HR Rethinks H-1B Ahead of Expected Reforms

Business at Cornerstone OnDemand Inc., grew so fast in the last five years, the human resources technology maker had to increase its U.S. software developer staff from 52 to 163 to keep up.

The company hired at least a few of those developers through the federal government’s controversial H-1B visa program, which grants foreigners permission to work in the United States.

But times are changing. Competition for H-1Bs already made it difficult for tech companies like Cornerstone to secure as many of the visas as it would like. New restrictions championed by the Trump administration as part of broader immigration reform could make it even harder.

In this year’s H-1B visa lottery, “They tell us this year there’s a 50 percent chance people won’t be selected,” Peter Renault, Cornerstone’s technology talent acquisition lead, told Workforce in an interview in late April, before results were made public. “We always have openings, so there’s some kind of gap there. And there’s not much you can do to hedge against it.”

Cornerstone isn’t alone in addressing the new realities of the H-1B. HR executives and recruiters at U.S. employers that use it to hire for information technology and other positions have been scrambling to adapt ever since Trump won the 2016 presidential election and targeted overhauling the program.

Some employers are curtailing their use of H-1Bs. Other are bulking up overseas offices or sending foreign nationals to work out of offices in their home countries.

U.S. employers have used the opportunity to criticize the administration’s H-1B clampdown as an ill-conceived policy shift that could ultimately do the country more harm than good, particularly for a U.S. tech sector that’s seriously understaffed. At a May 3 appearance, Eric Schmidt, executive chairman at Google parent company Alphabet called it “the stupidest policy in the entire American political system.”

But Trump supporters and critics of the current system laud the president’s moves to protect U.S. jobs for U.S. workers. The visa program undercuts American jobs by allowing companies to shift positions to outsourcers that ultimately send the work overseas, argues Sara Blackwell, a Sarasota, Florida, lawyer who’s represented laid-off U.S. workers in H-1B lawsuits. “We have executives who are outsourcing for cheap foreign labor,” Blackwell said.

The ‘Hire American’ Executive Order

The “ executive order Trump signed April 18 made good on his campaign promise to reform the current H-1B program. The U.S. Citizenship and Immigration Services agency, the Homeland Security division that administers the program, each year grants 65,000 temporary work visas to foreign workers, plus another 20,000 to foreigners with advanced degrees. The visas are good for three years and can be extended for another three. Among other things, the executive order directs the State, Labor, Homeland Security and Justice departments to propose new rules “as soon as practical,” including ensuring visas go to most skilled or highest-paid workers.

Specifics on how those directives will be carried out have not been announced. In the interim, the administration has introduced a number of smaller yet not insignificant policy updates meant to . Included in those measures are stepped up audits of employers with a majority of H-1B workers and companies whose H-1B visa holders primarily work offsite. Both actions appear to target U.S. divisions of Indian-owned outsourcers, which in recent years have received a substantial portion of H-1B visas granted.

That employers aren’t waiting for new regulations or legislation to act became apparent from result of the April application deadline for H-1B visas for the federal government’s 2018 fiscal year. Visa applications fell for the first time since 2013, to 199,000 for FY 2018 from 236,000 for FY2017. The 16 percent decrease is a sharp reversal from the previous five years, during which time applications for the visa rose a cumulative 90 percent.

In early May, began in a lottery held last month to see which applicants would receive the visas for FY2018. USCIS did not respond to a request for names of employers whose applications where accepted or when that data would be released.

USCIS Nominee Supports Efforts to End Abuses

Lee Francis Cissna, Trump’s nominee to run USCIS and a lawyer in that agency’s Office of the Chief Counsel, supports efforts to root out abuses of the program. “I think that the practice of laying off American workers … and replacing them should be stopped,” Cissna said during his May 24 confirmation hearing. He also told senators at the hearing current penalties for misusing the visas are “probably too low.”

The Trump administration wants to replace the H-1B lottery with a system that prioritizes higher skilled, higher paid workers, a senior administration told reporters in a background briefing of the “Buy American, Hire American” executive order, .

But executive orders only go so far. The ultimate responsibility for changing immigration laws rests with Congress, which is weighing its own reforms. On Capitol Hill, supporters and opponents of the current H-1B system have introduced bills that would expand or curtail the program respectively.

Previous attempts to pass similar legislation , and it’s a tossup whether a Congress that’s divided over it and many other issues will be able to accomplish anything this term, said , who ran USCIS for the Obama administration from 2014 until Jan. 20, the day Trump took office. “There are those who think the number should stay where it is or go backwards, along with tighter restrictions,” said Rodriguez, who now practices immigration and health care law at Seyfarth Shaw LLP, in Washington D.C. “Then there’s the school of thought that says let’s expand the numbers but also put in more safeguards protecting U.S. workers and design the system in a way that favors getting the highest levels of talent we can.”

