that corporations exercise good governance with respect to immigration matters. There is bound to be stricter scrutiny in the future of all applicants, and there is little doubt that Congress in future legislation may also use the Infosys example to tighten the ability for IT consulting firms to access business and work visas, as it has already accomplished in S. 744. Still, this episode can prove to be a valuable teaching moment for Infosys and other IT consulting firms. One of the conditions under the settlement agreement is that Infosys will provide more detailed description of the activities that will be performed when an applicant applies for a B-1 visa. As the B-1 visa allows a wide range of permissible activities, a best industry practice can evolve to specify the proposed activities in some detail, and the legal basis for them, when applicants apply for a B-1 visa or at the time of seeking admission at a port of entry. As a quid pro quo, it is hoped that the government will also seriously adjudicate such applications on their merits.

The work location indicated in the LCAs of H-1B workers in the IT consulting industry are also bound to change after the initial filing. Interestingly, the settlement agreement does not suggest that the employer file an amended H-1B petition, and instead, only alleged that Infosys did not submit a new LCA covering the new location. In the future, employers should immediately file new LCAs to cover the new locations after the original location has changed, and make disclosure at the time of applying for a visa or at the port of entry. It may also be prudent for the employer to proactively file LCAs in future anticipated locations, whenever feasible, in case there is a change in the work location, thus obviating the need to submit one after the H-1B petition is already approved. It is further hoped that the government will not insist on the more cumbersome and expensive H-1B amendment, which was not suggested in the settlement agreement.

It goes without saying that employers must also be compliant with their I-9 obligations. While there have been no dearth in enforcement actions for I-9 violations, the action against Infosys was novel as it involved allegations of misuse of the B-1 visa in addition to the I-9 violations, while Infosys countered by saying that its use of the B-1 was proper. Despite the settlement, the scope of the B-1 visa continues to remain ambiguous, although it would behoove employers to articulate the reasons for the B-1 visa in an application and then to have their employees abide by the terms and conditions upon visiting the US.

As noted in a prior blog, it is important too for the end user client company to be vigilant to ensure that foreign national workers assigned to the company are working under the appropriate visa categories. In the event that the end user client has knowledge or encourages activities not authorized under these visa categories, there is potential for the company to be ensnared in criminal liability.  Even short of criminal liability, it is important to make sure due diligence has been done to avoid being caught up in an embarrassing investigation against a partner company. If the end user company urgently needs software engineers through its IT contracting company for a project, a manager within the end user company may be requested to write a let­ter as a client of the contracting compa­ny to justify the need for its employee overseas to visit the US on a B-1 visa. If this letter indicates that the software engineer is required for meetings, or to conduct an analysis of the project to be subsequently worked on overseas (an obviously per­missible B-1 activity), but the actual pur­pose is for the engineer to actually par­ticipate in programming and working on the solution in the U.S., it may come back to haunt the end user company if there is a criminal investigation against the IT contracting company. Therefore, when drafting such a letter, it is important to ensure that the proposed activities discussed in the letter are per­missible B-1 activities, and when the foreign national arrives, he or she engages in activities that are consistent with the listed activities.  Of course, if the foreign national is assigned to perform work at the client company, the end user must ensure that the worker has an appropriate work visa such as the H-1B visa. End user clients must cooperate with the sponsoring employer to post the LCA at their sites.

Some years ago Wal-Mart was criminally investigated for engaging janitors as independent contractors when it knew that they were not authorized to work in the US. The investigation ended with a consent decree in 2005 where Wal-Mart like Infosys did not also acknowledge any wrong doing,  although the practices that have emerged from that episode with respect to ensuring that even employees of independent contracting companies have I-9s have become the gold standard. While its reputation has taken a beating – not to mention that Indian heritage IT firms even if compliant have borne the brunt of intense governmental scrutiny in recent years – Infosys also has the opportunity to develop gold standard best practices in the B-1 and other arenas (such as tracking work sites of their employees under the LCA) to not only comply with the terms of the settlement but to also assure its prestigious clients who must be anxious after the settlement.

Infosys should consider itself fortunate that it did not go down in flames like Enron or Anderson, and has been given another chance. It must seize this opportunity to redeem itself by elevating standards and best practices, which others will follow and which the government will hopefully honor.  In conclusion, the following quotefrom US Attorney for the Eastern District of Texas is worth noting:

“Infosys persuaded me and our partners that they could be fully fledged legal participants in the immigration process of the United States, so we’ll see,” Bales said. He added that Infosys hired American workers and was valuable to the American economy, and “we’re not in the business of putting people out of business when they provide value.”

Cyrus Mehta

THE MANY PROBLEMS SURROUNDING THE H-1B VISA CAP

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Everyone was rushing to file H-1B visa petitions between the April 1-5 window as there was a sinking feeling that the USCIS would receive more than the 65,000 cases allocated under the H-1B annual cap as well as more than the 20,000 cases under the additional Master’s cap. Just as we were emerging from the H-1B filing madness – as we were all underwater working desperately hard for our clients – USCIS announces on April 5 itself that both the caps have been reached.

This means that all H-1B cases properly filed between April 1-5, 2013 will be subject to a randomized lottery. It also means that those not selected, will need to wait to file next April 2014. If we do not get more H-1B visa numbers from Congress, people rejected this year could stand a chance of being rejected next year in 2014 too based on the randomized lottery. Those who will be selected, and the chances of being selected depend on how many more H-1B cases USCIS received over 85,000, can only start their H-1B employment on October 1, 2013.

