H-1B Visa Program: More Oversight by Labor Can Improve Compliance with Program Requirements
Released: 2006-06-22T00:00:00

Letter

Background

The H-1B program was created by the Immigration Act of 1990, which amended the Immigration and Nationality Act (INA). The H-1B visa category was created to enable U.S. employers to hire temporary workers as needed in specialty occupations, or those that require theoretical and practical application of a body of highly specialized knowledge. It also requires a bachelor’s or higher degree (or its equivalent) in the specific occupation as a minimum requirement for entry into the occupation in the United States. The Immigration Act of 1990 capped the number of H-1B visas at 65,000 per fiscal year.

Since the creation of the H-1B program, the number of H-1B visas permitted each fiscal year has changed several times. Congress passed the American Competitiveness and Workforce Improvement Act of 1998 (ACWIA), which increased the limit to 115,000 for fiscal years 1999 and 2000. In 2000, Congress passed the American Competitiveness in the Twenty-First Century Act (AC-21), which raised the limit to 195,000 for fiscal year 2001 and maintained that level through fiscal years 2002 and 2003. The number of H-1B visas reverted back to 65,000 thereafter.

Generally, an H-1B visa is valid for 3 years of employment and is renewable for an additional 3 years.

Filing an application with Labor’s Employment and Training Administration is the employer’s first step in hiring an H-1B worker, and Labor is responsible for either certifying or denying the employer’s application within 7 days. By law, it may only review applications for omissions and obvious inaccuracies. Labor has no authority to verify the authenticity of the information. Employers must include on the application information such as their name, address, rate of pay and work location for the H-1B worker, and employer identification number. All employers are also required to make four attestations on the application as to: 1. Wages: The employer will pay non-immigrants at least the local prevailing wage or the employer’s actual wage, whichever is higher, and pay for nonproductive time caused by a decision made by the employer; and offer nonimmigrants benefits on the same basis as U.S. workers. 2. Working conditions: The employment of H-1B nonimmigrants will not adversely affect the working conditions of U.S. workers similarly employed. 3. Strike, lockout, or work stoppage: No strike or lockout exists in the occupational classification at the place of employment. 4. Notification: The employer has notified employees at the place of employment of the intent to employ H-1B workers.

Certain employers are required to make three additional attestations on their application. These additional attestations apply to H-1B employers who: (1) are H-1B dependent, that is, generally those whose workforce is comprised of 15 percent or more H-1B nonimmigrant employees; or (2) are found by Labor to have committed either a willful failure to meet H-1B program requirements or misrepresented a material fact in an application during the previous 5 years. These employers are required to additionally attest that: (1) they did not displace a U.S. worker within the period of 90 days before and 90 days after filing a petition for an H-1B worker; (2) they took good faith steps prior to filing the H-1B application to recruit U.S. workers and that they offered the job to a U.S. applicant who was equally or better qualified than an H-1B worker; and (3) prior to placing the H-1B worker with another employer, they inquired and have no knowledge as to that employer’s action or intent to displace a U.S. worker within the 90 days before and 90 days after the placement of the H-1B worker with that employer.

After Labor certifies an application, the employer must submit a petition for each worker it wishes to hire to USCIS. On March 1, 2003, Homeland Security took over all functions and authorities of Justice’s Immigration and Naturalization Service under the Homeland Security Act of 2002 and the Homeland Security Reorganization Plan of November 25, 2002. Employers submit to USCIS the application, petition, and supporting documentation along with the appropriate fees. Information on the petition must indicate the wages that will be paid to the H-1B worker, the location of the position, and the worker’s qualifications. Through a process known as adjudication, USCIS reviews the documents for certain criteria, such as whether the petition is accompanied by a certified application from Labor, whether the employer is eligible to apply for H-1B workers, and whether the prospective H-1B worker is qualified for the position.

