The Consolidated Appropriation Act of 2005: Its Impact on the H and L Visa Categories

On December 8, 2004, Congress passed the H-1 and L-1 Visa Reform Acts of 2004. These reforms were enacted in response to Congressional concerns that the immigration regulations in this country lend themselves to unintended use or fraud, which may hinder the competitiveness of either U.S. workers or U.S. companies.

Overview of H and L visas Categories

The H-1B visa is in place for companies to employ foreign nationals in the U.S. in specialty occupations requiring at a minimum a bachelor’s degree or equivalent professional experience. The L visa permits an employer to temporarily transfer intra-company employees from an affiliate, subsidiary or parent company abroad to the U.S. to work for the U.S. entity in a specialized knowledge or managerial capacity. Workers in L status are meant to perform duties which cannot otherwise be performed by a U.S. worker, without the knowledge of the entity’s proprietary products, services or operations. Both of these visa classifications are used extensively by our clients in order to meet the staffing needs of their offices in the U.S. However, recent reforms, passed in response to allegations of fraud, have further restricted the use of both of these categories. The changes have been made even though Congress acknowledges the need to maintain these visa classifications for those employers who use these categories legitimately.

Additional Fees

As indicated in our NewsFlash of December 8, 2004, and as discussed above, the training fee was reinstated and raised to $1500 for all but the smallest employees. In addition, a new Fraud Detection and Prevention fee of $500 on all initial H or L applications, including L-1 blanket petitions and petitions for a change of employer, took effect on March 8, 2005. What all of this means is that the filing fee alone for a new H-1B petition adds up to more than $2,000 for regular processing for new petitions and change of employer applications. Given the limited number of H-1B visas available per fiscal year, many employers are opting to file premium processing for initial petitions to have the certainty of an approved petition. Although the agency has stated that numbers are allocated hands on insures that a quota allocation for the new fiscal year is in hand. With the additional fee for premium processing, the total filing fees are more than $3,000 for an H-1B. To minimize the effects of these increased fees, we recommend anticipating future staffing changes, to the extent possible, and creating a legal strategy to maximize effectiveness while minimizing costs.

Other Changes effective March 8, 2005

Several sections of the H-1B Visa Reform Act of 2004 were made effective on March 8th. The concept of H-1B dependency has been re-instated as well as a non-displacement attestation on the LCA filed by employers, who are H-1B dependent or who have committed a willful failure or misrepresentation during the preceding five years. These changes have now become a standard requirement. This means that an employer date of filing, a PP approval now needs to maintain statistics, as opposed to merely public access files and immigration files, regarding their use of the H-1B category to determine H-1B dependency at any given time. Given the nature of attestations being made to the Department of Labor and to the Department of Homeland Security (DHS), we recommend that all employers have centralized policies and procedures in place regarding the maintenance and retention of their immigration files, including the withdrawal of H-1B petitions.

As indicated above the prevailing wage requirement for both H-1B and Labor Certification purposes requires that employers pay 100% of the prevailing wage rather than the “safe harbor” amount of at least 95% of the prevailing wage. The Secretary of Labor, in instances where a government wage survey is provided, is now required to identify four district wage levels. We, recommend that employers develop a policy for the determination of prevailing wages for positions within their organization and apply these policies consistently. In addition, we recommend that employers maintain accurate actual wage data for positions within their organization.

It is important to note that the permanent LCA attestation requirements also provide the Department of Labor (“DOL”) with investigatory authority where there is reasonable cause to believe that an employer has committed willful failure to meet conditions, has engaged in a pattern or practice of failures to meet conditions, or has committed a substantial failure affecting multiple employees. The Act also calls for a procedure for claim reviews, for notice to an employer, a time limit for the investigation, and a hearing process with time to correct a failure. An employer will not be assessed penalties for failures to pay the prevailing wage if the employer can establish that the manner in which the wage was determined was consistent with recognized industry standards and practices. Congress has intended to provide a mechanism for enforcement of these reforms and requirements, and the DOL and Department of Homeland Security (“DHS”) have already intimated that they intend to make full use of this authority. Filing immigration related applications and petitions through the immigration agency or the DOS should not be an ad hoc process within your organization. All organizations should have immigration policies and procedures in place, a point of contact for all immigration issues, and separate, but centralized locations for I-9, public access, and immigration files.

More Changes Effective on June 8, 2005

On December 10, 2004, Greenberg Traurig sent out a NewsFlash alerting our clients of the changes enacted in the L Visa Reform Act, which takes effect in June. Concern that employers were misusing immigration regulations led to a significant change in the L-1 category. The L Visa Reform Act requires that DHS maintain statistics regarding the use of this category; that DHS report to Congress on areas potentially open to abuse; and that a task force be established in Congress to bring about changes based on these reports from DHS. The Act prohibits the use of the category for the purpose of bringing “labor for hire” to the U.S. and specifies that the transfer employees must be stationed primarily at the worksite of the petitioning employer or its affiliate, subsidiary or parent for the purpose of providing a specialized knowledge service directly to the petitioning employer.

In addition to establishing that a qualifying relationship exists between the U.S. and foreign entities, it is more important than ever that a petitioning employer seek counsel when there is any doubt as to whether a qualifying employer-employee relationship exists both abroad and in the U.S., and that it exists for the requisite period of time before filing a petition. The State Department provide further guidance on the appropriate relationship last year indicating that:

The essential element in determining the existence of an "employer-employee" relationship is the right of control, that is, the right of the employer to order and to control the employee in the performance of his or her work. This, rather than the source of salary, is the controlling factor. Possession of the authority to engage or the authority to discharge is very strong evidence of the existence of an employer-employee relationship.

Another important change taking affect within a few short months requires all L-1 applicants, including those applying under a blanket petition, to have worked for the affiliate, subsidiary or parent abroad for a full year. No longer will blanket L applicants be allowed to transfer after only six months of employment with the affiliate abroad.

Given the latest L-1 and H-1 visa reforms affecting wages, conditions, attestations and legitimate employment relationships, we strongly recommend that all organizations with non-immigrant employees conduct an audit for immigration compliance. We are available to provide specific or customized guidance and audit services with respect to these issues.

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