August 20, 2016

What Every In-House Counsel Needs to Know about Immigration Law Compliance - Part One in a Two-Part Series

Introduction: Party Politics and Rhetoric Driving an Environment of Enforcement

In-house counsel has rarely faced a more inhospitable and uncertain regulatory environment in the province of immigration. Perhaps unparalleled in contemporary history, the immigration debate has commandeered superposition in the American political landscape, simultaneously occupying all branches of government, state and federal. While the schizophrenic administration announces targeted raids against Central Americans, a deadlocked Supreme Court in a nine-word per curiam ruling left millions of unlawfully present immigrants in the first circle of Dante’s Hell—Limbo—ensuring that the presidential election will devolve into tribal warfare and identity politics. United States v. Texas, 579 U.S. ___ (2016). The legislative branch, meanwhile, is locked in its own ideological stalemate over whether to deport or legalize, tighten the noose or loosen the reins; neither side willing to concede political capital to find common ground.

In an election year’s political ambient, a perfect storm can materialize from little more than the flapping of a butterfly’s wings. Driven by a small number of anecdotes of abuse related in particular to two nonimmigrant visa classifications: B-1 (Temporary Business Visitor) and H-1B (Specialty Occupation), enforcement saber-rattling has propelled both Republicans and Democrats to react. Once again, the H-1B visa category has become a center of political unease over immigration in general. These stories include the use of H-1B workers by Southern California Edison Company (SCE), Walt Disney World, Pfizer, and Infosys. Although these cases did not involve many workers (H-1B employees in general represent a small percentage of the U.S. workforce) and the extent of the actual abuse can be reasonably questioned, these company names are chanted like a mantra by politicians on both sides of the aisle as examples of the threat the H-1B poses to the U.S. workforce.

Senate Republicans Grassley (R-Iowa) and Sessions (R-Alabama) have called for more restrictions on H-1B and other employment provisions. While many Republicans have been supportive of the H-1B program and business-related immigration overall, factions within the party generally opposed to immigration have used stories of H-1B abuse to promote further restraint on immigration. In fact, it was Senator Hatch’s (R-Utah) proposed bill to increase the number of H-1B visas from 65,000 to 195,000 annually in the Immigration Innovation Act of 2015 that animated Senator Grassley, chairman of the Senate’s Judiciary Committee, to actively oppose his Republican colleague. Perhaps nativist tendencies run thicker than ideology.

Democrats as well have used these stories to support the need for greater immigration restrictions, premised on the notion that H-1B workers displace and undercut the wages of U.S. workers. For example, in an unusual show of bipartisanship in the immigration realm, Senator Durbin (D-Illinois) collaborated with Senator Grassley in 2015 to introduce The H-1B and L-1 Visa Reform Act of 2015 (S. 2266, 114th Congress), which would have barred firms from hiring H-1B workers if more than 50 percent of their employees were already on H-1B or L-1 visas. In a statement posted on his website, Senator Grassley specifically referred to media reports of abuse as justification for reform: “The abuse of the system is real, and media reports are validating what we have argued against for years, including the fact that Americans are training their replacements.” 

In the wake of the Southern California Edison story, 10 senators from both parties (Durbin, Sessions, Blumenthal (D-Connecticut), Grassley, Brown (D-Ohio), Vitter (R-Louisiana.), McCaskill (D-Missouri), Cassidy (R-Louisiana), Sanders (I-Vermont), and Inhofe (R-Oklahoma) wrote to the secretaries of the Department of Homeland Security, Department of Labor, and the Attorney General calling for an investigation of H-1B worker displacement allegations at SCE and other firms. Senator Blumenthal also wrote a letter to U.S. Attorney General Loretta Lynch in February 2016 “urg[ing]” the Department of Justice to investigate claims that H-1B workers unlawfully displaced workers at Eversource Energy.

In-house counsel must stay abreast of these political developments and carefully tread the murky policy waters they create. While immigration reform remains sidelined due to its staunchly partisan and controversial nature, the ubiquity of these stories and the bipartisan nature of the concern they invoke (although to be sure, the political parties differ over their motivations) has sounded the alarm for “reform” of the H-1B (and to a lesser extent, the L-1 Intracompany Transferee visa classification, which raises comparable issues) than any other immigration provision. Recent events, however, have broadened the target for immigration critics to include the B-1 Business Visitor classification.

