What do the proposed restrictions on the L-1 visas mean?

The L-1 visa is one of the most hotly debated topics in outsourcing these days. Here's what's behind the controversy and what you need to consider.

Ask a question about outsourcing these days and you’re likely to get an earful. Everyone has an opinion. And even if your company hasn’t yet been affected by the trend sweeping the nation, this isn’t a story that’s going away any time soon. As legislation comes to the floor and candidates gear up for campaign seasons, outsourcing and its subtopics—visas, layoffs, retraining, tax incentives—will get more and more press time.

One of the most hotly debated topics in outsourcing is the L-1 visa, which is currently in hot demand with IT companies—and contested by many American workers.

The current incarnation of the visa has been called a “back door to cheap labor" by various government servants, because companies can bring in employees from foreign subsidiaries (provided they’ve worked for the company for at least six months), then outsource them to other U.S. firms for extremely low wages.

In several recent highly publicized cases, American workers were forced to train their L-1 replacements before being fired—or forfeit their severance packages. Public outcry led Rep. John Mica (R-FL) to introduce HR 2154, which he said would close the “loophole” in the current law by preventing employers from contracting employees out to other firms once they arrive in the United States.

Mica’s proposed restrictions, however, garnered little support—critics said he was too lenient and that the new law would do nothing to protect American jobs. And in late July, Rep. Nancy Johnson (R-CT) and Sen. Chris Dodd (D-CT) sent H.R. 2849 and S. 1452 to the House and Senate, respectively—the USA Jobs Protection Act of 2003.

Their bill is already coming under fire from major corporations, but it’s also gaining a groundswell of approval from American workers who believe it might be the key to keeping their jobs. The Dodd-Johnson bill would, for example, limit L-1 visas to companies that “did not displace U.S. workers for 180 days before or after the filing of the L-1 petition. Companies would also be required to prove that they had “taken good faith steps to recruit U.S. workers for the position.”

Wages, too, are a major sticking point. The Dodd-Johnson bill would require employers to pay L-1 employees “wages that are the greater of the actual wage or the prevailing wage.” Currently, no such restrictions are in place; some companies pay L-1 workers one-third to one-fifth of what their American counterparts earn.

Said former IT worker Michael Emmons, “They’re asking us to compete with people who make $6,000 a year. How can we live here and do that?” Emmons worked for Siemens in Lake Mary, FL, where he and the rest of his team were mandated to train their replacements from Indian firm Tata Consulting. He said that the government’s visa programs are destroying what’s left of the fragile American economy.

But Jai Shekhawat, CEO and co-founder of Fieldglass, an outsourced services management firm, said that restrictions are not the answer, although he concedes that there is enough abuse of the visas to warrant significant concern.

“Fair wages are definitely an issue,” he said. “Companies should pay employees fair wages regardless of what visa they come in on.” But prohibiting companies from moving workers once they’re in the United States or allowing L-1s only to workers who have been employed by the overseas subsidiary for two years, said Shekhawat, would be the real downfall of the American IT industry.

“Strictly speaking from a business point of view, either I’ll bring people here to work for me—alongside American workers—or I’ll send the business to them, overseas. If R&D leaves the United States, even fewer jobs will be left here,” he said.

Emmons, who runs the Outsource Congress Web site (and who just announced his own candidacy), is not convinced. “They’ll take the jobs away regardless,” he said. “And it won’t stop with IT workers.”

The debate goes on. And it’s likely that some of the proposed restrictions will make it through Congress and be enforced in the coming months. So if you're bringing in workers on L-1 visas, or you plan to in the near future, make sure you’re able to comply with the possible changes.
  • Make sure the employees you’re bringing in are actually skilled workers. One test is to ask whether the person would survive the more stringent H1-B requirements. If you can honestly answer that question, you’ll know whether you have a legitimate reason for using the L-1 visa.
  • Don’t arbitrarily move your workers around the country. If you’re going to bring them in for a specific project, that’s where they should stay.
  • Do you plan to pay the employee a fair wage? If you need to find cost-effective labor, you might be better off outsourcing part or all of your project to an out-of-work American IT worker—you’ll save on overhead and benefits, and you won’t run the risk of violating the law if changes are passed.

Editor's Picks

Free Newsletters, In your Inbox