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The Interplay Between The H-1b And L Visa In Today's Economic Downturn

by Cyrus D. Mehta

The new Bureau of Citizenship and Immigration Services (BCIS) reports that 79,100 H-1B petitions had been approved in the fiscal year that ended September 30, 2002. This is considerably less than the 195,000 quota applicable to fiscal year 2002 as well as 2003, but more than 65,000 to which the quota will revert in fiscal year 2004, which begins October 1, 2003.

It remains to be seen whether Congress will pass legislation to maintain the present quota of 195,000. Many US workers have been laid off, and some lay the blame, however erroneous it may be, to an H-1B worker who may have taken the job. As the H-1B visa program has been used by technology workers, and since unemployment rates are high in the technology industry, it is uncertain whether members of Congress will be persuaded in maintaining the current H-1B numbers. However, in May 2002, the Information Technology Association of America ("ITAA") released a study on demand, gap, skills development, and worker retention in the information technology industry, in which it concluded that despite the economic downturn and the fact that the size of the IT workforce dropped from 10.4 million to 9.9 million since 2002, there continues to be a shortage of IT workers.1 For 2001, in its previous annual study, the ITAA projected a demand for 900,000 IT jobs, of which 450,000 would be unfilled due to lack of candidates with superior qualifications and trainings. According to the May 2002 ITAA study, strong demand for IT professionals will continue, especially for those with specific technical competencies such as C++ programming language, Oracle, Java and Windows NT, which are still unavailable among U.S. workers.

Linking the H-1B visa program to a quota makes little sense. Whether the number is 65,000 or 195,000, neither have any bearing to the economic reality. Immigration policy should allow market conditions to regulate the number of H-1B workers. This is amply illustrated by the fact that even though there is a cap of 195,000, by the end of fiscal year 2002 only 79,100 H-1B visas were used. If the cap, rather than market conditions govern usage, then all 195,000 should have been used up by September 30, 2002.

L-1 Visa Program

As a background, the L-1 visa facilitates the transfer of key employees from a foreign corporation to a U.S. branch, parent/subsidiary or affiliated entity. The purpose of the visa, also known as the intra-company transferee visa, is to give U.S. corporations the ability to bring in top-level managerial or specialized employees into the USA.The entity in the USA can be a branch office of a foreign company or it could be a parent/subsidiary. To establish the parent/subsidiary relationship one entity must own more than 50% of the shares of the other, and must also be able to control it.

Alternatively, the U.S. and foreign entity can also be siblings (or affiliates) i.e. they are owned by the same owner or same group of owners in similar proportions.

The employee must have also worked in an executive, managerial or specialized knowledge capacity for the foreign entity for at least one year in the past three years and is being sponsored to work in the same capacity for the U.S. entity. In the case of an employee entering the US on an L blanket permit issued to an employer, the experience requirement overseas is lowered to six months instead of a year [changed 5/9/03-Ed.]

Despite these stringent conditions, the L-1 visa program has come under attack. A recent article in Business Week2 indicates how major US companies have outsourced their IT functions, laid off US workers and replaced them with L-1 foreign workers supplied by a major Indian technology consulting firm.

The Business Week article also quotes a State Department spokesman Stuart Patt who responded in the negative to the question: "Is it OK to use L-1s for outsourcing to other firms?" The same article also quotes an INS official who states that the Immigration and Naturalization Service is reviewing the L-1 visa program to "assess whether companies are using the L-1to circumvent the H-1B program."

However, the Department of State (DOS) in a cable once indicated that off-site work on an L1 visa is common practice and "is not in and of itself sufficient to warrant visa refusal."3 According to the cable, a determination must still be made whether a person has specialized knowledge and whether the petitioner or a third party is controlling the worker. Thus, if the L-1B's employment is directed and supervised by the third party contractor, it may be viewed as "a simple contract labor arrangement" rather than the employee possessing specialized knowledge of the sending company's procedures, services, research, equipment or techniques.

