A Visa Loophole as Big as a Mainframe

Date: Friday, February 28, 2003 2:19 PM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

The L-1 visa is finally getting some overdue press. We were treated to
a 4-part Orlando TV news special on L-1 and now BusinessWeek features
L-1 in a major article.

Information about the L-1 visa and how easily it's abused is quite
accurately reported. Unfortunately the facts on H-1B are so wrong it
mars the entire article. Let's take a look at some of the most blatant
of the errors:

-- Several times it is stated that companies can't use H-1B to displace
U.S. workers. That is totally false and it's very frustrating that
reporters continue to perpetrate this myth. Companies are not required
to favor American citizens when hiring or firing.

-- It was claimed that in 2001, Congress had specifically banned the
displacement of U.S. employees. The last significant vote on H-1B was
in 2000 so perhaps that was a typo. Senator Kennedy, in 1998, both in
committee and on the Senate floor, proposed amendments to legislation
so that companies must first try to fill vacancies with Americans
before using H-1B labor, and to forbid companies to hire H-1B labor
into positions whose skills were held by Americans who had been laid
off in the past six months. On May 18, 1998, both amendments were
tabled (killed) on the Senate floor even though the 6 month rule could
easily be abused by large companies. The actions of the U.S. Senate
proved that our politicians intended to make it legal to hire H-1B
labor into positions for which Americans are available, and they wanted
it to allow companies to lay off their American workforce and replace
them with H-1B labor.

In the House, a similar bill called the Watt Amendment to H.R. 3736
would have forbidden U.S. firms from using
temporary foreign workers to replace Americans, and would have required
U.S. firms to check a box on a form attesting that they had first
sought an American worker for the job. That bill was defeated by a vote
of 242-177. Our Congress thought that forcing companies to check a box
would impede business way too much.

-- We are treated to the old myth of prevailing salaries. The
prevailing salary rule is rarely enforced. Even worse, companies can
use their own biased surveys to determine prevailing salaries. At any
rate, the law of supply and demand dictates that as you glut the labor
market, prevailing salaries will continue to spiral downward.

Some other comments on the article:

-- CEO of TATA, S. Ramadorai, said that 1/2 of their workers are L-1s.
Could L-1s be on the verge of overtaking H-1Bs?

-- TATA claims that they are "in complete compliance with all laws and
regulations with respect to H and L visas." Even if their claim was
true they are in complete violation of the fair labor laws in the
United States. Just send your resume to them and you will see what I
mean - especially if your last name is something like Smith, Brown, or
Jones. If I was the reporter I would have asked Ramadorai how many
Americans he employs as engineers and programmers.

-- John L. Mica (R-Fla.) complained that L-1 it's a "back door to cheap
labor" and vows he will try to amend the L-1 statute if Justice doesn't
prosecute in the Siemens case.

Question: Which bill Mica voted against?

The answer: Watt ammendment to H.R. 3736

Excuse me for being skeptical but Mica's vow to ammend the L-1 to
protect American workers sounds very hollow. Is he just lying to
placate angry Floridians, or does he feel guilty his betrayal of
American workers in 1998?

L-1 definitely needs to be changed. Since corporations will never allow
it to be abolished perhaps we could at least insist on labor
certification so that a paper trail of LCAs could be viewed. That won't
help American workers since an ammendment of this type would probably
be as weak as H-1B.

MARCH 10, 2003

A Visa Loophole as Big as a Mainframe

More companies are using L-1 visas to bring in low-wage foreign

IT workers--and replace Americans

THE L-1 VISA SCHEME

Some 330,000 foreigners work in the U.S.
under a visa program called the L-1,
designed for intracompany transfers by
multinationals. While many use L-1s
legitimately, some are also using them to
circumvent the stricter H-1B visa

---- H-1B ----
* Companies can't use it to displace U.S.
workers and must pay H-1B workers the
prevailing U.S. wage.

* Employers must file detailed documents
with the Labor Dept., which closely monitors
H-1B visa holders.

---- L-1 ----
* Although this visa only applies to execu-
tives, managers, and workers with "spe-
cialized knowledge," foreign outsourcing
companies are using it to supply thousands
of high-tech workers to U.S. companies.

* The L-1 has no prohibitions against dis-
placing Americans or requirements to pay
prevailing wages

* Lightly supervised by the State Dept., the
L-1 allows foreign IT outsourcing firms to
file blanket petitions for ongoing approval
to bring "multiple aliens" into the U.S.

Senior systems analyst Patricia Fluno was shocked when she found out
last summer that she and 11 colleagues in the Lake Mary (Fla.) offices
of Siemens (SI ) were being replaced by techies brought in by Tata
Consultancy Services, India's largest
information-technology (IT) consulting firm. Fluno, 53, couldn't
understand how Tata and Siemens could bring Indian workers into the
U.S.

After all, in 2001, Congress had specifically banned the displacement
of U.S. employees by foreigners brought in under the
controversial H-1B visa program, which many employers had tapped to
fill vacant jobs in the booming 1990s. Congress also had
demanded rules requiring employers to pay H-1B workers prevailing U.S.
wages--and Siemens made no bones about the cost-cutting nature of the
layoffs. When Fluno asked one of the replacements about his visa during
the two months that she trained him to take her job, Fluno says a
Siemens manager told her not to ask such "personal" questions.

