H-1B Program Gets Two (Well-Deserved) Kicks in the Ribs

By David North, September 21, 2010

The exploitative H-1B program for permitting corporations to hire nonimmigrant high-tech workers at cut-rate wages got a couple of unrelated but well-deserved kicks in the ribs last month.

A federal court ruled in favor of a USCIS memorandum designed to limit some of the worst abuses of the program, and the U.S. Labor Department forced a software firm to pay $1 million in back wages to 135 of its workers.

In both instances the Obama administration played an unusual role, that of cutting back a migration program. Its leaders may have been thinking in terms of zapping excessive corporate greed, which it did in these two situations, rather than in terms of reducing migration.

The origins of the court case grew out of a memorandum written by a senior USCIS career official, Donald Neufeld, in January of this year. It limited the role of middlemen using the H-1B program to place high-tech workers in jobs with other corporations.

Frankly, my initial reaction to the Neufeld memo was lukewarm, that it would have little impact on the exploitation built into the H-1B program, as I noted in an earlier blog, but once the users (and I would argue, abusers) of that program sued USCIS, I was convinced that Neufeld was on the side of the angels.

Three H-1B users (Broadgate, Inc., Logic Planet, Inc., and DVR Softek, Inc,) together with two trade associations (Techserve Alliance and American Staffing Association) felt threatened enough to sue USCIS under the Administrative Procedures Act, saying, essentially, that USCIS had exceeded its powers by issuing the memo. (The immigration lawyers' trade paper, Interpreter Releases, in its August 23 issue, identified the associations as "not-for-profit membership associations" as if there existed a category of for-profit trade associations.)

Computer World described the case this way:

The lawsuit argued that the IT staffing industry could lose some $100 million in business a year because of the memo. The firms that joined TechServe in filing the lawsuit were: Broadgate Inc. in Troy, Michigan, which counts 21 H-1B visa holders among its 46 IT workers; Logic Planet Inc., in Edison, N.J., which employees 95 IT workers, including 89 on H-1B visas; and DVR Softek Inc., also in Edison, N.J., which says that 45 of its 50 tech workers hold H-1B visas.

The five outfits argued their case before U.S. District Court Judge Gladys Kessler in the D.C. District Court. Her ruling against them was no sweeping indictment of the exploitative H-1B program; rather, it was a narrow finding that "the Memorandum does not constitute final agency action subject to judicial review."

There is no indication in the court's electronic files that an appeal has been lodged. For readers with access to the federal courts electronic records system, PACER, the decision can be found here.

The DOL action was meatier. The erring firm is Smartsoft International Inc., a mid-sized user of H-1B workers as software designers. According to a website that appears to draw data from DOL sources, the firm takes on about 150 H-1B workers annually, and ranks 147th as an H-1B sponsor. Its overall record is such, according to the website, that it has lost a number of certification battles with the government.

In this most recent case, according to another Interpreter Releases story (August 23), it was determined that "some employees were not paid any wages at the beginning of their employment, were paid on a part-time basis despite being hired under a full-time employment agreement, and were paid less than the prevailing wage..."

The non-payment at the start of employment presumably was designed to repay the employer for his up-front fees, a prohibited practice.

As part of a settlement that ended the dispute, Smartsoft agreed to pay nearly $1 million in back wages to 135 of its workers, presumably all H-1Bs. When you divide one million by 135 you get one of those wonderful repeating numbers, $7,407.407407 etc or a little over $7,407 each.

U.S. workers who did not get those jobs because of the H-1 program got another repeating number: 000000.

Neither of these cases, sadly, will dent the main thrust of the H-1B program, which is designed to lower wages for corporations employing foreign workers. In the instance of Smartsoft it was a case of an employer who was further abusing an already abusive program. While the Neufeld ruling will be helpful vis-a-vis the body shops that play a relatively small role in the overall program – which is good – it will have no impact on the ongoing utilization of the H-1B program by the likes of Microsoft, Goldman Sachs, and JPMorgan.

Similarly, the recent decision of Congress to raise H-1B fees for the job shops, useful as it is, will have no impact on the big corporations using the program.