There are modifications to the H-1B program that would make a meaningful difference to U.S. businesses, American workers, and foreign talent interested in working in the United States that do not involve changing the number of visas on offer. The reality is the program was not designed to function in the way it has been sold to public: as a program to fill legitimate hiring gaps with the “best and the brightest” from abroad. Rather, the program – including its authorizing statute and implementing regulations – give employers, including third-party recruiters, lawful options if they want to replace U.S. staff with underpaid foreign labor.
Egregiously, many of the top H-1B employers are outsourcing companies or companies with business models that are designed to permanently take businesses from the United States and bring them abroad. Currently, nothing in the authorizing statutes or implementing regulations prevent or penalize employers who abuse the H-1B program in this fashion.
Many other top H-1B employers are Silicon Valley giants who have laid off thousands of their domestic workers in the past 12-24 months. Mass layoffs followed shortly by large numbers of H-1B hirings is not an uncommon phenomenon, unfortunately. The law only provides minimal protections to U.S. workers against unfair competition and replacement.
Loopholes That Allow Employers to Replace Their American Workers
Most Americans – myself, included, at least before I got into this profession – believe that federal immigration and labor laws prohibit employers from hiring H-1B workers for the purpose of replacing their domestic U.S. workers. The truth is that the protections U.S. workers receive are so weak that they appear to be almost designed to be ignored. (You can read my colleague George Fishman’s report on the H-1B program’s failures here.)
In order to even petition U.S. Citizenship and Immigration Services (USCIS) for an H-1B worker, for example, an employer must first file a Labor Certification Application (LCA) with the Department of Labor (DOL). To have an LCA approved, however, employers do not need to prove that they won’t displace their U.S. workers or provide any firm evidence dispelling an ill intent to do so. They also do not need to demonstrate (or even claim) that they attempted to hire a U.S. worker to fill the vacancy first. To receive an approved LCA, the employer only needs to “attest” four things:
- That the employer will pay the nonimmigrant worker either the average wage for the same or similar job in that area or the average pay rate for other people doing a similar job within the company (more on this below);
- That hiring H-1B nonimmigrants will not cause a negative effect in the current “working conditions” of those already working with the company in similar roles;
- That there is not a strike or lockout in the course of a labor dispute at the place of employment; and
- That they provided notice to their workforce (or its bargaining representative, if any) of the filing of a LCA with DOL.
Only “H-1B-dependent” employers – such as Meta, Facebook’s parent company – are required to jump through slightly higher hoops to petition for H-1B workers.1 An employer is considered “H-1B dependent” if a significant portion of its workforce is made up of H-1B visa holders.2
H-1B-dependent employers not only need to go through the standard LCA, but must also attest that they will not displace U.S. workers within 90 days before or after petitioning for an H-1B employee – but only if the H-1B worker they petition for is being offered less than $60,000 and has not earned a degree higher than a bachelor's degree. If either condition is met, however, the worker is considered “exempt” for purposes of this requirement. It’s also important to note that employers can petition for H-1B workers as early as six months out – so the 90 day no displacement period is not as meaningful as it may sound.
FY 2020 data from the Department of Labor demonstrated that nearly 98.6 percent of the workers on certified labor condition applications claimed an exemption from H-1B-dependent rules, and paints a clear picture of how weak these protections are for most affected workers. And, as a reminder, merely “attesting” something to be true does not provide the same level of assurance as having to demonstrate or present evidence that something is true.
Loopholes That Allow Employers to Lawfully Underpay Foreign Workers
Many Americans know that the H-1B statute says that employers must pay workers the higher of the actual wage provided to their employees in the same or similar occupations or the prevailing (average) wage for that occupation in the region where the employee will be working. What many do not know, however, is that the law instructed DOL to set four wage rates, through regulation, to correspond to how much an employer is required to pay a foreign worker based on their level of experience. Here, three of the four wage rates DOL set are at or below the prevailing or average wage.3
Unsurprisingly, the vast majority of H-1B workers petitioned for by employers are at the first or second wage rates – requiring these employers to pay these workers the 17th or 34th percentile of the prevailing wage, what an average worker in that occupation and region makes. Data provided by the Department of Homeland Security in November 2020 showed that the two-year average of H-1B selections for FY 2019 and FY 2020 indicated that 85 percent employers were paying at wage level one or two. Additionally, 90 percent of petitions that claimed an advance degree exemption were given to employers paying at wage levels one and two.
This means that employers stand to save thousands for each H-1B worker they hire instead of an American worker, especially if a specific worker’s wage level is misreported by the employer as lower-skilled. In cases where the wage levels are reported honestly, it suggests that the H-1B program is benefiting lower skill or entry-level workers more often than workers with higher levels of expertise or experience.
Foreign workers who are eager for opportunities in the United States have an increased incentive to accept offers that are below market value. Moreover, neither an H-1B beneficiary nor DOL have the practical ability to challenge an employer’s claim regarding a worker’s skill level. In fact, DOL is only permitted, under law, to deny an LCA on the basis that the application is found to be “incomplete or obviously inaccurate”, limiting the extent of permissible agency review.
Fixing the wage rate regulation is an easy fix – one that the first Trump administration finalized by the end of its first term. The change was ultimately discarded by the incoming Biden administration in 2021 – possibly at the bequest of Silicon Valley lobbyists – and never put into effect.
What More Can Be Done?
The quickest and easiest reform the incoming Trump administration (or Congress, for that matter) can make is to reinstate the rule it finalized on January 8, 2021, that requires USCIS to select the highest-paid H-1B petitions in years where the demand of H-1B workers exceeds the supply of visas. Currently, USCIS conducts a random lottery, which not only allows the lowest-skilled workers to crowd out the “best and brightest”, but also gives no weight to industries or occupations that have the greatest need for more workers. This reform was also abandoned by the Biden administration before it could go into effect.
Additionally, because federal law already requires companies to attest that they “will not adversely affect” employees on an H-1B hire's way in, it should also require companies to prioritize the retention of their American workforce (i.e., U.S. citizens and green card holders) over temporary nonimmigrant workers in similar occupations when workers must be laid off.
I also see no reason to limit the requirement that an employer will not displace an U.S. worker to H-1B-dependent employers or to limit the unlawful displacement period to just the 90 days before and after submitting a petition. These are all small tweaks to the statute and regulation that would protect the interests of U.S. workers and foreign workers alike. They would also benefit businesses that are impeded from bringing on talented workers because of third-party recruiters and other importers of cheap labor that abuse the program.
End Notes
1 Notably, Tesla is not considered an H-1B dependent employer, but may become one soon. Currently, about 10 percent of its workforce are H-1B visa holders.
2 Companies with at least 51 full-time employees are considered “H-1B dependent” if 15 percent of their workforce are H-1B visa holders. Companies with 26-50 full-time employees qualify if they employ 13 or more H-1B visa holders. Companies with 25 or fewer full-time employees need to only have eight H-1B workers to obtain this status.
3 Wage percentiles are currently set at Level 1:17 percent; Level 2: 34 percent; Level 3: 50 percent; Level 4: 67 percent.