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The L-1 visa, which multinational companies use to transfer their managers, executives, and workers with specialized knowledge of the company’s products, processes, and systems, has played a key role in U.S. business immigration since Congress established this nonimmigrant (temporary) visa category more than 30 years ago. During 2003, though, allegations of misuse have dragged the L-1 visa out from its position of relative obscurity and into the bright lights. Those allegations were simple: that the L-1 had become the visa of choice to replace U.S. workers with cheaper foreign labor. As seems inevitable in matters of immigration, though, neither the actual problem nor the ideas for a legislative correction have turned out to be so straightforward. What began with publicity over a particular form of apparent misuse has become a much broader debate over whether the L-1 visa harms or hurts the American economy. The debate has been blurred with the wider controversy over “outsourcing” of jobs from this country to others, and has generated bills that could dramatically affect the access of American companies and institutions to foreign brainpower. Despite the broad terms of the debate, all the reports of L-1 misuse described a very specific pattern. According to that pattern, a multinational company imports foreign workers into the United States and then sends them to the workplace of an unrelated company, basically leasing to that unrelated company a labor force to perform work that seems not to call for the sort of specialized knowledge that the L category was set up to require. CONGRESS REACTS A number of bills to reform the L-1 visa category were introduced during the summer of 2003, though none with the benefit of a hearing. H.R. 2154, introduced by Rep. John Mica (R.-Fla.), would restrict the placement of a L visa holder at the worksite of any third-party employer where there are “indicia of an employment relationship between the nonimmigrant and such other employer.” Critics worried that this “indicia of employment” test would eliminate not only the sorts of L-1 abuses reported in the press, but also legitimate offsite placement arrangements. In the June 19 issue of the New York Law Journal, Stanley Mailman and Stephen Yale-Loehr compared Rep. Mica’s approach with “prescribing sulphuric acid for a case of acne. It works, but there isn’t much left of the patient.” Yet that bill turned out to be modest by comparison with what was to follow. Fueled by the advocacy of entities like The Organization for the Rights of American Workers (TORAW), a Connecticut-based organization that advocates severe limits on the ability of companies to hire nonimmigrant workers, three more L-1 bills quickly followed. On July 10th, Rep. Rosa DeLauro (D. Conn.) introduced H.R. 2702, the L-1 Nonimmigrant Reform Act. Two weeks later, Rep. Nancy Johnson (D. Conn.) introduced H.R. 2849, the USA Jobs Protection Act of 2003, and Sen. Christopher Dodd (D. Conn.) introduced an identical bill, S. 1452, in the Senate. These bills would reach far beyond the “job shop” problem highlighted in most of the reporting of L-1 misuse. In addition to prohibiting placement of L-1 visa holders at the workplace of a third party — outright in the DeLauro bill, and if there are “indicia of employment” by the third party company in the Dodd/Johnson bills — these proposals would go much farther, including: � An annual cap of 35,000 L-1 visas per year (DeLauro). Under current law, there is no cap on L-1 visas, and in each of the last four years the State Department has issued between 55,000 and 60,000 L-1 visas, far fewer than the number of H-1B visas (for workers coming temporarily to perform services in a “specialty occupation”). � Limits on the period of admission, to three years for any L visa (DeLauro) or three years for workers with “specialized knowledge” and five years for managers and executives (Dodd/Johnson). Under current law, specialized knowledge workers may be admitted for up to five years, managers and executives for up to seven. � Elimination of the “Blanket L” program, which allows companies meeting certain criteria to obtain a certification that the organization generally meets the requirements necessary for a multinational company to petition for L-1 workers. (DeLauro)(The Dodd/Johnson bills would require annual executive branch evaluations of the extent to which the program would hinder enforcement efforts). The Blanket L program is designed to gain efficiencies for both the petitioner and the government by avoiding the need for the same evaluation of a specific petitioning company’s qualifications over and over again. It does not mean that all of that company’s petitions for particular L-1 workers are automatically approved; each such worker must still demonstrate to a U.S. consular official that he or she qualifies under the law as a manager, executive, or specialized knowledge worker. � An increase in the number of years the employee to be transferred must have been employed by the petitioning multinational company, to two of the three years preceding the petition. Under current law, that transferred employee must have worked for the