Closing loopholes in L-1 visa legislation

New guidelines enforce stricter compliance by U.S. companies

By Debby Young -- Electronic Business, 4/1/2005

If your company employs foreign nationals, you need to review the latest visa legislation coming out of Congress. It might have significant impact on your hiring practices.

Visa reforms recently approved by the Bush administration represent a mixed bag for high-tech companies. While the L-1 Visa and H-1B Visa Reform Act tightens loopholes that previously allowed global companies to displace U.S. professionals with lower-paid foreign nationals, the act still enables U.S. companies to tap into talented employees from affiliates overseas.

The high-tech industry is among the largest users of L-1 and H-1B visas, which permit foreigners to work in the United States (see box, "Comparing L-1B and H-1B visas," below). Industry associations such as the AeA are staunch defenders of programs that allow U.S. companies to benefit from unique expertise found in the foreign labor pool and more effectively compete in a global economy. But detractors of the L-1 program charge that global companies operating in the U.S. are not only laying off U.S. workers and replacing them with L-1 visa intra-company transferees, but also assigning those visa holders to third-party sites as cheap labor-for-hire. They claim the petitioning companies are really just employment agencies, placing L-1 visa workers at offsite companies for projects that have nothing to do with the specialized knowledge (such as products, services and proprietary techniques) of the company that requested the visa.

To appease detractors of the temporary visa program, President Bush in December 2004 signed the L-1 Visa and H-1B Visa Reform Act as part of the Fiscal 2005 Omnibus Appropriations Bill. The most significant changes to the legislation revolved around three issues: Using L-1B visas for contract labor; importing skilled foreign professionals who weren't really intra-company transferees; and funding closer scrutiny of L-1 visa holders as part of heightened homeland security.

Peter Yost, a business immigration attorney and partner at the law firm of Faegre & Benson LLP, says the new reforms seem to "reasonably balance the need to prevent potential abuses that unfairly disadvantage U.S. workers against the benefits of the L-1 visa category to the U.S. economy." Specifically he refers to a policy that supports foreign companies who want to set up operations in the United States by facilitating temporary relocation of experienced employees from their overseas affiliates. Yost explains that it's a win-win situation because these U.S. operations then create new jobs for U.S. workers.

The new provisions address one of the central controversies in the temporary visa program: the issue of off-site placement of L-1B visa holders. (L-1B visas pertain to professionals with specialized knowledge; L-1A visas are strictly used for transferring managers and executives from overseas operations.) Companies can no longer place their L-1B visa employees at third-party sites unless they remain under the control and supervision of the L-1 employer. For instance, Company A can't place its L-1 visa employee at Company B to install the new accounting system designed by Company A unless a manager from Company A oversees the project.

The new reforms seem to "reasonably balance the need to prevent potential abuses that unfairly disadvantage U.S. workers against the benefits of the L-1 visa category to the U.S. economy."
—Peter Yost, Faegre & Benson LLP

In addition, the services provided at the third-party site by the L-1B visa holder must be related to the specialized knowledge for which the visa was initially issued. For instance, if the visa holder was transferred to the U.S. for his proprietary networking expertise, he can't be reassigned to debug accounting software just because he happens to be on site. Any company that petitions to place their L-1B employees at third-party sites will face tight scrutiny by the U.S. Consulate and the United States Citizenship and Immigration Services (formerly the Immigration and Naturalization Service). According to Frida Glucoft, immigration attorney and practice chair at the firm of Mitchell Silberberg & Knupp, the prohibition against using L-1B visa holders as contract labor is designed to curb abuses of a category that was never "designed to facilitate the outplacement of foreign workers as contract labor."

Congress also increased the amount of time foreign nationals have to have been employed by the foreign affiliate before applying for the L-1 visa. Lengthening the employment requirement was designed to root out companies that were recruiting overseas with the sole purpose of importing cheaper skilled professionals. Under the new provisions, to qualify as an intra-company transferee under a blanket L-1 visa, the foreign national must have been employed by the related foreign entity for 12 continuous months prior to the company filing the L-1 visa application. The new law rescinds a 2002 amendment that allowed foreign nationals to be transferred to the U.S. after only six months. Glucoft clarifies that the change only applies to new applicants under blanket L-1 status. Anyone granted blanket L-1 visas before June 6, 2005 with only six months of qualifying employment "will be able to extend their stays and visas, even though they don't have the one-year requisite overseas employment."

The reform act also created a new Fraud Prevention and Detection fee of $500 which became effective in March 2005. The collected monies will be divided equally between the Department of State, the Department of Homeland Security (DHS) and the Department of Labor. Money earmarked for DHS will fund data collection on L-1 visa holders and petitioners.

While job activist still fear that the L-1 visa invites guest workers to set up permanent housekeeping on American soil, the American Council on International Personnel (ACIP) applauds the visitor employment legislation as enabling its members to broaden their global competitiveness. As a lobbyist for facilitating the movement of skilled professionals across international borders, the board of directors of the Washington, DC-based organization is populated with representatives from such high-tech global leaders as IBM, Sun Microsystems, EDS, Intel and others.

How multinational companies will fare under heightened legislative control over their professional staffing strategies remains to be seen. But as Yost concludes, "in this period of soft job creation and heightened concern over possible abuses that favor foreign workers over U.S. workers, the deal Congress struck with the new L-1 and H-1B legislation could have been much worse for U.S. employers."