H-1B Visa Program: Labor Could Improve Its Oversight and Increase Information Sharing with Homeland Security
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, 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. An H-1B visa generally 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 (see app. II for the Labor Condition Application). 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 nonimmigrants 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 to USCIS an H-1B petition for each worker it wishes to hire (see App. III for the H-1B petition and supplement). 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 Homeland Security the application, petition, and supporting documentation along with the appropriate fees. When Congress passed ACWIA in 1998, it imposed a filing fee of $500 on H-1B petitions. In 2000, Congress passed legislation to increase the amount of filing fees to $1,000 then increased the amount again to $1,500 in 2004. Along with a $1,500 filing fee, an employer must also submit a $500 fraud prevention and detection fee to Homeland Security. 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, Homeland Security 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 employ an H-1B worker, whether the position is a specialty occupation, 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 may be 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.

Figure 1 gives an overview of the H-1B visa process. The figure highlights the major steps that an employer takes when hiring an H-1B worker. Figure 2 highlights the process for investigations when a violation has been alleged.

Labor Has Limited H-1B Authority, but the Agency Could Improve Its Oversight of Employers’ Compliance with Program Requirements

Labor’s H-1B authority is limited in scope, but the agency could improve its oversight of employers’ compliance with program requirements. While Labor’s review of employers’ applications to hire H-1B workers is timely, it lacks quality assurance controls and may overlook some inaccuracies, such as applications containing employer identification numbers with invalid prefix codes. Labor’s Wage and Hour Division investigates complaints made against H-1B employers and keeps a database of employers with prior violations. Labor has the authority to conduct random investigations of some of these employers and began doing so in April 2006. Labor uses education as the primary method of promoting compliance with the H-1B program. In addition to conducting compliance assistance programs for employers, it also coordinates with the Department of State to provide H-1B workers with information about their employee rights.

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

Labor has reduced the time it takes to certify employers’ applications by reviewing them electronically and subjecting them to data checks. Labor increased the percentage of applications reviewed within the required seven days from 56 percent in fiscal year 2001 to 100 percent in fiscal year 2005. As of January 2006, all applications must be submitted electronically and Labor’s website informs employers that it will certify or deny applications within minutes based on the information entered. Our analysis of Labor’s data found that of the 960,563 applications that Labor electronically reviewed from January 2002 through September 2005, 99.5 percent were certified, as shown in table 1. Not all applications continue through the process and result in H-1B visas—employers can withdraw their applications, petitions can be denied, or the visa may not be issued. Therefore, Labor officials told us the number of applications submitted represents employers’ interest in the H-1B program rather than the actual number of H-1B visas that are issued.

In addition to agreeing to certain attestations on the application, employers must provide information about themselves, such as address and employer identification number, as well as information about each position they are seeking to fill, the time period they will need the worker, the prevailing wage and location for the position, the wage the worker will be paid, and the number of workers they want to hire. On the applications submitted electronically from January 2002 through September 2005, approximately 90 percent of employers requested only one worker even though they are allowed to request multiple workers for the same occupation on an application. Approximately one-third of the applications were for workers in computer system analysis and programming occupations, with the next most frequent request, for college and university education workers, at 7 percent. About 30 percent of the positions were located in either California or New York. See appendix IV for more information on H-1B workers.

Labor’s review of the application is limited by law to identifying omissions or obvious inaccuracies. Labor will not certify an application if the employer has failed to check all the necessary boxes or not filled in required information such as wage rate, prevailing wage or period of intended employment. Labor’s system will also deny an application if it contains obvious inaccuracies. In addition to checks to ensure that data fields have the correct number of digits or are numerical when required, Labor has defined obvious inaccuracies 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. Table 2 shows the wage rates and corresponding prevailing wages from a sample of applications Labor incorrectly certified because the wage rate was not equal to or greater than the prevailing wage.