If a company now wishes to hire a badly needed engineer from abroad, it will need to wait till October 1, 2013 before this person can come on board, and that too if this worker was lucky enough to be selected under the lottery. It is self evident that the cap hinders the ability of a company to hire skilled and talented workers in order to grow and compete in the global economy. The hiring of an H-1B worker does not displace a US worker. In fact, research shows that they result in more jobs for US workers.

It is also ironic that the USCIS should announce the H-1B cap on the same day that the job report for March 2013 was announced. The US added a dismal 88,000 jobs in March, but US employers clearly filed more than 85,000 H-1B cases this week for jobs that they can only fill on October 1, 2013. It will be interesting to further understand why there has been this demand for H-1Bs when the job report was so anemic. The H-1B cap was reached much quicker this year, and the last time the cap was reached so quickly was in 2008. It’s clear that the economy has revived notwithstanding the March job report, and business immigration lawyers, who rush to file H-1B cases on behalf of US employers,  tend to see upticks and downturns in the economy faster than others! Some more analysis is needed on the latest job report.

Still, it makes absolutely no sense to impose an H-1B cap. Let the market do the job of determining how many H-1Bs can enter the US based on the fluctuating demands of employers. At one point, when the H-1B cap prior to 2003 was 195,000 for a few years, this quota was never filled. Therefore, H-1B quotas do not necessarily dictate how many H-1B visa cases will be filed. It is market conditions that determine H-1B usage. Based on the lessons from the H-1B cap, it does not make sense to impose arbitrary caps at all, especially with respect to other temporary visas. In the negotiations involving comprehensive immigration reform regarding low skilled workers, business and labor trumpeted that a deal had been reached on future flows. When times are good, according to the deal, employers would be able to benefit from 200,000 workers; and when times are not so good they would only be able to get 20,000 workers. While a flexible cap based on market conditions is still better than a fix cap, such as the H-1B cap, there is no way of knowing whether businesses may need more than 20,000 low skilled workers even when there is an economic downturn. And when times are good, there is no way of knowing whether 200,000 visas would be sufficient.

The H-1B cap also arbitrarily forces employers to make hiring decisions for positions that will only materialize after 6 months. In certain industries, such as IT consulting, employers may not yet have an assignment for a worker who may be placed at a third party client site. Yet, an H-1B petition filed without being able to specify with laser precision the work site will be less likely to be approved by the USCIS. Indeed, in recent times, an employer who designated its headquarters as the worksite, when the intention was to place the H-1B worker at client sites, have been criminally prosecuted for not stating its true intentions and for also not paying the workers the H-1B wage until they were assigned to a client.

While the allegations made in the indictment against this employer are particularly egregious, many bona fide IT consulting employers are unable to precisely locate the work assignment six months ahead of time even though they do have a legitimate roster of clients, ongoing work and have every intention to pay the H-1B worker the required wage as soon as  he or she arrives in the US on October 1, 2013. Such employers who genuinely indicate in their H-1B petitions that they may not have a current assignment but do have the ability to offer a position on October 1, 2013, should not be penalized by wholesale denying their H-1B petitions or to be perceived as engaging in fraudulent conduct. After all, the concept of a fixed worksite has become quite antiquated in the second decade of the 21st century as H-1B workers in certain industries can be mobile, work out of their laptops from remote locations, and visit the client location whenever necessary. It is hoped that future H-1B rules give way to the more contemporary notion of a workspace rather than a physical worksite.

Finally, IT consulting employers who hire professional workers from India unfortunately seem to be getting more of a rap for indiscriminately using up the H-1B visa. However, it is this very business model has provided reliability to companies in the United States and throughout the industrialized world to obtain top-drawer talent quickly with flexibility and at affordable prices that benefit end consumers and promote diversity of product development. This is what the oft-criticized “job shop” readily provides. By making possible a source of expertise that can be modified and redirected in response to changing demand, uncertain budgets, shifting corporate priorities and unpredictable fluctuations in the business cycle itself, the pejorative reference to them as “job shop” is, in reality, the engine of technological ingenuity on which progress in the global information age largely depends.  Such a business model is also consistent with free trade, which the US promotes vehemently to other countries, but seems to restrict when it applies to service industries located in countries such as India that desire to do business  in the US through their skilled personnel.

Negotiations in the Senate regarding high skilled  workers in a comprehensive immigration reform proposal suggest that a future H-1B visa for employers who rely on H-1B workers may be more restrictive or they be subject to a much higher fee. If there is so much opprobrium against  the use of H-1B visas by offshore IT consulting companies, why not create a whole new visa category that will be linked to free trade in services. This visa, which we can call a Service Visa,  can be somewhat more restrictive than the H-1B visa by requiring a lesser duration of time and perhaps require that the worker be employed at the foreign entity before such a visa can be used. It also need not allow “dual intent” and require the worker to have ties with the home country. If such a worker is to be sponsored for a green card, he or she may have to first switch to the H-1B visa.

In conclusion, H-1B caps are generally bad for US employers and for the economy, and this one on April 5, 2013 has been particularly nasty. They do not allow employers to function and compete in a more natural market for skilled workers. The H-1B cap has not been raised for a long time, and it is time that we creatively reform the system rather than  forcing employers to madly rush to file H-1B petitions in early April each year, only to find their fate being determined by a randomized lottery with respect to workers they so badly need to remain competitive.