Senate's big immigration bill seeks to crackdown on offshore outsourcing

Sens. Grassley and Durbin's long-sought 50/50 rule makes in into comprehensive bill

WASHINGTON -- The U.S. Senate's comprehensive immigration bill would make major changes to the H-1B visa that are certain to upset some and likely please others.

The H-1B changes would likely most upset India's offshore industry.

IT service firms that rely heavily on H-1B and L-1 visas would be hit with new rules intended to "crack down" on the use of H-1B visas "to outsource American jobs," according to an outline of the bill prepared by senate staff.

The full bill is due to be released Tuesday.

This bill has the potential of disrupting offshoring outsourcing firms, saddling them with visa fees of as much as $10,000, and the eventual limitation of H-1B and L-1 workers to 50% of an employer's workforce. More than half the U.S.-based workforces of many offshore firms are foreign workers holding temporary visas.

But the bill may please some U.S. based tech firms by raising the 65,000 base H-1B cap to 110,000 upon passage. The cap could reach 180,000 based on a formula that considers visa demand as well as the unemployment rates of managers and professionals.

These are just a few of the major changes sought by the Senate's so-called "Gang of Eight" in their comprehensive immigration bill, dubbed the "Border Security, Economic Opportunity, and Immigration Modernization Act of 2013."

Leading the effort is Sen. Chuck Schumer (D-NY), head of the Senate's immigration subcommittee. The other "Gang of Eight" members are Sens. John McCain (R-Ariz.), Richard Durbin (D-Ill.), Lindsey Graham (R-S.C.), Robert Menendez (D- N.J.), Marco Rubio (R-Fla.), Michael Bennet (D-Col.) and Jeff Flake (R-Ariz.).

Two of the senators have been vocal critics of the H-1B visa by offshore IT service firm.

Schumer once said that the visa has created "multinational temp agencies" that undercut U.S. wages. Durbin, along with Sen. Chuck Grassley, has in the past proposed limiting large H-1B and L-1 visa use to 50% of an employer's U.S. workforce. Durbin's earlier proposal is included in the new bill.

The new bill would also increase the 20,000 H-1B visa cap for advanced degree graduates of U.S. universities to 25,000, while advanced degree holders in STEM fields (science, technology, engineering and math) have other options. The bill exempts doctoral degree holders in STEM subjects from employment-based green card limits, and gives preference to foreigners with a master's degree or higher in those majors from an accredited school and with a job offer in a related field.

In total, the two proposed new caps would raise the possible maximum number of H-1B visas to 205,000.

The bill also requires H-1B employers to pay higher wages to the foreign workers. How much higher isn't clear, but the goal is to "prevent H-1B workers from undercutting the wages paid to American workers by requiring employers to pay significantly higher wages for H-1B workers than under current law," according to the Senate outline.

There is room to raise wages. At least half of H-1B workers are hired as entry level workers and paid wages that may be below incumbent U.S. workers.

The bill also requires employers to "first advertise the jobs to American workers at this higher wage before hiring an H-1B worker."

Regarding large users of H-1B visas, the bill intends to "crack down on abusers of the H-1B system" by requiring H-1B dependent employers -- employers with 15% or more of their workforce on temporary visas -- to pay higher fees.

Industry groups were holding back on reaction until the details are revealed later today.

Ron Hira, a public policy professor at the Rochester Institute of Technology, said one puzzling thing is why the base cap is allowed to go as high as 180,000, yet the H-1B exemption for advance degree grads stays near the same.

Hira wondered why the tech industry wouldn't fight for a higher advanced degree exemption, given that these graduates are the ones they care most about.

Regarding offshore outsourcers, the bill includes restrictive provisions on H-1B use. If an employer has 50 or more employees and more than 30% but less than 50% are H-1B or L-1 employees, the employer must pay a $5,000 fee per additional worker. If it goes above 50%, the fee rises to $10,000.

Employers who are seeking to convert a temporary visa holder to a green card, may be able to exclude that employee from the limit.

What may be the most onerous provision for India's large IT services may be the restrictions on India's IT offshore firms. It includes the so-called 50-50 rule, limiting H-1B and L-1 visa holders to 50% of an IT services firm's U.S. workforce.

That provision takes effect in steps, starting at 75% in 2014, and 65% in 2015 and then 50% in 2016.

Regarding the increased restrictions on offshore outsourcing firms, Hira said it will likely change the hiring behavior of some of the large firms, and prompt them to acquire companies that have large numbers of American workers. That way these firms "can keep on exploiting the H-1B and L-1 programs while still meeting these thresholds," he said.

"The upshot is that it will force some changes in the outsourcers, but it won't eliminate the H-1B as the outsourcing visa, just blunt it some," said Hira. How much will depend on the wage requirements, which remain vague, he said.

Another provision in the bill would require the U.S. to establish a searchable website for posting H-1B positions. It requires employers to post detailed job openings on the Labor Dept. website for at least 30 calendar days before hiring an H-1B applicant to fill that position.

Daniel Costa, an immigration policy analyst at the Economic Policy Institute, said he was encouraged by the creation of an H-1B job database.

"That will bring some much needed transparency and credibility to the program," said Costa, "Since employers aren't required to recruit US workers before petitioning for an H-1B, it's hard to know to what extent they actually are."

But Costa said the increased fees for H-1B visas on visa dependent firms "are nominal, and not much of a penalty" and argued that an employer can more than recoup the cost with lower wages.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His e-mail address is pthibodeau@computerworld.com.

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This story, "Senate's big immigration bill seeks to crackdown on offshore outsourcing" was originally published by Computerworld.

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