B-1 Business Visitor Abuse and Wage Obligation Circumvention

It is important that in-house counsel closely monitor for misuse of business visitor visas by foreign employees visiting the company’s U.S. offices or client sites. Permissible uses of the B-1 visa and business visitor entry through the Visa Waiver Program and ESTA (Electronic System for Travel Authorization) are fairly circumscribed. The Immigration and Nationality Act (INA) provides that a business visitor must be “visiting the United States temporarily for business,” and cannot be “visiting for the purpose of study or of performing skilled or unskilled labor.” While this leaves room for interpretation, policy guidance enumerates permissible business visitor activities in the following ways:

  • engage in commercial transactions, which do not involve gainful employment in the United States (such as a merchant who takes orders for goods manufactured abroad)
  • negotiate contracts
  • consult with business associates
  • litigate
  • participate in scientific, educational, professional, or business conventions, conferences, or seminars
  • undertake independent research
  • attend board meetings as a member of the board of directors
  • seek investment in the USA, including an investment that would qualify him or her for E-2 Treaty Investor status, under certain conditions
  • work on a sea vessel in the Outer Continental Shelf, under certain conditions
  • install, service, or repair commercial or industrial equipment or machinery purchased from a company outside the United States, or supervise or train such workers to perform these services, under certain conditions
  • observe the conduct of business or other professional or vocational activity, under certain conditions
  • receiving training, under certain conditions

See Chapter 9 of the Foreign Affairs Manual (FAM), Section 402.2-5.

The rule of thumb when it comes to permissible business visitor activities is whether they are “incidental to work that will principally be performed outside of the United States.” Importantly, unlike the H-1B category, issuance of B-1 visas is neither restricted by number nor tied to any particular employer.

Another example of permissible B visa activity involves individuals who would qualify as H-1B, but who are customarily employed by a foreign firm that pays the employee’s salary, and the source of the employee’s salary is abroad. Because this provision can allow for H-1B-type services without the H-1B cap restrictions, it is a tempting resource for employers. However, a State Department general guidance cable of October 2012 provides that aliens engaged in activities of this nature, the so-called B-1 in lieu of H-1B, must “clearly plan to engage in H-1B-caliber activity for a temporary period, normally less than six months in duration,” along with other restrictions.

If your employees enter as business visitors to engage in “work” or other non-permissible business activities, this can lead to a number of negative consequences:

  • Denied entry to the United States, resulting in:
    • Unused/non-refundable travel costs;
    • Negative ramifications for the employee’s business unit, which was likely relying on the employee to complete an important project;
    • Potential blacklisting of your company with U.S. Customs and Border Protection.
  • U.S. Citizenship and Immigration Services, the U.S. Department of Labor, and/or U.S. Immigration and Customs Enforcement have jurisdiction to appear at your company offices for an unannounced “site visit” and examine whether all employees have proper work authorization. If, during such a site visit, an immigration officer discovers an employee in business visitor B-1 visa status engaging in productive work or other non-permissible business visitor activities, this could mean:
    • For violations of 31 U.S.C. § 3729(a)(1)(A), civil penalties of up to $11,000 for each false claim submitted to a U.S. government employee, three times the amount of damages that the government sustained as a result of the conduct, costs and expenses of litigation;
    • For violations of 8 U.S.C. § 1324a(a)(1)(B), civil penalties of up to $1,100 for each violation and costs and expenses of litigation.

A prominent example of these potential negative consequences to employers for business visitor violations is found in the Justice Department’s lawsuit against Infosys, a large multinational technology corporation based in India. The department alleged that Infosys “used B-1 visa holders to perform jobs that involved skilled labor that were instead required to be performed by United States citizens or required legitimate H-1B visa holders.” In 2013, Infosys agreed to a civil settlement resolving all claims for a $34 million payment, a record for immigration cases. This negatively impacted not only Infosys’ reputation with government authorities, but also its profits.

H-1B Wage Compliance

Another area fraught with peril for in-house counsel is wage compliance for its H-1B employees. U.S. employers are required to pay H-1B workers the actual wages paid to similarly situated employees in the company, or the prevailing wage—whichever is greater. Additional employer requirements exist to help protect the wages of U.S. workers from being adversely affected by H-1B workers. These include maintaining auditable paperwork, demonstrating how the actual wage and prevailing wage were calculated, and including various attestations, such as a statement from the employer to offer benefits to H-1B workers on the same basis as U.S. workers. Violations of these obligations can lead to civil penalties of up to $35,000 per violation, depending on the type and severity of the violation.