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, our analysis of Labor’s data found that Labor’s review may not identify numbers that are erroneous. For example, we found 993 certified applications with invalid employer identification number prefixes. While an invalid employer identification number could indicate a fraudulent application, Labor does not consider it an obvious inaccuracy. 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 with H-1B applications because it is an attestation process, not a verification process.

According to Labor, most of the process of reviewing applications is automated—the primary reason an analyst will review an application is if the employer’s prevailing wage source is not recognized by Labor’s database. The analyst reviews the source of the prevailing wage provided by the employer just to ensure the source meets Labor’s criteria, not to verify that the prevailing wage is correct. The employer may obtain a prevailing wage from a state workforce agency, a collective bargaining agreement, or another source, such as a private employment survey. If the employer uses a private employment survey and the analyst finds the survey meets Labor’s criteria—such as having been conducted in the last 2 years and using a statistically valid methodology to collect the data—the survey will be added to Labor’s database and used to approve future applications. Officials also told us that analysts review from three to five applications per day. In an effort to promote consistency in prevailing wage determinations, Labor has issued guidance for its state workforce agencies as well as for employers using surveys. Labor officials told us they always advise employers to obtain prevailing wage rates from the state workforce agency, but they also said that because the application is an attestation process, employers are responsible for doing the required analysis to determine the prevailing wage and maintaining the proper documentation to support the prevailing wage provided on the application.

We and others have previously reported that Labor’s review of the labor condition application is limited and provides little assurance that employers are fulfilling their H-1B responsibilities. In 2000, given Labor’s limited review of the application, we suggested Congress consider streamlining the H-1B approval process by requiring employers to submit the application directly to the Immigration and Naturalization Service, now the USCIS. Similarly, in 2003, Labor’s Inspector General reported that either Labor should have authority to verify the accuracy of the application information or employers should file their applications directly to USCIS. While Labor officials told us they frequently review the application process to determine where improvements can be made, 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. Additionally, they 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. Officials also 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. H-1B workers or certain others with knowledge of an employer’s practices who believe an employer has violated program requirements can file a complaint with Labor’s Wage and Hour Division, which received 1,026 complaints from fiscal year 2000 through fiscal year 2005. If the complaint meets certain criteria—such as being filed within 12 months of the violation—Labor said it notifies the employer of the investigation and requests information, including payroll records, prevailing wage determinations, and Labor’s certified applications. Labor also interviews the employer and workers, checks its violations database to determine if the employer has any previous violations, and assesses the employer’s compliance with all H-1B program requirements. As a result, an investigation may result in more than one violation. Once the investigation is complete, Labor told us it meets with the employer to explain the findings and follows up with a letter to the employer listing violations and penalties, such as payment of back wages due to H-1B workers who were not paid the required wage, civil money penalties, debarment, or other administrative remedies (see table 3).

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 4, our analysis of Labor’s data found the number of complaints increased from 117 in fiscal year 2000 to 173 in fiscal year 2005. The number of cases with violations more than doubled over the same period. The most common violation was not paying H-1B workers the required wage. With the increase in violations, the amount of penalties also increased. In fiscal year 2000, 226 H-1B workers were found to be due back wages of $1.2 million, by fiscal year 2005 the number had increased to 604 workers with back wages due of $5.2 million. In addition to the payment of back wages, employers were required to pay civil money penalties of more than $400,000 over the same period.

From fiscal year 2002 through fiscal year 2005, Labor requested over 50 debarment periods from Homeland Security for employers that committed certain violations—for example, willfully failing to pay an H-1B worker the required wage—that resulted in their being disqualified from participating in the H-1B program for a specified period of time. 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.