Indian Outsourcers Change Strategies

Indian outsourcers, who accounted for 69 percent of all H-1B workers as of 2015, are taking some of the most drastic measures to deal with changing H-1B policies.

After the Justice Department and USCIS announced stepped-up H-1B audits, a handful of Indian outsourcers said they would stop relying as heavily on the visas to bring as many workers into the country.

Indian outsourcer Infosys Ltd., which has received thousands of H-1Bs over the years, recently said it would hire 10,000 U.S. workers in the next two years and open four technology centers here. On an April earning call, Infosys officials said they are increasing U.S.-based employees, offshoring and using more automation to respond to H-1B program changes while continuing to monitor the situation. “We are planning for any eventuality, but at this stage we have not seen any undue things which are impacting the way we do our business,” Infosys Chief Operating Officer Pravin Rao said on the call.

Indian outsourcers’ new labor model will no doubt be welcomed by H-1B critics, who claim the foreign companies don’t abide by requirements of the program to try to fill jobs with Americans before handing them to immigrants. Critics also fault the program for allowing H-1B employers to pay local prevailing wages that generally are less than what most U.S. workers with similar jobs earn.

The same critics maintain loopholes and lax oversight have allowed companies such as Disney Corp. and Southern California Edison to lay off highly paid U.S. employees and replace them with lower-paid foreign workers, many of whom are outsourcer employees. In several highly publicized cases, the laid-off workers were required to train their replacements. Such practices have led to a number of lawsuits, including one filed by a group of former Disney World IT employees who maintain they were .

H-1B Alternatives: Gig Workers, More Training

Elsewhere, U.S. companies are bypassing potential H-1B problems by increasing hiring in their overseas offices. Nicole Sahin runs a staffing firm that helps major U.S. companies and fast-growth startups hire salespeople in 140 countries. In the past six months, Sahin said she has seen a 30 percent jump in clients sending foreign national back to their home countries or hiring locally, all direct responses to coming changes to the H-1B.

“There’s a lot of fear around it,” said Sahin, co-founder and chief executive at Globalizaton Parnters in Boston. “Some employees want to leave the U.S. because they don’t feel like they’d have the security they had under the previous administration.”

Uncertainty about the visa program could push employers to embrace the gig economy and hire independent contractors, said Yvette Cameron, senior vice president for strategy and corporate development for SAP/SuccessFactors. If employers were using H-1Bs to lower costs, using gig workers who aren’t eligible for benefits or pensions is another way to keep labor costs low, said Cameron, whose job puts her in touch with thousands of SAP/SuccessFactors customers.

Historically, U.S. companies have relied on H-1B visas to hire foreign graduate students with science, technology, engineering and math degrees from American universities. However, H-1B reform and Trump administration immigrant policies have already put a damper on applications to U.S. colleges and universities from India, China and the Middle East. As a result, total applications from foreign students dropped 38% for fall 2017, according to the American Association of Collegiate Registrars and Admissions Officers.

Stepping up domestic STEM studies could help fill the gap left by fewer foreign grad student coming here. Companies have gotten accustomed to hiring employees who can hit the ground running, said Ron Hira, an H-1B expert and political science professor at Howard University. Having government agencies to subsidize on-the-job training “might be a way to fill genuine gaps,” Hira said.

Employees also need to step up their training, said Katherine Jones, a partner and director of talent research at Mercer, the management consulting firm. Starting STEM education as in elementary or high school could help, Jones said, as could projects such as the charter public high school Oracle is paying for and expects to open for the 2017-18 school year on its Redwood City, California, campus in the heart of Silicon Valley. Coding schools and other types of short-term bootcamps that teach STEM skills are other options, she said.

At Cornerstone, Renault isn’t giving up on H-1Bs. As Cornerstone has grown, the company has used the visas to hire foreigner grad students for such jobs as systems and network engineers, applying for H-1B once their student visas expire. “We make sure they have the right educational background and a skill set that’s harder to find here,” Renault said. “We work with a really good immigration attorney here that helps us mitigate that risk.”

Cornerstone has also brought some of its Indian employees with engineering or other skills to the United States for work as needed, and sponsored H-1B visas for them. In the past, the company has had a few candidates not chosen in the H-1B lottery. One Cornerstone employee who didn’t get picked in the lottery moved back to Auckland, New Zealand, until they were approved in a subsequent H-1B lottery, and then returned to the United States.

“We’re hired a lot of good engineers that have done good work for the company and our products” through H-1Bs, Renault said. “Of course we don’t want it to go down, as that would take away the pool of candidates we see.”

Workforce contributor Michelle V. Rafter covers workplace issues and labor policy. Comment below or email editors@workforce.com.