The Department of Labor may also impose other remedies, including payment of back wages. Smartsoft International, for example, was ordered to pay nearly $1 million in back wages to 135 H-1B employees in 2010. Prince George’s County Public Schools, too, was ordered by the Department of Labor (DOL) to pay $4.2 million in back wages to over one-thousand workers to resolve H-1B violations. The potential harm is not only financial; H-1B violations can also result in program debarment, precluding future access to the H-1B program for a period of up to three years, depending upon the nature of the violation. The DOL also maintains a list of debarred employers on its website.

Displacement of U.S. Workers

There are a number of cautionary tales for in-house counsel to use to discourage decision-makers from cutting corners. The cases now frequently cited as examples of visa abuse and displacement of U.S. workers demonstrate the risks that an employer can face if accused of misusing these visa classifications. SCE, which was accused of replacing U.S. workers with workers from Indian companies Tata and Infosys, was investigated by the DOL and the Office of Special Counsel for Immigration-Related Unfair Employment Practices at the Department of Justice. Both investigations were eventually closed without action taken against SCE. However, SCE was publicly criticized in the letter from 10 senators cited above, as well as by Rep. Chu (D-California), Rep. Issa (R-California) and other members of Congress.

Even family-friendly Walt Disney World Corporation is currently being investigated for outsourcing abuse by the DOL. The Institute of Electrical and Electronics Engineers, an international association of technical professionals, posted an online petition to encourage Americans who were displaced to file complaints with the Justice Department. Congressional critics of Disney practices included Democratic Senator Nelson of Florida. The Senate Subcommittee on Immigration and the National Interest held a February 25, 2016, hearing on “The Impact of High-Skilled Immigration on US Workers.” Its first witness was Leo Perrero, a former Disney IT engineer, who claimed to be “displaced by a less skilled foreign work force imported into our country using the H-1B visa program.”

No doubt, this has impacted Walt Disney World’s bottom line. Disney was additionally singled out by Donald Trump after a GOP debate. In his “Position On Visas,” he asserts: “I remain totally committed to eliminating rampant, widespread H-1B abuse and ending outrageous practices such as those that occurred at Disney in Florida when Americans were forced to train their foreign replacements. I will end forever the use of the H-1B as a cheap labor program, and institute an absolute requirement to hire American workers first for every visa and immigration program.” On wedge issues such as immigration, opposition can be unmoored from law and reality and still result in adverse action. Here, public and political perception is reality—potentially a cause for concern for our future legislation and leadership.

Rise of Private Party Complaints and Lawsuits

Real and perceived victims of job displacement are not relying solely on government agencies to seek redress of their grievances. The Infosys investigation and subsequent settlement mentioned above were instigated by a private party lawsuit filed against the company in an Alabama federal district court by whistleblower, Jack “Jay” Palmer, in February 2011. Jack was a project manager at Infosys when he brought the lawsuit. He alleged that Infosys was writing false invitation letters for Indian employees and claimed that he was asked to sign such a letter and refused. His lawsuit claimed that he had been punished and sidelined by Infosys executives after he witnessed widespread visa fraud. Although his lawsuit was dismissed by the federal court in August 2012, it led to the federal investigation mentioned above.

More recently, Leo Perrero, mentioned above, and Dena Moore, Americans both laid off by Disney and allegedly replaced by H-1B workers whom they were required to train, brought a class-action lawsuit against Disney in a Florida federal court, claiming that the company colluded to break the law by bringing in immigrant workers to displace Americans. As occurred with Infosys, the private lawsuit by Perrero and Moore led to a DOL investigation of Disney. These cases highlight the rise in private party “whistleblower” lawsuits and the need to protect against them through careful preventative action and foresight.


Partnering with seasoned immigration counsel is one way to maneuver the complexities of this dynamic field. We have only “the lamp of experience,” as Patrick Henry put it, to determine the future, but that is perhaps the best guide for in-house counsel on the contentious issue of immigration. As more incidents of alleged abuse occur and political rhetoric intensifies, the trend is luminously clear; more enforcement, more regulation, and stricter qualitative and quantitative controls. In turbulent times, a finger on the pulse of the political theater of operations is perhaps the best way to make sound business decisions. In a truly global economy, the flapping of a butterfly’s wings in Walt Disney World could create the conditions that cause the regulatory leviathan to rise. If we do not pay close attention, it could also determine the next leader of the free world.