In addition to investigating complaints, Labor’s Wage and Hour Division has recently begun randomly investigating employers who have willfully violated the program’s requirements. Labor has had the statutory authority to conduct random investigations of these employers since 1998. Under this authority, Labor can subject employers on a case-by-case basis to random investigations up to 5 years from the date the employer first willfully violated the requirements of the H-1B program or willfully misrepresented a material fact in the labor condition application. Officials told us that the WHD did not schedule random H-1B investigations of willful violators until recently because, by definition, such employers are debarred from employing H-1B workers for a fixed number of years (they often go out of business due to the debarment), the number of such employers is very small (the total didn’t reach 50 nationwide until late in fiscal year 2005) and trained H-1B investigators have heavy case loads. However, Labor said that it will initiate random investigations nationwide in fiscal year 2006. Labor has an existing database that it plans to use for targeting employers for investigations. The database contains information about employers who have previously violated their obligations under the H-1B program, including the types of violations and the penalties that were assessed. Although cases with willful violations represent a small number of all cases with violations, they have increased from 8 percent in fiscal year 2000 to 14 percent in fiscal year 2005. (See fig. 3) Officials said that they now have 59 cases on which they can follow-up to determine if the employer has committed another violation. Labor said that, in addition to initiating random investigations of willful violators nationwide, it will set up a system to track the data in its database and train its employees in fiscal year 2006. In April 2006, Labor sent a letter to its regional offices directing them each to initiate an investigation of at least one case prior to September 30, 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. For example, Labor conducts compliance assistance programs, posts guidance on its website, and explains employers’ obligations under the law during complaint investigations.

Labor held a total of 6 H-1B compliance assistance programs for H-1B employers from fiscal year 2000 through fiscal year 2005. Typically, compliance assistance programs are conducted by Labor’s district offices based upon requests by employers, employer associations, or employee groups. For example, in fiscal year 2002, Labor gave two presentations in Massachusetts, attended by 290 participants, mostly attorneys. In addition, Labor presented at two continuing education events for attorneys in Los Angeles and New Jersey in fiscal year 2004. Labor also holds seminars in response to requests for compliance information from employer associations and discusses compliance with H-1B program requirements with companies that do not have pending lawsuits related to the H-1B program.

Labor provides information to employers through its website, such as employer guidance and fact sheets that describe employer responsibilities and employee rights under the H-1B program. Some of the fact sheets have not been updated since the program was amended by the H-1B Visa Reform Act in 2004, but officials told us they have developed 26 new fact sheets that will be made available on the agency’s website this fiscal year. Labor also publicizes violation cases by issuing press releases on its website, particularly when it debars an employer. Labor officials told us that the purpose of the press releases is to show that there are consequences for not complying with the law.

Labor takes the opportunity to explain employer obligations under the law during its investigations of complaints filed against H-1B employers. At the beginning, an investigator sends the employer the regulations that pertain to the H-1B program and, during the investigation, highlights the law and regulations that are relevant to the case. The investigator also answers any questions the employer may have. At a final conference, Labor tells the employer which parts of the law the employer violated. Additionally, Labor always asks the employer it is investigating how it plans to change to come into compliance with the program.

Labor is working with the Department of State to provide information cards to H-1B workers about their employment rights. Workers receive the information cards with their visas. Labor also distributes the cards to employers so that they are aware of an H-1B worker’s rights. The cards include information on employees’ rights regarding wages and benefits, illegal deductions, working conditions, records, and discrimination. (See fig. 4.)

Homeland Security and Justice also provide information to employers in a variety of ways such as publishing newsletters, responding to written inquiries from employers and their counsel, informational bulletins, answering questions for employers who call, and providing information on their websites. Homeland Security publishes informational bulletins for employers seeking to hire foreign workers. The Department also uses its website to advise the public of any changes in the H-1B 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 also trains employers, and works with other federal agencies to coordinate education programs for employers. Justice also has a telephone intervention hotline for U.S. workers and H-1B employers to call when disputes arise. Justice uses the hotline to quickly address questions and to resolve problems. In addition, Justice answers e-mails, issues guidance, and provides information on its website.

