New H-1B rules will kill midsize IT companies: ITServe Alliance


The Trump administration October 6 made two major immigration announcements that midsize IT companies, which depend on the H-1B visa program, say will kill their business.

The Department of Homeland Security announced an interim final rules (IFR) that changes regulatory definitions of a “specialty occupation”, “worksite” and “third-party worksite.”

This, the department said, would strengthen the H-1B nonimmigrant visa program to protect US workers, restore integrity to the H-1B program and better guarantee that H-1B petitions are approved only for qualified beneficiaries and petitioners.

The Department of Labor announced it was “strengthening wage protections for the temporary and permanent employment of certain aliens in the United States” to help protect the wages and job opportunities of American workers.

While the homeland security regulation will come into to effect 60 days after publishing and public review, the labor changes would come into effect immediately.

Ever since Donald Trump came to power, IT — mostly consulting or mid-size — companies and their employees on H-1B visas have gone through several hardships and court cases.

The new rules, too, are likely to be challenged in court.

Amar Varda, president, ITServe Alliance. indica News picture, courtesy Mr Varda

We are talking within the organization and with our litigation and immigration attorneys how to go about it,” Amar Varda, president of ITServe Alliance, told indica News when asked how the Alliance would react.

ITServe Alliance is the largest association of IT consulting firms in the United States (mainly Indian companies). It has over 1,400 companies as members, and these companies provide services to Fortune 500 businesses and government agencies by hiring employees in the US.

Asked if the labor rule change is asking to raise salaries, Varda said: “Yes, and the way the law has been written it is going to undermine all our efforts so far.”

So, we are talking to our attorneys and are trying to figure out what our next step should be,” he said.

He said the regulations were over 300 pages and attorneys were still poring trough them.

However, the most concerning is the salary issue, and the Trump administration is also trying to restrict H-1B placement at the client’s place.

The IFR says the third party placement would be for just one year.

But some contracts they might go on for multiple years,” Varada said. “They want to restrict H-1B employees working.”

Varda said the point — employee-employer relationship — on which the Alliance won a case against the Unites States Citizenship and immigration Services had been brought back. “Earlier it was a memo, now they are coming back as a rule,” he said, sounding concerned.

The main difference, earlier it was a memo and the normal process is they have to publish the rule and take the comment it goes to Congress, but now they found their own loophole and try to make this as a final rule,” he said.

But again, we would definitely challenge them,” Varda said.

This would hurt the entire industry and would kill our business. We cannot pay those kinds of salaries they are proposing,” he stressed.

He said the kind of salaries that were being made mandatory could be afforded by only the big companies such as TCS, Infosys, Tech Mahindra, Wipro.

Their model is both onsite and offshore. Our model companies all are like…are US based companies. Our employees work within the country in the US, so it is definitely a challenge,” Varda said.

The regulation will restructure the prevailing wage system for the H-1B, E-3, H-1B1 and PERM programs.

Entry-level wages for H-1B and PERM cases, for example, will increase to the 45th percentile of wages for the occupation and geographic location, from the 17th percentile – just under the current wage minimum for Level III.

The regulation will be published on Thursday and will take effect immediately upon publication, though it is expected to be challenged in court.

The $60,000 salary threshold was set in 1998 through the American Competitiveness and Workforce Improvement Act and has not been adjusted to date. If adjusted for inflation, the salary threshold for the exception to the US worker recruitment would be over $93,000.

Outsourcing companies have been criticized as “gaming the system” so that they have a ready pool of low-paid temporary workers, which ultimately hurts the wages of US workers.

In recent years, US companies such as The Walt Disney Company, Hewlett-Packard, University of California San Francisco, Southern California Edison, Qualcomm, and Toys “R” Us have reportedly laid off their qualified US workers and replaced them with H-1B workers provided by H-1B-dependent outsourcing companies.

Acting Secretary Chad Wolf said through a press note: “We have entered an era in which economic security is an integral part of homeland security. Put simply, economic security is homeland security. In response, we must do everything we can within the bounds of the law to make sure the American worker is put first.”

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