company for one of the last three years, or for six months in the case of an employee entering on the basis of a blanket petition. � Importation of a number of provisions from the H-1B program designed to provide protection for the U.S. workforce, such as a requirement to pay the prevailing wage, to recruit U.S. workers in advance of hiring an L-1 specialized knowledge worker (Dodd/Johnson), and to demonstrate that it has not laid off U.S. workers within the six months preceding or following the hiring of an L-1 visa holder. THE TROUBLE WITH CAPS If the basic logic of some of these legislative proposals is that the lessons learned in the H-1B program ought to inform the L-1 program, then the question of caps is a good place to start. Caps can be politically attractive when Congress turns to immigration issues. Placing a limit on the number of people admitted in a debated category can secure the agreement of skeptical fellow lawmakers. Moreover, at least in the context of employment visas, caps are designed to serve a purpose few would quarrel with: to protect the U.S. workforce. But the promise that caps offer on the floor of a house of Congress tends not to be fulfilled in practice. Caps tend to be arbitrarily set, because there is rarely a clear set of factors to inform the decision. They also tend to be arbitrary in application. If the H-1B program, for example, rests on the idea that foreign specialty occupation talent serves U.S. economic interests, how is it possible to distinguish the value of the 65,001st specialty worker from that of the 65,000th? Recent history indicates very strongly that H-1B usage answers much more directly to market forces than to legislatively set levels. From the late 1990s to 2000, the cap on H- 1Bs, initially set at 65,000, was met or surpassed repeatedly. This was so even during 1999 and 2000, years for which Congress elevated the cap to well over 100,000. In response to the intense demand for H-1B workers to fill critical talent shortages during these economic boom years, particularly in the information technology field, Congress again raised the cap to 195,000 for 2001-2003. But actual use rose and fell with the economy. As the economy peaked in 2001, the Immigration and Naturalization Service approved about 164,000 H-1B petitions (excluding those not subject to the cap). When economic conditions worsened the following year, the demand for H-1B workers dropped accordingly, with only about 79,000 petitions subject to the cap — well under half of the available number — approved. Demand in 2003 was roughly the same. Now, though, as the economy is reheating, the demand is likely to increase, even as the cap has dropped again to 65,000. Many are predicting that the cap may be reached as early as next month, potentially making every remaining day in fiscal year 2004 a “blackout date” for specialty occupation workers. With U.S. software strength having been built in significant part on the H-1B program, to use just one industry as an example, the potential for damage to the country’s economic self-interest is evident. These points call into question the value of treating a cap as a positive lesson to be learned from the H-1B program and added to the L-1 program. SORTING OUT THE ISSUES The reasoning behind the importation of some other H-1B program protective features into the L-1 program is at first glance appealing: why, after all, should an L-1 employer be able to offer less than the prevailing wage to its L-1 employees, and why should an employer be free to lay off U.S. workers in favor of L-1 workers but not H-1B workers? Beyond the surface, though, these provisions threaten to ignore basic differences between the L-1 and H-1B categories, and not to supplant misuse with worker protections in the way they were intended. Recruitment and prevailing wage requirements are just two examples. The H-1B program is designed to permit U.S. entities to hire specialty occupation workers from the general talent pool abroad. The L-1 program instead permits the transfer of personnel who already are a part of the petitioning company or an affiliate, either in a leadership position or as a person who brings specialized knowledge relating to that company. Imposing a recruiting requirement in the L-1 program, therefore, would require a company seeking to transfer such an employee to first conduct a futile outside search for an applicant with internal company knowledge. Even the prevailing wage issue poses very serious complications. Prevailing wages in this country may well be inconsistent with pay scales abroad of persons already employed by the petitioning company. Assignments overseas typically come with non-wage equalizing features that would have to be taken into account, as would eligibility to maintain home-country benefits, in many cases far more valuable than similar benefits in this country. Many global employers maintain that it is more expensive to hire from abroad, not less, and that the incentives for doing so relate therefore to productivity rather than cost. These sorts of issues were aired in a hearing on L-1 reform convened on July 29 by the Senate Committee on the Judiciary’s Subcommittee on Immigration and Border Security. Sitting