H-1B, B-1 Visa Scrutiny Threatens IT Outsourcing Providers

IT outsourcing companies are starting to feel the pinch from increased U.S. government scrutiny of H-1B and other nonimmigrant visa programs. The latest investigation into misuse of the H-1B visa program comes from the Social Security Administration.

The Social Security Administration's (SSA) Office of Inspector General this month published a report citing incidents of misuse of the H-1B visa among sponsoring employers and visa holders.

Specifically, the Inspector General's Office found that as many as 18 percent of H-1B visa holders may have used their social security numbers for purposes other than to work for their approved employers. Examining a sample of 200 records to assess H-1B workers' use of social security numbers, the report says that 11 percent of the visa holders reported wages from companies other than the employer that sponsored them, and seven percent reported no U.S. wages at all.

H-1B visa holders may only work for sponsoring employers after approval by the Departments of Labor and Homeland Security. Although most of the non-compliant H-1B workers had posted wages from employers in fields associated with technical or specialty occupations, the report noted that one H-1B worker had earnings from a restaurant and janitorial service.

The SSA's Inspector General's Office contacted the employers of the H-1B workers who did not receive wages; six acknowledged sponsoring the worker but said the H-1B holder had never worked for the company, and three said they had no record of the H-1B recipients, although Department of Homeland Security (DHS) records indicated they were the sponsoring employers.

Field office personnel responsible for processing the visa holders' social security number applications said in interviews with the inspector general team that some H-1B workers acknowledged they would not receive wages in the United States because their employers would pay them in their home countries. Others admitted that they planned to work for a company other than their authorized employer, according to the report.

"Unauthorized work by H-1B workers weakens [social security number] integrity and may require that the [SSA] pay future benefits to individuals who misuse a [social security number] to work in the United States," concludes the report, which also questions whether H-1B workers need social security numbers if their employers do not report wages.

The SSA's report is the latest evidence of increased government scrutiny of the nonimmigrant visas—like the H-1B, the L-1 and the B-1—that IT outsourcing companies rely on to perform work in the U.S.

The SSA's findings generally line up with a 2008 report from the U.S. Citizenship and Immigration Service which found that 21 percent of H-1B petitions it examined involved fraud or technical violations.

The additional attention being paid to nonimmigrant visas could prove problematic for outsourcers and their clients. "We have anecdotal evidence from numerous IT outsourcing suppliers that an increased level of scrutiny on—and rejection rates for—B-1 visas is hindering their ability to conduct internal meetings and training for foreign employees in the U.S.," says Peter Bendor-Samuel, CEO of outsourcing consultancy Everest Group. "It is highly likely that this same [investigative] approach will be taken throughout the remainder of the election cycle regarding H-1B visas and L-1 visas."

The B-1 visa—designed to allow foreigners to come to the U.S. for short periods of time to attend, for example, corporate conferences or to conduct contract negotiations—made headlines this year when an Infosys employee sued the Indian IT service provider for misusing the visas in order to increase its profit margins. Recently, two more Infosys workers have come forward with similar allegations.

Meanwhile, H-1B lawsuits are emerging, like one recently filed in California by IT employees alleging that their employer replaced them with H-1B workers in violation of the state's anti-discrimination laws.

The State Department has confirmed that it is considering changes to the B-1 visa program to prevent abuse. In addition, "the State Department has the option of targeting visa applications for scrutiny based on many factors, to include city, nationality, work type and firm type," says Bendor-Samuel. "They are not dependent on pending or future changes in law to employ these options."

The Department of Homeland Security says that it has increased enforcement of nonimmigrant visa regulations over the past two years.

In the short term, increased rejection rates and audits is the biggest risk for IT outsourcers reliant on nonimmigrant visas. "This can lead to long-term suspensions for habitual offenders, potentially causing significant disruptions in the availability of skilled foreign workers even without any major legislative action," says Bendor-Samuel.

New legislation or policy changes are longer-term risks, and it's not clear how those will play out. Much depends on the outcome of next year's elections, the perception of whether suppliers are policing themselves, the outcome of current civil and potential criminal cases, and the state of the economy. "Economic improvement will help remove the spotlight from this topic," says Bendor-Samuel.

In the meantime, however, outsourcing clients should be wary of public associations with visa issues. Bendor-Samuel says outsourcers could see sudden cancellations of major application development and maintenance projects or a reluctance to go public with new outsourcing deals. "One major ITO firm recently announced a $900 million IT outsourcing contract in which the client requested that its name be withheld," says Bendor-Samuel.

The report from SSA's Inspector General Office recommended that the Department of Homeland Security and SSA establish a data match agreement to reduce the number of H-1B workers who may use their social security numbers for purposes other than to work for their approved employer.

Bendor-Samuel says the IT outsourcing community should be prepared for further announcements from the U.S. State Department around policy changes or changes to definitions as they are applied to the screening and approval of visa applications. Such changes may "result in additional delays in the screening process."

For outsourcing customers, that could translate to longer transitions, reduced quality and higher fees, says Bendor-Samuel, adding that they "could face legal issues if they had reason to be aware of any visa fraud perpetrated by one of their service providers."

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