The Wage and Hour Division of Labor’s Employment Standards Administration performs investigative and enforcement functions to determine whether an employer has complied with its attestations on the application. An aggrieved individual or entity or certain non-aggrieved parties may file a complaint with Labor that an employer violated a requirement of the H-1B program. To conduct an investigation, the Administrator must have reasonable cause to believe that an employer did not comply with or misrepresented information on its application.

Employers who violate any of the attestations on the application are subject to civil money penalties or administrative remedy, such as paying back wages to H-1B workers or debarment, which disqualifies an employer from participating in the H-1B program for a specified period of time. Employers, the person who filed the complaint, or other interested parties who disagree with the findings of the investigation then have 15 days to appeal by requesting an administrative hearing.

The Office of Special Counsel for Immigration Related Unfair Employment Practices (OSC) of the Department of Justice also has some enforcement responsibility. Under statutory authority created by the Immigration Reform and Control Act of 1986, OSC pursues charges of citizenship discrimination brought by U.S. workers who allege that an employer preferred to hire an H-1B worker.

Labor Does Not Use Its Full Authority to Oversee Employers’ Compliance with Program Requirements

Labor’s H-1B authority is limited in scope, but it does not use its full authority to oversee employers’ compliance with program requirements. Labor’s review of employers’ applications to hire H-1B workers overlooks some inaccuracies, such as applications containing invalid employer identification numbers. WHD investigates complaints made against H-1B employers and recently began random investigations of some employers who had previously violated program requirements. Labor uses education as the primary method of promoting employers’ compliance with the H-1B program.

Labor’s Review of Employers’ Requests Is Fast but May Overlook Some Inaccuracies

Labor reviews applications electronically by subjecting them to data checks, and its web site informs employers that it will certify or deny applications within minutes based on the information entered. We found that of the 960,563 applications that Labor electronically reviewed from January 2002 through September 2005, it certified 99.5 percent.

Labor’s review of the application is limited by law to identifying omissions or obvious inaccuracies. Labor defines an obvious inaccuracy as when an employer: files an application after being debarred, or disqualified, from participating in the H-1B program; submits an application more than 6 months before the beginning date of the period of employment; identifies multiple occupations on a single application; states a wage rate that is below the Fair Labor Standards Act minimum wage; identifies a wage rate that is below the prevailing wage on the application; and identifies a wage range where the bottom of the range is lower than the prevailing wage on the application.

Despite these checks, Labor’s system does not consistently identify all obvious inaccuracies. For example, although the overall percentage was small, we found 3,229 applications that were certified even though the wage rate on the application was lower than the prevailing wage for that occupation in the specific location (see table 1).

Additionally, Labor does not identify other errors that may be obvious. Specifically, Labor told us its system reviews an application’s employer identification number to ensure it has the correct number of digits and that the number does not appear on the list of employers who are ineligible to participate in the H-1B program. However, we found 993 certified applications with invalid employer identification number prefixes. Officials told us that in other programs, such as the permanent employment program, Labor matches the application’s employer identification number to a database with valid employer identification numbers. However, they do not formally do this match with H-1B applications because it is an attestation process, not a verification process.

Likewise, Labor officials told us they frequently review the application process to determine where improvements can be made, but they rely on a system of data checks rather than a formal quality assurance process because of the factual nature of the form and the number of applications received. Also, officials said if they conducted a more in-depth review of the applications, they could overreach their legal authority and increase the processing time for applications. Additionally, they said the integrity of the H-1B program is ensured through enforcement and by the fact that there is actual review by staff when the employer submits the paperwork to USCIS.

Labor Investigates Complaints, and Has Begun the Process of Randomly Investigating Previous Violators

Labor enforces H-1B program requirements primarily by investigating complaints filed against employers by H-1B workers or others. Labor’s Wage and Hour Division received 1,026 complaints from fiscal year 2000 through fiscal year 2005. Labor officials said they investigate the employer’s compliance with all program requirements for all H-1B workers; therefore, an investigation may yield more than one violation.

