Immigration reforms to create hurdles for Indian tech companies

H1-B and L-1 Visa Reform Act of 2013 proposes changes in doling out visas.

Bureau Report

WASHINGTON, DC: Proposed U.S. legislation aimed at making it harder for Indian companies to acquire visas for workers they send to America could throw up new hurdles for India’s technology outsourcing services companies.

The proposal, dubbed H1-B and L-1 Visa Reform Act of 2013, seeks to deny skilled-foreign-worker visas to foreign firms operating in the U.S. who are deemed to be relying too heavily on expatriates rather than hiring locally. The bill aims to deny new H1B, or skilled-worker, visas to those firms with more than 50 employees and 50% or more of its employees already on this visa, reported The Wall Street Journal.

The proposal also requires companies to list vacancies on a U.S. labor department sponsored website for a period of 30 days, before hiring foreign workers.

It also asks companies to pay prevailing wages to visa holders, ensure more scrutiny and seeks to raise penalties on those companies flouting existing visa rules, said the report.

They seek to double penalties on administrative violations to $2,000. For deliberate attempt to flout the rules the law suggests a fine of $10,000, up from $5,000. Such companies may be barred from future recruiting of employees under H1-B and L-1 visas, the draft legislation proposes.

The legislation doesn’t single out Indian firms, but they are among the largest employers in the U.S. Each year, the U.S. grants about 65,000 H1-B visas. Of the 10 companies that account for the largest number of visas, five are from India, said the Journal.

The new proposal comes against a backdrop of persisting concerns in the U.S. about rising unemployment and whether foreign workers, especially in the software sector, are displacing qualified Americans. Increasing protectionism in the U.S. is a source of worry for Indian IT companies, which are now being forced to step up local hiring.

The skilled-worker visas are critical for India’s outsourcing companies, which take thousands of workers overseas for technology projects. A major chunk of employees in overseas offices of India’s software companies are Indian nationals, who are brought into the country using the H1 B or L1 visas, the report said.

A note introducing the proposal posted on the website of U.S. Senator Charles Grassley, a Republican from Iowa, said offshoring companies accounted for nearly half of H1-B visas in the fiscal year 2012.

“The program was never meant to replace qualified American workers, but it was instead intended as a means to fill gaps in highly specialized areas of employment,” Grassley said in press release earlier this week.

“The legislation will benefit the American worker, while still ensuring that U.S. companies get the specialized workers they need,” he said.

A similar proposal was introduced by Grassley and Senator Dick Durbin more than four years ago. However, the legislations was defeated in the U.S. Senate. Instead, in 2010, the U.S. introduced a law that almost doubled fees for visa applications, making it costly for the Indian outsourcing companies to procure visas.

The note introducing the bill on Senator Grassley’s website says the bill is likely to provide a good basis for H1-B VISA reform in the comprehensive immigration bill being put together by a bipartisan group of senators. A group of eight lawmakers in the U.S. is working on a plan to overhaul the country’s’ immigration system, though Senator Grassley isn’t part of this group, said the Journal.

The comprehensive immigration bill proposes to reform a series of immigration laws in the U.S., including revamping the worker visa program, conferring citizenship to people who entered the country illegally and effectively securing the border. It is likely to be unveiled in April.

The probability of Senator Grassley’s bill passing as an independent legislation is “very low,” because the comprehensive immigration reforms bill is already in the works in the U.S., said Ameet Nivsarkar, vice president of Nasscom, the trade body representing India’s software industry. But, the language of Senator Grassley’s bill is “particularly concerning” for India’s IT industry, he added.

“Politically, nothing will be decided until everything on immigration is decided this year,” said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute For International Economics in the U.S, to the Journal. “This (Senator Grassley’s) bill has no chance on its own and only potentially as part of a bigger reform,” he adds.

Some analysts say the bill is a concern.

“The bill, if passed, will force those companies without a large American workforce to hire more people locally,” says Siddharth Pai, the president of Asia-Pacific business of U.S.-based technology advisory services firm Information Services Group. But, it doesn’t discriminate against Indian firms, he added.

“It’s an irritant for the IT companies,” says Sandeep Muthangi, an analyst with a Mumbai-based brokerage IIFL Capital. The administrative costs are likely to go up as there will be increased scrutiny and higher penalties in case of any violations, he added.

The latest proposal to reform the skilled-workers visa program comes as the U.S. is probing into whether India’s second-largest software exporter by sales Infosys Ltd. abused a temporary business visa program to send workers to the U.S. Infosys has denied any wrongdoing.

The probe stemmed from a civil suit filed in 2011 by an Infosys employee, Jack Palmer, who alleged that he was harassed for blowing the whistle on how the company abused the visa program.

Palmer accused Infosys of using short-term business visas instead of the skilled-labor visas, which are expensive and available only in limited numbers. The Alabama state court that was hearing the case threw it out in August last year, the report said.

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