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Greater scrutiny and higher costs take shine out of H-1B visa

Posted on May 16, 2011
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Last month, Sanjay Kumar (name changed on request) and his wife Seema, who is expecting a baby, travelled to Delhi from the US to attend a wedding. That was the beginning of a nightmare for the couple.

Kumar had been living in the US for nearly seven years, two years as a student, followed by five years working with a small IT services company owned by an Indian American in New Jersey. On returning to India, Kumar had to get his H-1B visa stamped at the US Embassy in Delhi because he was on an ‘H-1B extension’.

The H-1B visa is a work permit that allows highly skilled workers like Kumar to work in the US. The visa is valid for a period of three years after which it can be extended again. Two weeks after he applied for the H-1B, Kumar received a form asking for additional questions about the company that he worked for.

A week later, his visa was suspended on the grounds that his employer was not able to provide qualifying employment according to US rules and regulations. “I have lived in the US for seven years and worked with this company for five years. I have a house in New Jersey, a car, and my wife and I have bank accounts. We don’t know what to do,” says Kumar, who is also seeking legal advice.

Over the past few months, cyberspace is buzzing with stories of how Indian companies and visa applicants (like Kumar) are finding it tougher to get H-1B visas or even securing extensions.

“The United States Citizenship and Immigration Services (USCIS) is denying many H-1B petitions…and if a person is lucky to get the approval, the US authorities, particularly the embassy and consulates in India, seem to be denying many H-1B and H-4 visas to applicants who travel to India and apply at the consulates for a visa stamp to re-enter the US,” said Sheela Murthy, founder and president of the Murthy Law Firm in Owings Mills, Maryland, and a top immigration lawyer in the US.

Besides, many H-1B extensions are also being denied. This causes huge problems for H-1B employees who have homes, assets, liabilities and families all entrenched in the US. “They are expected to pack up and leave the US within a few weeks after an H-1B denial unless the family is lucky to have filed the I-485 and obtained the employment authorisation document,” added Murthy.

Demand for the H-1B visa is cooling off. This year, by May 6, USCIS, the agency that oversees immigration and visas, has received only 10,200 petitions counting towards the 65,000 cap, and another 7,300 applications in the ‘master’s exemption’ category. The first 20,000 applicants who have a US masters degree are not counted towards the 65,000 limit.

Back in 2007, the quota for H-1B visas for 2007-08 was exhausted before the end of the first day on which visa applications were accepted (April 2, 2007). It was then that Microsoft founder Bill Gates had suggested that the cap (set at 65,000 per year) on the H-1B be removed all together. In all, USCIS had received 1,19,193 H- 1B visa applications on April 2 and 3, 2007. It granted visas to 65,000 applicants using a random, computer-generated lottery selection.

In a complete turnaround, 2011 is the second consecutive year that the dash for H-1B visas has slowed to a stroll. For 2010-11, for which the USCIS began accepting petitions on April 1, 2010, it took 301 days to reach the cap. Murthy said the demand for H-1B this year is “probably the lowest in the high-tech era”, which began in the early 1990s. Why has demand for this guest-worker visa programme, which has brought to the US anywhere between 1.6 million and 2 million high-skilled workers over the past two decades dropped in the past two years?

Recession and the Backlash

For one, the scars of the recession, which ended a few quarters ago, have ensured that companies are still unsure about ramping up hiring. The US national unemployment was 9.2% in March 2011, according to the US Bureau of Labor Statistics.

Johnson Myalil, an immigration attorney at High-Tech Immigration Law Group, in Reston, Virginia, said many large US tech companies are not hiring guest workers because they want to avoid lay-offs. “They don’t want to be seen as hiring foreign workers on the one side and then laying off American employees,” said Myalil.

Also, over the years, complaints that H-1B workers are displacing American employees and keeping salaries relatively low have been growing steadily. As a result, the past few years saw the threshold for H-1B approvals being raised dramatically.

The ones most affected by this increased scrutiny are small businesses, especially those in the once-lucrative IT consulting and manpower supplying business. “The USCIS is bringing a very narrow interpretation of employee-employer relationship now,” said Myalil. “The new sermon on the mount is employers should have control over the employee at all time.”