While the number of H-1B complaints and violations has increased from fiscal year 2000 through fiscal year 2005, the overall numbers remain small and may have been affected by changes to the program. As shown in table 2, we found that the number of complaints increased from 117 in fiscal year 2000 to 173 in fiscal year 2005, and the number of cases with violations more than doubled, along with a corresponding increase in the number of employer penalties. In fiscal year 2000, Labor required employers to pay back wages totaling $1.2 million to 206 H-1B workers; by fiscal year 2005, back wages penalties had increased to $5.2 million for 604 workers. The most common type of violation each fiscal year involved a failure to pay H-1B workers the required wage. Labor officials told us it is difficult to attribute changes in complaints and violations to any specific cause because of multiple legislative changes to the program, such as the temporary increase in the number of H-1B workers allowed to enter the country and the additional attestations for certain employers that expired and then were reinstated.

Labor’s Wage and Hour Division has recently begun random investigations of employers who have willfully violated H-1B program requirements in the past. Under the INA, as amended, Labor has had the authority to conduct these investigations since 1998, but officials told us the agency had not done so until recently for several reasons. First, these employers frequently go out of business because they are not allowed to participate in the H-1B program for a period of time. Second, there are only a limited number of willful violators—just 50 nationwide in late fiscal year 2005. In addition, we were told that H-1B investigators have heavy caseloads. However, Labor officials said they now have 59 cases that they can investigate, and in April 2006, directed each of their regional offices to initiate a random investigation of at least one employer prior to the end of fiscal year 2006.

Labor Relies Primarily on Education to Promote Employer Compliance

Labor uses education as the primary method of promoting employer compliance with the H-1B program. From 2000 through 2005, Labor’s district offices conducted six presentations on H-1B compliance. Labor also holds compliance seminars in response to requests from employer associations and discusses program requirements with companies that do not have pending lawsuits related to the H-1B program. Additionally, Labor posts guidance and fact sheets on its web site. While some of its fact sheets have not been updated since the program was amended by the H-1B Visa Reform Act in 2004, officials said 26 new fact sheets will be posted on the agency’s web site by the end of fiscal year 2006. During investigations of employers, Labor explains the employer’s legal obligations and asks the employer about the changes it plans to make to comply with the law. When an investigation results in an employer’s debarment, Labor publicizes the case through press releases highlighting the consequences for not complying with H-1B program requirements. Labor is also working with the Department of State to provide information cards to H-1B workers when they are issued their visa. These cards inform them about their employment rights, including required wages and benefits, illegal deductions, working conditions, records, and discrimination.

Homeland Security and Justice also use education to promote employer compliance with the H-1B program. Homeland Security publishes informational bulletins and uses its web site to advise the public of any changes to the program regarding filing fees or eligibility resulting from changes in the law. Justice engages in educational activities through public service announcements aimed at employers, workers, and the general public. The agency trains employers and works with other federal agencies to coordinate employer education programs. Justice also uses a telephone intervention hotline to resolve disputes between U.S. workers and H-1B employers, answers questions submitted via e-mail, issues guidance, and provides information on its web site.

Labor and Homeland Security Face Challenges Sharing Information

Labor, Homeland Security, and Justice all have responsibilities under the H-1B program, but Labor and Homeland Security face challenges sharing information that could help identify possible program violations. In addition to Homeland Security, Labor also shares enforcement responsibilities with Justice, which pursues charges filed by U.S. workers who allege that they were not hired or were displaced because of an H-1B worker. Justice has found discriminatory conduct in relatively few cases.

