Diversity & Inclusion

The H-1B loophole: replacing American workers with foreigners to cut costs

by Cristopher Willis

Each year, the United States grants 85,000 H-1B employment visas, and every single one is highly sought after by American companies. These temporary work visas allow companies to hire international applicants with college degrees—often advanced—in a variety of fields, such as medicine and health care, engineering, architecture, accounting, and the arts.P52 - Week 3 Circles - Mickey Power

H-1B visas broaden the pool of highly skilled workers from which an employer can draw, and federal guidelines allow their use only when American workers cannot be found. What’s not to love? Just ask the hundreds of Disney employees who were recently laid off.

The law and its benefits

In theory, the H-1B visa allows an employer with specific needs to find the ideal candidate and bring her in, even if she’s an international applicant. The employer is supposed to file for an H-1B visa only when a qualified American worker isn’t available, and it must pay the worker the prevailing wage for the job.

Cutting-edge technology companies such as Google and Facebook, which look exclusively for “very, very smart people” as Google’s CEO Eric Schmidt put it, especially favor the program. In fact, Schmidt recently urged Congress to significantly increase the number of H-1B visas available each year. Google and others argue that the economy generally benefits when the best workers fill jobs and then benefits again when those workers return home and use their training and experience to start competing businesses and invigorate the market.

Perceived exploitation and PR problems

Right before last year’s winter holiday season, Disney told between 250 and 500 of its skilled IT employees that they would be losing their jobs as part of a restructuring that would take place over a three-month period. During that time, many of the IT jobs were filled by workers brought in on H-1B visas to do the same jobs as the Disney employees who were being laid off. How similar? Some Disney employees were “required to train their replacements to do the jobs they had lost,” wrote the New York Times as part of a broader article that takes a skeptical stance on the value of the H-1B visa.

The Disney situation highlights a significant loophole in the H-1B visa program. Although the visa is intended to be used only when qualified American workers cannot be found, immigration laws don’t require an employer to prove that there’s a shortage of domestic workers with the requisite qualifications before recruiting an applicant via the H-1B program. By actively displacing current employees and asking them to train their replacements, Disney was subjected to lots of thorny questions about whether there could possibly be a shortage of qualified workers.

Moreover, the prevailing wage standard doesn’t require an employer to pay an H-1B employee the same wage it would pay an American employee. And while major tech companies such as Google, Facebook, Apple, and Microsoft report paying their H-1B workers competitive wages, the media has focused on the companies that use the program to cut costs rather than recruit talent, such as Fossil and Southern California Edison. The U.S. Department of Labor (DOL) is officially investigating both companies.


Most employers looking to hire an employee or two through the H-1B program aren’t planning anything as dramatic as the massive Disney IT worker swap. Nor are most employers the magical PR powerhouse that Disney is, brushing off the occasional frustrations of a local community. Although there are excellent legitimate reasons to seek out an H-1B employee, the use of these visas attracts public attention—and sometimes backlash.

The program was designed to complement the American workforce and help employers find highly capable employees when the current U.S. market can’t provide enough applicants. It’s possible to use the program to replace qualified workers or pay a new employee less money than his American counterpart for the same work, but there are significant ramifications if you follow that route. Consider the cost of training new employees and establishing a cycle of temporary workers rather than maintaining a long-term workforce, and keep in mind the potential backlash from the community and the media that even companies such as Disney must face.

Cristopher Willis is a student at Georgetown Law School and wrote this article while he was an associate with Brann & Isaacson.

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