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 could better address the challenges they face in sharing information. After Labor certifies an application, Homeland Security’s USCIS reviews the information but cannot easily verify how many times the employer has used the application. Also, USCIS staff told us that, during their review, they may find evidence that employers are not meeting their H-1B obligations. However, current law precludes the Wage and Hour Division from using this information to initiate an investigation of the employer. 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, so that an H-1B worker could be hired instead. From 2000 through 2005, Justice entered six out-of-court settlements to remedy violations and assessed $7,200 in penalties.

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’s USCIS reviews Labor’s certified application as part of the adjudication process; however, it lacks the ability to easily verify whether employers have submitted petitions for more workers than originally requested on the application. Labor can certify applications for multiple workers and, therefore, employers can use one application in support of more than one petition. However, USCIS’ data system, CLAIMS 3, 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 staff told us that when employers do not provide the names of the other H-1B workers approved using the same certified application, the adjudicator may request it from the employer. USCIS staff also told us that a letter is sent to the employer requesting the information and the employer has approximately 12 weeks to respond. Consequently, a request for information requires staff time and slows down the adjudication process. While USCIS told us 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. USCIS told us it is currently transforming its information technology system; however, it will be several years before the new 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 the Wage and Hour Division from using this information to initiate an investigation of the employer. For example, to extend an H-1B worker’s stay in the United States, an employer may submit a petition with the worker’s W-2 form as supporting documentation. USCIS staff told us they have reviewed petitions where the wage on the W-2 form was less than the wage the employer indicated it would pay on the original Labor application. In these cases, USCIS asks the employer to explain the wage discrepancy. If the employer has a legitimate explanation and documentation—for example the worker was on some type of extended leave—the petition may be approved. However, if the employer is unable to adequately explain the discrepancy, USCIS said it may deny the petition but generally does not report these employers to Labor for investigation. USCIS does not have a formal process for reporting the discrepancy to Labor. 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.

Labor and Homeland Security also coordinate when employers have committed violations resulting in debarment. After Labor’s Wage and Hour Division determines that an employer has committed a debarrable offense—such as willfully not paying an H-1B worker the required wage— Labor notifies USCIS, which in turn provides dates for the period of time that it will automatically deny petitions from the employer. Labor’s Wage and Hour Division then sends a letter informing the employer that it is ineligible to sponsor workers for the H-1B program for that period of time. A copy of the letter is sent to Labor’s Employment and Training Administration so that it will not certify any applications from the employer for the same period.

Both Labor and USCIS officials said they are working to improve communication between the two agencies. For example, Labor, Homeland Security, and the State Department convened a multi-agency fraud working group, which met in March 2006, to discuss strategies for dealing with fraud in the H and L visa programs.

Justice Handles U.S. Workers’ Cases

Justice pursues charges filed by U.S. workers who allege that an H-1B worker was hired in their place. The Immigration and Nationality Act, as amended, gives U.S. workers the right to file a charge against an employer when they believe an employer preferred to hire an H-1B visa holder. When a charge has been filed, Justice’s Office of Special Counsel opens an investigation for 120 or 210 days, as determined by statute. Charges may be resolved through a complaint before an administrative law judge, an out of court settlement, or a dismissal for lack of reasonable cause to believe a violation has occurred. Between 2000 and 2005, no cases were heard in court 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. If Justice finds that an employer hired an H-1B worker instead of a U.S. worker, Justice may assess penalties, impose debarment, or seek administrative remedies such as back wages. Justice may assess penalties on cases settled out of court if it finds that an employer hired an H-1B worker over a better-qualified U.S. worker. From 2000 through 2005, Justice found discriminatory conduct in 6 out of the 97 investigations closed. Justice assessed a total of $7,200 in penalties in three of the six cases, all in 2003.