Labor and Homeland Security Coordinate to Process Employers’ Requests to Hire H-1B Workers, but Do Not Use Certain Information to Investigate Possible Violations

Homeland Security reviews Labor’s certified application as part of the adjudication process; however, it cannot easily verify whether employers have submitted petitions for more workers than originally requested on the application. USCIS’s data system does not match each petition to its corresponding application because the system does not include a field for the unique number Labor assigns each application. As a result, USCIS cannot easily verify how many times the employer has used a given application or which petitions were supported by which application, potentially allowing employers to use the application for more workers than they were certified to hire. USCIS told us that while it has attempted to add Labor’s application case number to its database, it has not been able to because of the system’s memory limitations and it will be several years before a new information technology system is operational.

During the process of reviewing employers’ petitions, USCIS may find evidence the employer is not meeting the requirements of the H-1B program, but current law precludes Labor’s Wage and Hour Division from using this information to initiate an investigation of the employer. Some petitions to extend workers’ H-1B status have been submitted with W-2 forms where the wage on the W-2 was less than the wage the employer indicated it would pay on the original Labor application, according to USCIS staff. If the employer is unable to adequately explain the discrepancy, USCIS may deny the petition but does not have a formal mechanism for reporting these discrepancies to Labor. Moreover, even if USCIS did report these cases, current law precludes WHD from using the information to initiate an investigation. According to officials from Labor, it does not consider Homeland Security to be an aggrieved party; therefore, Labor would not initiate an investigation based on information received from, or a complaint filed by, Homeland Security.

Justice Handles U.S. Worker Cases

Justice pursues charges filed by U.S. workers who allege that an H-1B worker was hired in their place. Such charges may be resolved before an administrative law judge, through an out-of-court settlement, or by dismissal for lack of reasonable cause to believe that a violation occurred. From 2000 through 2005, no cases were heard by an administrative law judge. Most of the 101 investigations started by Justice from 2000 through 2005 were found to be incomplete, withdrawn, untimely, dismissed, or investigated without finding reasonable cause for a violation. Of the 97 investigations closed, Justice found discriminatory conduct in 6 cases, and assessed $7,200 in penalties in 3 of the 6 cases, all in 2003.

Conclusion and Recommendations

We found that Labor—in coordination with Homeland Security—could provide better oversight of employers’ compliance with H-1B visa program requirements. Even though Labor’s authority to review applications is limited, it is certifying some applications that do not meet program requirements or have inaccurate information. Additionally, USCIS may find information in the materials submitted by an H-1B employer that indicates the employer is not complying with the program requirements. However, these employers may not face consequences because USCIS does not have a formal mechanism for reporting this information to Labor, and current law restricts Labor from using such evidence to initiate an investigation. USCIS also has an opportunity to improve its oversight by matching information from its petition database with Labor’s application case number to detect whether employers are requesting more H-1B workers than they were originally certified to hire. As Congress deliberates changes to U.S. immigration policy, it is essential to ensure that employers comply with program requirements designed to protect both domestic and H-1B workers.

To increase employer compliance with the H-1B program and protect the rights of U.S. and H-1B workers, Congress should consider the following two actions:

Eliminate the restrictions on Labor using petition information submitted by employers to Homeland Security as the basis for initiating an investigation, and

Direct Homeland Security to provide Labor with information received during the adjudication process that may indicate whether an employer is fulfilling its H-1B responsibilities.

Further, we recommend that Labor strengthen its oversight of employers’ applications to hire H-1B workers by improving its procedures for checking for completeness and obvious inaccuracies, including developing more stringent, cost-effective methods of checking for wage inaccuracies and invalid employer identification numbers. We also recommend that USCIS ensure employers’ compliance with the program requirements by including Labor’s application case number in its new information technology system, so that adjudicators are able to quickly and independently ensure that employers are not requesting more H-1B workers than were originally approved on their application to Labor.

We provided a draft of our report to the Departments of Labor, Homeland Security, and Justice for their review and comments. Each agency provided technical comments, which we incorporated as appropriate. Justice did not have formal comments on our report.

Homeland Security agreed with our recommendations, and stated that USCIS intends to include Labor’s application case number in its new information technology system.