Fluno was onto something. In fact, Muralidhar Naidu Kollu, the Tata IT
analyst who now sits at Fluno's desk and does her job, didn't have an
H-1B at all. Instead, Fluno learned, Tata used a more obscure visa
called the L-1, which is designed for intracompany transfers by
multinational corporations. Even though Tata's primary business is
supplying off-shore IT expertise to U.S. companies, it used the loosely
regulated L-1 program to place Kollu and 11 other Indians in Siemens'
Florida offices. Reached at Fluno's old phone number, Kollu, who speaks
halting English, says he specializes in SAP software, just like Fluno.
He declined to discuss his salary, but Fluno says her Siemens
supervisors told her he earns just one-third of her $98,000 a year.

"Is my government telling me that if an H-1B visa holder replaces me
it's illegal, but if an L-1 replaces me, it's O.K.?" demands Fluno, who
has been looking for a permanent job ever since. "If this is a
loophole, it needs to be stopped." Tata officials say the company fully
complies with the L-1 law and pays the prevailing industry wage to all
its U.S.-based employees, although they declined to provide specifics
about Kollu or other employees at Siemens. Siemens spokeswoman Paula
Davis says her company isn't responsible for Tata's employment
practices. "They don't work for us; they work for Tata," she says.

Fluno's experience is just one example of an explosion in the use--and
in some cases, the abuse--of L-1 visas. With the travails of the
high-tech industry and the jump in IT unemployment, fewer U.S.
companies can tap the H-1B program these days by saying qualified
Americans aren't available. At the same time, many employers looking to
slash costs have discovered that they can use firms that hire L-1s to
dump high-paid Americans in favor of cheaper workers from abroad. As a
result, many companies are subcontracting thousands of jobs to
outsourcing companies such as Tata, Infosys Technologies (INFY ), and
Wipro Technologies (WIT )--the three largest Indian software servicing
companies, which all are using more L-1s. Among those using such IT
contractors are Bank of America (BAC ), Dell Computer (DELL ), General
Electric (GE ), Merrill Lynch (MER ), and Siemens (SI ).

Bombay-based Tata now uses L-1s to bring in half of the 5,000 IT
workers it has placed at companies in the U.S., says CEO S.
Ramadorai. Nearly one-third of Infosys' 3,000 U.S.-based workers hold
L-1s, the company says, as do 32% of Wipro's 1,500. Like Tata,
Bangalore-based Infosys and Wipro say they follow the letter of the L-1
law.

But they may be violating the spirit of the law. "Is it O.K. to use
L-1s for outsourcing to other firms? The answer is no," says State
Dept. spokesman Stuart Patt. Tata's outside public-relations firm says
that Tata "is in complete compliance with all laws and regulations with
respect to H and L visas."

Legal or not, the growing use of L-1s has sparked a backlash. The
program has been plagued by accusations that individuals use it to gain
illicit entry into the U.S. Complaints from the Siemens workers have
led the Justice Dept. to launch investigations. Fluno's case was
dismissed on Feb. 11; three others continue. At the same time, the
Immigration & Naturalization Service is reviewing the L-1 visa program
"to assess whether companies are using the L-1 to circumvent the H-1B
program," says an INS official. And Representative John L. Mica
(R-Fla.) vows he'll try to amend the L-1 statute if Justice doesn't
prosecute in the Siemens case. "It's a back door to cheap labor," he
says.

While many L-1s ease the intracompany transfers they're meant for,
outsourcing has triggered a surge in their numbers. New L-1s jumped by
50% between 1998 and 2002, to 58,000, and climbed an additional 10% in
the first five months of fiscal 2003, according to State Dept. data.
Meanwhile, new H-1B visas plunged by 27% through 2002 and fell 17% so
far in fiscal 2003. What's more, L-1s allow employees to remain in the
U.S. for up to seven years and can include multiple workers; H-1Bs are
issued to individuals, who are limited to six-year stays. There were
384,000 people working in the U.S. on H-1Bs in 2001, the last year
available, and at 329,000, nearly as many on L-1s.

Companies like Tata have grabbed U.S. market share in IT consulting in
part by exploiting the L-1's loopholes. The private company, which
supplies outsourced IT services to client companies from 48 offices in
the U.S., saw its business from U.S. companies grow 29%, to more than
$500 million, in its latest fiscal year, which ended March, 2002. Tata
says nearly three-quarters of its sales come from supplying IT
expertise to an impressive list of blue-chip U.S. clients such as Apple
Computer, Bank One, Boeing, and Eli Lilly. But with half its U.S. labor
here on L-1s, Tata's growth might well be smaller if it relied solely
on H-1Bs. "Demand is so great that people will massage any visa
category," says Jessica Vaughn, senior policy analyst at the Center for
Immigration Studies in Washington.

Fluno and colleagues, meanwhile, are still looking for IT work (Siemens
says it helped five of them find comparable jobs). They hope to start a
campaign against L-1 abuse. But with so many major companies already
using them, their campaign may be all uphill.

By Brian Grow in Orlando, Fla., with Manjeet Kripalani in Bombay

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