beside one another at the witness table were representatives of a range of perspectives. Subcommittee members heard from an academic, a representative of organized labor, representatives of various business sectors, and even from Pat Fluno, the former Siemens computer programmer whose apparent displacement by L-1 visa holders working for Tata Consultancy Services featured prominently in a March 10, 2003, Business Week article that sparked this year’s L-1 flare-up. Fluno gave forceful testimony setting out the case that she lost her job to workers inappropriately given L-1 visas. She argued further that the pattern that resulted in her job loss is related to the more general issue of “offshoring.” Michael Gildea, executive director of the Department for Professional Employees, testified that the L-1 has “morphed into something that now victimizes highly skilled, well educated American professionals.” Gildea singled out three Indianowned firms — Tata Consultancy Services, Wipro Technologies, and Infosys Technologies — calling them “among the primary culprits involved in the heist of hundreds of thousands of U.S. jobs.” Gildea made a number of suggestions for change, many of which line up quite specifically with the provisions of the DeLauro or Dodd/Johnson bills. Daryl Buffenstein, a partner at Paul, Hastings, Janofsky & Walker, offered a broader perspective on the role of the L-1 visa in the U.S. economy. On behalf of the Global Personnel Alliance (GPA), a loose consortium of internationally active companies interested in global personnel mobility, Buffenstein testified that “[t]he story of the L-1 visa is the story of job creation. It is the story of bringing jobs to the United States, and of keeping here, in this country, jobs that would otherwise move elsewhere.” GPA offered examples of foreign companies that, using a handful of L-1 transfers from abroad, set up operations in the United States that have created jobs for U.S. workers in numbers far out of proportion to the number of L-1 employees. GPA also gave examples of U.S. companies operating internationally that rely upon the ability to transfer key personnel temporarily from foreign branches or affiliates in order to maintain international competitiveness.For both U.S. and foreignbased companies using the L-1, GPA argued to the senators, there are circumstances in which it is necessary and legitimate for a company to place its L-1 employees at the site of another company. The ability to do this, according to GPA, can and should be regulated, but it should not be eliminated. On Sept. 17 Sen. Saxby Chambliss (R. Ga.), the chairman of the Senate Immigration Subcommittee, introduced the L-1 Visa Reform Act of 2003. Somewhat narrower than the proposals discussed above, the Chambliss bill would not affect the intracompany transfer of managers and executives. Instead it would focus more surgically on the pattern of L-1 misuse that has been at the core of the L-1 controversy since it burst forth last spring. Implicit in Sen. Chambliss’ approach, however, is the notion that there are offsite placement arrangements that, properly regulated, legitimately promote the U.S. economic interests underlying the L-1 visa category. Thus, his bill would forbid the offsite placement of L-1B workers who are not meaningfully controlled by the petitioning employer, and who lack the necessary specialized knowledge of the petitioning employer’s business. The Chambliss bill would also repeal the provision in current law that permits an L-1B specialized knowledge worker to enter on a blanket petition after merely six months of prior employment with the petitioning company. SCALPEL OR SLEDGEHAMMER? Given the coming elections, it is particularly difficult to predict the course of congressional activity on immigration issues in 2004. There will be almost certainly a great deal of pressure for business immigration legislation early in the year, principally because H-1B visas will soon be unavailable for the rest of the year, and because certain workforce-protection features of the H-1B program that enjoy wide congressional support expired last month. Because of the L-1 issue’s own momentum, and because it has been bound up with the H-1B debate, any business immigration legislation will likely include L-1 provisions. Clearly, if workers from abroad are imported with L-1 visas to do work that does not call for specialized knowledge of the importing company, and if they are sent to work at the premises of another business, under the other business’ effective control and supplanting its employees, that is a practice deserving correction. Yet the L-1 has served U.S. economic interests well for 33 years. The question for 2004 is whether Congress will approach the L-1 problem holding a scalpel or a sledgehammer. Bo Cooper, who served as general counsel of the U.S. Immigration and Naturalization Service from 1999 to 2003, is of counsel to Paul, Hastings, Janofsky & Walker in Washington, D.C. He also teaches immigration law at the University of Michigan Law School. Zachary Fasman is a partner in the firm’s New York office,where he represents management in labor and employment law.

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