Limits on H-1B hiring by bailout recipients still in economic stimulus bill

House, Senate negotiators leave restrictions in compromise version of $787B stimulus plan

A provision intended to require banks receiving federal bailout funds to give hiring priority to U.S. workers over foreigners with H-1B visas was left in the economic stimulus package when U.S. House and Senate negotiators agreed on a compromise bill this week.

The $787 billion stimulus bill was subsequently approved by the House of Representatives today, and a vote in the Senate is expected tonight.

The provision designed to curb the use of H-1B visas was proposed last week by Sens. Bernie Sanders (I-Vt.) and Chuck Grassley (R-Iowa) as an amendment to the Senate's stimulus legislation. The proposal initially sought to bar H-1B hiring by financial services firms receiving bailout money, but it was later modified to restrict such hiring.

The stimulus bill, once it is approved by the Senate and signed by President Barack Obama, will require firms that take bailout funding to make a good-faith effort to hire U.S. citizens before people who are in the country on H-1B visas.

Opponents of the measure said it is so restrictive that affected financial services firms will likely stop hiring H-1B workers altogether. However, the provision doesn't prevent them from using offshore outsourcing contractors, which typically are heavy users of H-1B visas.

As a result of the conference agreement, Sanders said in a statement today that he expects the H-1B provisions to be adopted along with the rest of the stimulus bill. He added that what may have prompted the negotiators to keep the H-1B restrictions in the bill were all of the ongoing layoffs and other job losses. "With thousands of financial services workers unemployed, it is absurd for banks to claim they can't find qualified American workers," Sanders said.

The proposed restrictions require firms that receive money under the federal Troubled Assets Relief Program (TARP) to comply with hiring rules set for "H-1B dependent" firms — those with more than 15% of their workers on visas. Those rules set a number of strict requirements for hiring H-1B holders, including a need for companies to attest that they actively recruited American workers and are not displacing or replacing U.S. citizens with foreign workers.

However, the impact of the new legislation on offshoring of IT work may be limited. Ron Hira, an assistant professor of public policy at Rochester Institute of Technology and co-author of the book Outsourcing America, claimed that many TARP-recipient banks "have huge shadow workforces — people who work for the bank indirectly through outsourcing contract firms."

The TARP-related hiring provision "will rectify some of the indefensible practices of quasi-nationalized banks," Hira said. "But unfortunately, it doesn't close the loopholes where most of the abuse occurs."

Hira said the amount of outsourcing by Wall Street firms has actually increased since the bailout program began last fall, citing deals such as offshore outsourcer Tata Consultancy Services Ltd.'s October agreement to acquire a unit of Citigroup Inc. that does business process outsourcing and IT services work. Similarly, Wipro Ltd. agreed in December to buy Citigroup's IT subsidiary in India.

In addition, Hira contended that "many, if not all, of these banks have human resource practices where they force their American workers to train foreign replacements, and subsequently lay off the American workers." That practice "sometimes results in tragedy," he added, citing the 2003 suicide of a former Bank of America Corp. programmer who reportedly was laid off after training his replacement.

On the other hand, Charles Kuck, president of the American Immigration Lawyers Association, expressed disappointment at the inclusion of the hiring restrictions in the compromise stimulus bill.

"These banks will not able to hire qualified foreign talent to pull them out of this mess — if that was necessary," Kuck said. "Maybe we've got all the homegrown talent we need to pull us out of this mess, because now we have to hope we do."

While the restrictions don't prevent employers from hiring H-1B holders, Kuck predicted that the affected firms will be unlikely to do so because of the added cost and work that will now be involved. The key advantage of the H-1B program, he said, is the ability it gives companies to quickly hire people to fill available jobs.

"There are very few employers that are going to wait that period of time to be able to do that [under the restrictions] when they have to bring somebody on board right away," Kuck said. "You are effectively saying, 'You can't use the program.'"

The big question, according to Kuck, is whether companies receiving TARP funds will be able to bring in "the best person available to do the job." That's a separate issue, he said, from the low-level work that typically is going to outsourcing firms.

While the H-1B hiring restrictions made it into the final version of the stimulus bill, the negotiators dropped a related provision that would have required businesses taking bailout money to use the federal government's E-Verify system to vet the employment status of their workers.

Copyright © 2009 IDG Communications, Inc.

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