Conclusion

U.S. employers continue to request high numbers of foreign temporary workers under the H-1B nonimmigrant visa program. Labor, along with Homeland Security and Justice, must address the desires of U.S. employers for skilled foreign workers as well as ensure the program’s integrity and protect both domestic and foreign workers. Labor’s authority to review the Labor Condition Application is restricted to looking for completeness and obvious inaccuracies, but it could improve its oversight of employers’ compliance with program requirements. Additionally, USCIS may find information in the materials submitted by an H-1B employer that indicates the employer is not complying with program requirements. However, current law restricts Labor from using such evidence to initiate an investigation of the employer. USCIS also has an opportunity to improve its oversight of employers’ petitions to hire H-1B workers by matching information from its petition database with Labor’s application case numbers 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, ensuring that employers are in compliance with the program’s requirements that protect both domestic and H-1B workers is essential.

Matter for Congressional Consideration

To increase employer compliance with the H-1B program and protect the rights of U.S. and H-1B workers, Congress should consider (1) eliminating the restriction on using application and petition information submitted by employers as the basis for initiating an investigation, and (2) directing Homeland Security to provide Labor with information received during the adjudication process that may indicate an employer is not fulfilling its H-1B responsibilities.

Recommendations for Executive Action

To strengthen oversight of employers’ applications to hire H-1B workers, we recommend that Labor improve its procedures for checking completeness and obvious inaccuracies, including developing more stringent, cost-effective methods of checking for wage inaccuracies and invalid employer identification numbers.

To ensure employers are complying with program requirements, we recommend that as USCIS transforms its information technology system, the Labor application case number be included in the new 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.

Agency Comments and Our Evaluation

We provided a draft of this 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 measures is supported by the magnitude of the error rate that was 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.

We are sending copies of this report to the Secretary of Labor, the Secretary of Homeland Security, the Attorney General, relevant congressional committees, and others who are interested. Copies will also be made available to others upon request. The report will be available on GAO’s web site at http://www.gao.gov.

If you or your staff have any questions about this report please contact me on (202) 512-7215 or nilsens@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix VII.

Appendix I: Scope and Methodology

To understand the H-1B certification, adjudication, and enforcement processes and the responsibilities of each agency involved, we hosted a joint meeting with officials from the Departments of Labor, Homeland Security U.S. Citizen and Immigration Services (USCIS), and Justice. We also reviewed laws and regulations related to the H-1B program.

To obtain information on the characteristics of employers who filed Labor Condition Applications (applications) and the positions they sought to fill with H-1B workers, we analyzed the Efile H-1B Disclosure Data from the Employment and Training Administration (ETA) of the Department of Labor. These data included all the applications filed electronically from January 2002 through September 2005. We analyzed the data from a total of 960,563 applications to determine (1) the number that had been certified or denied, (2) the employers who requested the most workers, (3) the most frequently requested occupation codes, (4) the locations of the H-1B positions, (5) the source of the prevailing wage used by employers, and (6) how many applications were certified with invalid employer identification number prefixes when compared with a list of valid prefix codes obtained from the Internal Revenue Service. We also analyzed how prevailing wages compared to actual wage rates. The H-1B Visa Reform Act, which was passed on December 8, 2004, requires employers to pay H-1B workers at least 100 percent of the prevailing wage for each specific occupation and location. Prior to the enactment of this law, Labor’s regulations permitted employers to pay actual wages that were only 95 percent of the prevailing wage. Accordingly, to ensure we did not incorrectly identify any applications as erroneously certified during the time between the passage of the H-1B Visa Reform Act and Labor’s implementation of the new 100 percent requirement, our analysis only identified those cases where the actual wage rate was less than 95 percent of the prevailing wage.

Additionally, we interviewed officials from ETA regarding the application approval process, including the circumstances under which applications are reviewed by an analyst for discrepancies, how prevailing wage sources are determined to be legitimate, and the ETA resources that are used to process and review applications. Additionally, we accessed the application online system to determine when the employer would receive error notices when filling out the application. We conducted a data reliability assessment of the H-1B Disclosure Data by testing for completeness and accuracy, reviewing documentation, and interviewing knowledgeable officials. We found it to be sufficiently reliable for our purposes.

