Labor Department H-1B Enforcement: A Paper Tiger

By David North on June 21, 2013

One of the problems with the H-1B program, which brings low-paid, high-tech workers to the United States in the hundreds of thousands (and that would be dramatically expanded by the Schumer-Rubio bill now being debated in the Senate), is that there is a broad streak of fraud within it.

It should be noted that even when the program runs as it is supposed to, it takes multitudinous jobs away from American workers and it reduces wages for all in its ambit.

Regarding fraud in the program, the Government Accountability Office (GAO) reported a couple of years ago the incidence of fraud or technical violation in 21 percent of the cases it examined.

Three cabinet departments handle various parts of the program — a problem in itself — including Labor, Homeland Security, and State. None of them has done a good job in containing fraud, including the Labor Department, which, ironically, has the best data on the subject.

A close examination of the recent statistics on the subject shows that the Department of Labor (DOL):

  • Denied fewer than 6 percent of the H1-B applications it saw in FY 2012; and

  • Has only 31 names on its current list of debarred H-1B employers.

Let's look at these two different (but linked) regulatory activities in turn.

Denials. The first step in the process of hiring an H-1B is to secure, from DOL, a Labor Condition Application (LCA). This is, unfortunately, a low-key screening process and such important variables as Americans losing jobs because of the H-1B applications is routinely not part of the equation. Nevertheless, some problems are sorted out at this juncture. (Later in the process the Department of Homeland Security (DHS) checks on the petitions and the availability of slots, and State interviews the workers overseas to see if they meet the needed qualifications.)

In 2010, CIS learned, by studying DOL spreadsheets, that the department had approved 258,381 LCAs, and denied 38,827 of them; the denial percentage of the total volume of applications was 13.1 percent that year.

By 2012 the volume of applications had increased by about one-fifth, but the denial rate had fallen to 5.4 percent.

While this new, lower rate might suggest a higher quality of applications on average, my sense is that it is more likely to reflect a lower level of governmental scrutiny. The 5.4 percent might be compared to the 21 percent incidence of fraud and technical violations found by GAO a few years earlier, although a direct numerical comparison may be misleading, as different methodologies are involved.

Employers often file more LCAs than workers they intend to hire, so the total number of applications does not reflect the total number of hirings. Readers wanting to review these spreadsheets can find them here (under the LCA Programs section).

Debarment. In addition to the initial review of applications, described above, by the department's Employment and Training Administration, another unit, the Wage-Hour Division, conducts some field investigations of H-1B operations.

If these reveal, as they sometimes do, really remarkable clusters of violations, the department debars the firms from using the H-1B program for two or three years.

Such decisions are rare, as CIS reported in a Backgrounder of mine two years ago. At that time, when one count showed more than 58,000 employers using the H-1B program, there were all of 60 employers on a list of those penalized over the previous five years (including two double entries).

The list of currently debarred employers (a slightly different concept than the earlier list) has 31 employers on it, one a double listing. The new list can be seen here.

The only one of the debarred outfits on the current list whose name sounded familiar to me was that of the Prince George's (Md.) County school system, which happens: 1) to be located within a dozen miles of my house, and 2) is part of a local government that has been subject to innumerable well-publicized scandals, investigations, and indictments of its officials in recent years, as noted in an earlier CIS blog.

Of the 31 debarred entities on the current DoL list, a majority of them (16) no longer are operating under the listed names at the listed addresses in the United States; four others seem to be existing under the listed names, but at different U.S. addresses; and another 11, including Prince George's County, appear to be still in business, and still at the same location. All of this appears to indicate that many, perhaps most, of the debarred firms were not major players.

If the DoL is playing the paper tiger in this case, the debarred firms are playing the roles of paper rabbits, paper squirrels, and paper field mice.

The author is grateful to CIS interns Tova Baars and Jesica Ray for their research assistance.