It is the specialized knowledge L-1B visa, which is the most controversial. An employee can qualify for both an H-1B or L-1B visa. Unless an employer is H-1B dependent, there is no requirement for an employer to test the US labor market under the H-1B visa program. The employer must only pay prevailing wages. Under the L program, there is neither a requirement to test the labor market nor pay prevailing wages. However, it is unfair to characterize an employer's use of the L-1B visa as a circumvention of the H-1B visa. Besides establishing the qualifying relationship between the foreign and US entity, it is also important for the employer to satisfy the very stringent "specialized knowledge" requirement. "Specialized knowledge" is defined to include a person who has special knowledge of the company product, service, research, equipment, techniques, management or other interests and its application in international markets or has an advanced level of knowledge of processes and procedures of the company. 8 CFR 214.2(1)(1)(ii)(O). 9 FAM 41.54 N.8.2-2 further defines specialized knowledge as:

Not simply a skilled worker. Matter of Penner, 18 I&N Dec. 49 (Comm. 1982). Rather someone whose advanced level of expertise and proprietary knowledge of the employer organization's product, service, research, equipment, techniques, management or other activity is not readily available in the US labor market. The term "proprietary" however, is no longer in the regulations.

An old INS memo outlined the following characteristics of "specialized knowledge" employees:

(a) Possesses knowledge that is valuable to the employer's competitiveness in the market place; (b) Is uniquely qualified to contribute to the US employer's knowledge of foreign operating conditions; (c) Has been utilized as a key employee abroad and has been given significant assignments which have enhanced the employer's productivity, competitiveness, image or financial position; and (d) Possesses knowledge which can be gained only through extensive prior experience with that employer.

See Memo, Norton, Assoc. Comm., Examinations (Oct 27, 1988), reprinted in 65 Interpreter Releases 1194 (Nov. 7, 1988).

Furthermore, a recent memo from Fujie O. Ohata, dated December 20, 2002, states:

"The alien should possess a type of specialized or advanced knowledge that is different from that generally found in the particular industry. The knowledge need not be proprietary or unique. Where the alien has specialized knowledge of the company product, the knowledge must be noteworthy or uncommon. Where the alien has knowledge of company processes and procedures, the knowledge must be advanced. Note, the advanced knowledge need not be narrowly held throughout the company. Further, there is no test of the US Labor Market in determining whether an alien possesses specialized knowledge. Only an examination of the knowledge possessed by the alien is necessary.

There are multiple examples outlined in the March 1994, memo. A common type of specialized knowledge is knowledge of a process or a product, which would be difficult to impart to another individual without significant economic inconvenience to the United States of foreign firm. The knowledge is also not generally known and is advanced. The petitioner bears the burden of establishing through the submission of probative evidence that the alien's specialized knowledge is distinguished by some unusual qualification and not generally known by practitioners in the alien's industry. Likewise, a petitioner's assertion that the alien possesses an advanced level of knowledge must be supported by evidence describing and setting apart the knowledge from elementary knowledge possessed by others."

Thus, using the L-1B visa to bring in an employee with generic, albeit complex computer skills, unrelated to the petitioner's products, processes or methods, will not be possible. The appropriate category for such a worker is the more regulated H-1B visa.

The L visa program even for a specialized knowledge employees should not be altered by Congress. The current H-1B quota should also be maintained. If there is a rebound in the economy, it is important for employers to have several visa options to bring the best and brightest from all over the world. This policy would doubtlessly enhance America's productivity and competitiveness, which in turn will create more jobs for US workers.

1 Information Technology Association of America (ITAA), Bouncing Back: Jobs, Skills and the Continuing Demand for IT Workers (May 6, 2002) on the Internet at

2 A Mainframe-Size Visa Loophole, March 6, 2003

3 Cable, DOS, 96-State-75033 (1996), reprinted in 73 Interpreter Releases 963-65 (July 22, 1996).

About The Author

Cyrus D. Mehta, a graduate of Cambridge University and Columbia Law School, practices immigration law in New York City. He is First Vice Chair of the American Immigration Law Foundation and recipient of the 1997 Joseph Minsky Young Lawyers Award. He is also Chair of the Immigration and Nationality Law Committee of the Association of the Bar of the City of New York. He frequently lectures on various immigration subjects at legal seminars, workshops and universities and may be contacted at 212-425-0555 or

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.