To analyze the number and type of H-1B complaints received by Labor’s Wage and Hour Division (WHD) and the outcomes of the associated investigations, we received a data extract from WHD’s Wage and Hour Investigative Support and Reporting Database (WHISARD). From fiscal years 2000 through 2005, we analyzed the number of H-1B complaints, violations, and the penalties assessed including the number of employees due back wages, the amount of back wages due, civil money penalties, the most common violation, and the trend in the number of willful violations as a percentage of all violations. We also interviewed WHD officials on the complaint and investigation process, the appeal process, educational outreach to improve employer compliance, and the WHD resources used to process and investigate complaints. We conducted a data reliability assessment of the WHISARD data by testing for completeness and accuracy, reviewing documentation, and interviewing knowledgeable officials. We found it to be sufficiently reliable for our purposes.

To determine the number of employers who had been debarred, or disqualified from participating in the H-1B program for a specified period of time, we requested that WHD officials provide the number of times per fiscal year from 2000 through 2005 that they sent a letter to USCIS requesting a debarment period. We also requested that USCIS provide the number of request letters it had received from WHD.

To determine the number and type of H-1B petitions submitted by employers and adjudicated by the Department of Homeland Security US Citizenship and Immigration Service, we analyzed service center data from the Computer Linked Application Information Management System, Version 3.0 (CLAIMS 3) database from fiscal years 2000 through 2005. We analyzed (1) the number of petitions approved or denied; (2) the basis for the classification of the worker, such as whether the petition was for a new H-1B employee or for a continuation of a worker’s stay; (3) the employer’s requested action; (4) the educational level of the H-1B workers; (5) the number of H-1B workers requested on each petition; and (6) the occupation codes requested. Additionally, we conducted a data reliability assessment of selected variables by testing for completeness and accuracy, reviewing documentation, and interviewing knowledgeable officials. We reported on the variables that we found to be reliable enough for our purposes. To understand the policies and procedures of the program, we interviewed officials at USCIS headquarters. To understand the petition adjudication process, we conducted site visits at the USCIS Service Centers in Saint Albans, Vermont, and Laguna Niguel, California. According to USCIS, from October 2004 through December 2005 these service centers combined processed 63 percent of the H-1B petitions. To obtain context and facilitate our understanding of the electronic CLAIMS 3 data, we requested to review a non-probability sample of 48 petition files representing a variety of H-1B adjudication processes. During our site visits, we reviewed those that were available.

To determine the type of violations and the process for investigations of U.S. worker displacement allegations we interviewed Department of Justice officials. We analyzed a summary report provided by Justice of the number of employers investigated from 2000 through 2005 and the outcomes of those cases. To determine the number and outcomes of investigations, and the types and amounts of penalties assessed on employers, we obtained documentation from Justice.

Appendix II: Department of Labor Labor Condition Application

Appendix III: Department of Homeland Security USCIS Petition for a Nonimmigrant Worker and H-Classification Supplement

Appendix IV: Data Tables

The following tables provide additional information on analyses conducted on the application data from the Department of Labor’s Efile H-1B Disclosure Database and the petition data from USCIS’s Computer Linked Application Information Management System, Version 3.0.

Appendix V: Comments from the Department of Labor

Appendix VI: Comments from the Department of Homeland Security

Appendix VII: GAO Contact and Staff Acknowledgments

Acknowledgments

Alicia Puente Cackley, Assistant Director; Gretta L. Goodwin, Senior Economist; Amy J. Anderson, Senior Analyst; and Pawnee Davis, Analyst, made significant contributions to all phases of this report. In addition, William J. Schneider, Intern, assisted with data collection and analysis; Sheila R. McCoy provided legal assistance; Luann M. Moy provided methodological assistance; Susan F. Baker, Cynthia L. Grant, Lynn M. Milan, and Melinda L. Cordero provided data analysis; and Rachael C. Valliere, Communications Analyst, assisted in report development.

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