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The H1-B Quagmire?

published on March 1, 2005
on JupiterMedia's CIOUpdate

The H1-B employment visa for foreign nationals is often characterized as a boon for companies looking to hire "affordable" help and a bane to technology workers at home. Controversy and public policy aside, H1-Bs have potentially costly surprises for technology executives as hiring foreign workers is becoming more expensive and increasingly regulated.

Steven Friedman, CFO and CTO at The Pain Institute & The Ohio Valley Pain Consortium, helped to sponsor hundreds of H1-Bs during his previous job as an area technical manager for a large international technology consultancy. Over those years, Friedman learned some lessons involving H1-B workers.

For example, when the project finished the company had no new projects for the workers. Rather then bench them, Friedman wanted to send them home.

"We encountered a lot of unexpected costs," said Friedman. "When we went to terminate the consultants, we were informed by INS (now Citizenship and Immigration Services) that we couldn't. Because we had agreed to sponsor (the foreign workers), we had actually guaranteed them a position for which they were entitled to be paid -- whether we had work for them or not. We didn't know this at the time."

Today companies can avoid that particular expense, if they first notify the government by sending a notice to the CIS and withdraw the labor condition application (LCA) with the Department of Labor (DOL), according to attorney Cynthia Lange, a managing partner at Fragomen, a law firm specializing in corporate immigration and nationality law.

Another "Gotcha" with H1-Bs is companies are legally obligated to return foreign workers to their country of origin if a visa expires before workers can secure work from another U.S. employer. But employers are only required to pay transportation costs for the worker, not the worker's spouse, children or furniture and other positions, notes Lange.

Cultural Clashing

Conflicts arising from cultural differences between H1-B workers can also create unexpected costs. Lawsuits arising from discrimination and harassment can easily blindside an executive who hires foreign workers without training them in the cultural norms and legalities of the U.S. workplace.

Ray Costello, vice president of IT and customer service for Lumber Liquidators in Toano, Virginia, had to dismiss one foreign national for clashing with another. Costello could have lost a significant recruiting investment had the worker he let go, a consultant provided by another company, been a full-time hire.

"The Hindu consultant clashed right away with my H1-B, who was Muslim," said Costello. "The encounter was very disturbing for all of us. I let the consultant go, and when I asked my programmer what his problem was, he said, 'His people killed Gandhi!'."

The incident wasn't isolated. "I saw complete disrespect for women, dislike for their own countrymen and religious battles that made no sense," said Costello.

Executives may also be tempted to low ball salaries for their H1-B workers but the practice is illegal, according to Lange. The DOL demands that companies pay foreign workers the prevailing wage or a wage equal to an employee performing the same job, whichever is higher.

Even if a company does offer a foreign worker a lower salary, when the worker discovers their American counterparts make more money, they usually want parity, said Friedman.

Uncle Sam

Another perhaps unconsidered cost are the major shifts taking place in fee structures and laws surrounding foreign workers. Legal fees for processing H1-Bs can run $1,000 to $10,000 per applicant, depending on the law firm and the number of H1-Bs a firm processes for a company, said Lange.

  • Government fees have to be paid as well: $180 to file each application;
  • $1,500 per application for a fund devoted to the training and education of U.S. workers; and
  • $500 anti-fraud fee for each applicant.

Add another $1,000 to expedite the application quicker than the standard three months, and government fees can easily run over $3,000.

If the foreign national has a degree from a foreign university or foreign work experience, costs can climb higher: About $100 to have a service provider evaluate the educational degree, and thousands of dollars and many months to evaluate a worker's foreign experience.

Employers also have to provide documentation to the CIS that they have exhausted all forms of finding qualified candidates in the U.S. and that no U.S. workers are available to perform the job.

While these hurdles are all surmountable with time and money, perhaps the biggest quagmire facing companies sponsoring foreign work visas has to do with the U.S. government's mandate to protect sensitive intellectual property from the hands of foreign governments. "This is one of the hot new areas," said Lange.

Sensitive Stuff

Under the Export Control Law, companies are required to analyze if the foreign worker will be working with restricted technology as defined by the U.S. government, said Richard Pettler, manager of the Export Controls Practice Group at Fragomen.

Encryption technology, for example, would be restricted. Or, if the worker will have access to the underlying core technology, the company has to apply for an Export Control License.

At the root of this requirement is the government's fear that technology know-how may fall into the hands of a foreign government once and if the worker returns home, said Pettler.

If the worker comes from a nation the U.S. government determines to be a terrorist flashpoint, such as Syria, Iran, Libya, North Korea, Sudan, and Cuba, companies can kiss goodbye the possibility of receiving an Export Control License for the worker. And, if a company can't get a license for the worker and employs the worker anyway, it risks hefty legal fines if the government decides to enforce the provision.

The number of allowable H1-Bs is also somewhat unpredictable year-to-year as Congress adjusts the limits annually. However one thing is certain, as long as fear over terrorism continues to drive public policy, it may become increasingly expensive and perilous for U.S. companies to recruit foreign nationals into technology jobs involving sensitive high-tech information.

Left ill informed, IT executives might unwittingly exposure their company to a legal time bomb.

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david southgate
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