In a consulting company set-up, it is very difficult to establish that the employee would be directly reporting to the firm that hires him. “Chances of getting an H-1B petition approved are much less these days,” said Vinson Palathingal, the founder and CEO of Amaram Technology Corporation, a small consulting company based in the Washington, DC metropolitan area.

Since 1998, the company has hired nearly 80 guest workers, nearly all from India, on H-1B visa. Palathingal said he doesn’t plan to hire any new H-1B employees this year adding that a sharp rise in H-1B filing costs have also made guest workers less appealing for small businesses like Amaram.

Last August, Congress increased fee for companies that employ a large number of foreign workers by at least $2,000 to fund additional security measures on the US- Mexico border. The increase applies to firms that have 50 or more workers in the country, with more than half of their US employees in H-1B & L-1 categories.

“It was mainly because of the economic slowdown that for the past two years the H-1B quota was available till January. This year too, the quota will be available throughout the year, at least till December 2011,” said MV Nayak, general manager, overseas operations cell, Wipro Technologies. He added that the increased cost of the H-1B visas could be another reason for lower applications. “Since H-1B visas are available now for many months with the cap not being hit, companies like to apply for H-1Bs only when they need them. That saves them money,” said Ameet Nivsarkar, vice-president, Nasscom .

More Scrutiny?

For the Indian IT giants such as Infosys, Wipro and TCS, paying the extra visa fees are not the real problem. The Indian firms are now battling perceptions that they are flooding the US market with cheap labour from India.

Recently, the influential Iowa Senator Chuck Grassley called for an investigation of Infosys, which he said has “allegedly” committed “fraudulent actions” to circumvent “the requirements and US worker protections of the H-1B visa program”. Historically, India has been the single largest source of H-1B manpower and one of its biggest beneficiaries. In 2010, Indian applicants received 65% of all H-1B visas issued worldwide, according to a US state department official.

Grassley’s call is the latest in a series of negative publicity for Indian firms and employees, who had been facing criticism over outsourcing for the past several years. A 2008 USCIS report had found that nearly half of the beneficiaries of H-1B fraud and technical violations were employees from India.

A few months later, federal agents arrested 11 people, all of them of Indian origin, in six states following a visa and mail fraud investigation. Many said that report may have been the trigger for the stringent measures put in place by the USCIS and American consulates in India.

“We can expect more denials and more department of labour, fraud detection and national security investigations. Companies will need to very careful and make sure that all assertions are documented and verifiable. It is also important that employees monitor their employers’ processing and compliance,” says Rami Fakhoury, member of the Troy, Michigan-based Fakhoury Law Group.

Having said that, how does the year ahead look like? Immigration watchers expect a marginal rise in demand from last year. “We are seeing a marginal increase. Some smaller companies are looking at processing a few H-1Bs, which they were wary of doing last year. This seems to indicate increased business revenues from the US,” points out Mumbai-based immigration lawyer Poorvi Chothani.

All about H-1B

A non-immigrant visa category that allows US employers to augment the workforce with highly skilled temporary workers. H-1B workers are admitted to the US for an initial period of three years, which may be extended for another three years.

What’s the H-1B cap?

The US Congress sets a limit for the number of workers allowed to be admitted, popularly known as the H-1B cap. Initially, the cap was set at 65,000 in 1992. It was first reached in 1996-97.

With the dotcom boom and the Y2K scare, in October 1998, it was temporarily increased for 1999-2000 to 115,000. Later the numbers were further hiked to 195,000 for 2000-01, 2001-02 and 2002-03. The H-1B cap was reduced to 65,000 in 2004-05.

Which was the peak year for H-1B visa demand?

In 2007, the USCIS received a record 119,193 H-1B visa applications on April 2 and 3. It granted visas to 65,000 applicants using a random, computer-generated lottery selection.

How did the recession affect the H-1B demand?

As businesses froze on hiring, the cap for 2009-10 was reached only in December 21. This year, by May 6, USCIS has received only 10,200 applications.


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