Labor questioned whether our recommendation for more stringent application review measures is supported by the low error rate that we found, as well as whether the benefits of instituting such measures would equal or exceed the added costs of implementing them. In addition, Labor said that Congress intentionally limited the scope of Labor’s application review in order to place the focus for achieving program integrity on USCIS.

We believe that Labor is at risk of certifying H-1B applications that contain more errors than were found in the scope of our review. For example, we checked only for employer identification numbers with invalid prefix codes, and did not look for other combinations of invalid numbers or data. Therefore, we do not know the true magnitude of the error rate in the certification process. We continue to believe there are cost-effective methods that Labor could use to check the applications more stringently that would enhance the integrity of the H-1B process.

Mr. Chairman, this concludes my prepared statement. I would be happy to respond to any questions you or other Members of the Subcommittee may have at this time.

GAO Contacts and Staff Acknowledgments

For information regarding this testimony, please contact Sigurd R. Nilsen, Director, Education, Workforce, and Income Security Issues, on 202-512-7215. Individuals making key contributions to this testimony include: Alicia Puente Cackley, Gretta L. Goodwin, Amy J. Anderson, Pawnee A. Davis, Sheila McCoy and Rachael C. Valliere.

Related GAO Products

H-1B Visa Program: Labor Could Improve Its Oversight and Increase Information Sharing with Homeland Security. GAO-06-720. Washington, D.C.: June 22, 2006.

Homeland Security: Better Management Practices Could Enhance DHS’s Ability to Allocate Investigative Resources. GAO-06-462T. Washington, D.C.: March 28, 2006.

Immigration Benefits: Additional Controls and a Sanctions Strategy Could Enhance DHS’s Ability to Control Benefit Fraud. GAO-06-259. Washington, D.C.: March 10, 2006.

Homeland Security: Visitor and Immigrant Status Program Operating, but Management Improvements Are Still Needed. GAO-06-318T. Washington, D.C.: January 25, 2006.

Immigration Benefits: Improvements Needed to Address Backlogs and Ensure Quality of Adjudications. GAO-06-20. Washington, D.C.: November 21, 2005.

Immigration Enforcement: Weaknesses Hinder Employment Verification and Worksite Enforcement Efforts. GAO-05-813. Washington, D.C.: August 31, 2005.

Department of Homeland Security, U.S. Citizenship and Immigration Services: Allocation of Additional H-1B Visas Created by the H-1B Visa Reform Act of 2004. GAO-05-705R. Washington, D.C.: May 18, 2005.

Homeland Security: Some Progress Made, but Many Challenges Remain on U.S. Visitor and Immigrant Status Indicator Technology Program. GAO-05-202. Washington, DC: February 23, 2005.

Alien Registration: Usefulness of a Nonimmigrant Alien Annual Address Reporting Requirement Is Questionable. GAO-05-204. Washington, D.C.: January 28, 2005.

Highlights of a GAO Forum: Workforce Challenges and Opportunities For the 21st Century: Changing Labor Force Dynamics and the Role of Government Policies. GAO-04-845SP. Washington, D.C.: June 1, 2004.

H-1B Foreign Workers: Better Tracking Needed to Help Determine H-1B Program’s Effects on U.S. Workforce. GAO-03-883. Washington, D.C.: September 10, 2003.

Information Technology: Homeland Security Needs to Improve Entry Exit System Expenditure Planning. GAO-03-563. Washington, D.C.: June 9, 2003.

High-Skill Training: Grants from H-1B Visa Fees Meet Specific Workforce Needs, but at Varying Skill Levels. GAO-02-881. Washington, D.C.: September 20, 2002.

Immigration Benefits: Several Factors Impede Timeliness of Application Processing. GAO-01-488. Washington, D.C.: May 4, 2001.

H-1B Foreign Workers: Better Controls Needed to Help Employers and Protect Workers. GAO/HEHS-00-157. Washington, D.C.: September 7, 2000.

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