[Senate Hearing 108-327]
[From the U.S. Government Publishing Office]
S. Hrg. 108-327
THE L-1 VISA AND AMERICAN INTERESTS IN THE 21ST CENTURY GLOBAL ECONOMY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON IMMIGRATION, BORDER SECURITY AND CITIZENSHIP
of the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
JULY 29, 2003
__________
Serial No. J-108-31
__________
Printed for the use of the Committee on the Judiciary
91-789 U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
COMMITTEE ON THE JUDICIARY
ORRIN G. HATCH, Utah, Chairman
CHARLES E. GRASSLEY, Iowa PATRICK J. LEAHY, Vermont
ARLEN SPECTER, Pennsylvania EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina RUSSELL D. FEINGOLD, Wisconsin
LARRY E. CRAIG, Idaho CHARLES E. SCHUMER, New York
SAXBY CHAMBLISS, Georgia RICHARD J. DURBIN, Illinois
JOHN CORNYN, Texas JOHN EDWARDS, North Carolina
Bruce Artim, Chief Counsel and Staff Director
Bruce A. Cohen, Democratic Chief Counsel and Staff Director
------
Subcommittee on Immigration, Border Security and Citizenship
SAXBY CHAMBLISS, Georgia, Chairman
CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona PATRICK J. LEAHY, Vermont
MIKE DeWINE, Ohio DIANNE FEINSTEIN, California
JEFF SESSIONS, Alabama CHARLES E. SCHUMER, New York
LARRY E. CRAIG, Idaho RICHARD J. DURBIN, Illinois
JOHN CORNYN, Texas JOHN EDWARDS, North Carolina
Joe Jacquot, Majority Chief Counsel
James Flug, Democratic Chief Counsel
C O N T E N T S
----------
STATEMENTS OF COMMITTEE MEMBERS
Page
Chambliss, Hon. Saxby, a U.S. Senator from the State of Georgia.. 1
Cornyn, Hon. John, a U.S. Senator from the State of Texas........ 30
Feinstein, Hon. Dianne, a U.S. Senator from the State of
California..................................................... 26
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah,
prepared statement............................................. 72
Kennedy, Hon. Edward M., a U.S. Senator from the State of
Massachusetts.................................................. 2
Leahy, Hon. Patrick J. Leahy, a U.S. Senator from the State of
Vermont, prepared statement.................................... 74
WITNESSES
Buffenstein, Daryl R., General Counsel, Global Personnel
Alliance, Atlanta, Georgia..................................... 14
Dodd, Hon. Christopher J., a U.S. Senator from the State of
Connecticut.................................................... 3
Fluno, Patricia, former Siemens Technologies Employee, Lake Mary,
Florida........................................................ 7
Fragomen, Austin T., Jr., Chairman, American Council on
International Personnel, Inc., Washington, D.C................. 16
Gildea, Michael W., Executive Director, Department for
Professional Employees, AFL-CIO, Washington, D.C............... 11
Verman, Beth R., President, Systems Staffing Group, Inc., on
behalf of the National Association of Computer Consultant
Businesses, Bala Cynwyd, Pennsylvania.......................... 9
Yale-Loehr, Stephen, Adjunct Professor of Law, Cornell Law
School, Ithaxa, New York....................................... 18
SUBMISSIONS FOR THE RECORD
Buffenstein, Daryl R., General Counsel, Global Personnel
Alliance, Atlanta, Georgia, prepared statement................. 34
Fluno, Patricia, former Siemens Technologies Employee, Lake Mary,
Florida, prepared statement.................................... 46
Fragomen, Austin T., Jr., Chairman, American Council on
International Personnel, Inc., Washington, D.C., prepared
statement...................................................... 50
Gildea, Michael W., Executive Director, Department for
Professional Employees, AFL-CIO, Washington, D.C., prepared
statement...................................................... 63
Verman, Beth R., President, Systems Staffing Group, Inc., on
behalf of the National Association of Computer Consultant
Businesses, Bala Cynwyd, Pennsylvania, prepared statement and
attachment..................................................... 76
Yale-Loehr, Stephen, Adjunct Professor of Law, Cornell Law
School, Ithaxa, New York, prepared statement................... 84
THE L-1 VISA AND AMERICAN INTERESTS IN THE 21ST CENTURY GLOBAL ECONOMY
----------
TUESDAY, JULY 29, 2003
United States Senate,
Subcommittee on Immigration, Border Security and
Citizenship
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:34 p.m., in
room SD-226, Dirksen Senate Office Building, Hon. Saxby
Chambliss, Chairman of the Subcommittee, presiding.
Present: Senators Chambliss, Grassley, Cornyn, Kennedy, and
Feinstein.
OPENING STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR FROM
THE STATE OF GEORGIA
Chairman Chambliss. The Subcommittee will come to order. We
are here today for a Subcommittee hearing on the Immigration
and Border Security Subcommittee for the purpose of reviewing
the L-1 visa program.
I appreciate our panel of witnesses testifying today on
``The L-1 Visa and American Interests in the 21st Century
Global Economy.''
Congress created the L-1 visa to allow international
companies to move executives, managers and other key personnel
within the company and into the United States temporarily. A
current concern is whether some companies are making an end-run
around the visa process by bringing in professional workers on
an L-1 visa who are not solely intra-company transferees. With
media reports that some American workers have been displaced,
cause for closing the so-called L-1 loophole are increasing.
Today we will hear from a full range of perspectives and
will evaluate what actions can be taken without potentially
adverse consequences.
One particular issue is with companies who bring in workers
not just to transfer within the company, but also for
outsourcing them to other companies. For example, an alleged
problem arises when an offshore company obtains L-1 visas to
transfer foreign workers who had general professional skills
that are shared broadly by U.S. workers. Once these L-1 workers
arrive in the United States, they are outsourced to a third-
party company, often to work with computer software that is
widely available. When an outsourced L-1 worker sits at a desk
next to his U.S. counterpart doing the same work, a concern is
whether the foreign worker really has the kind of specialized
knowledge of his company's product that was anticipated by the
statute or whether this is a clever legal use of the L-1 visa
that evades the intent of Congress.
Some critics of the L-1 visa have advocated legislation,
and that may be appropriate, yet we must be careful not to
impose overly-burdensome requirements on United States
businesses. Unnecessary restrictions often backfire by limiting
flexibility, deterring investment, and hurting the very
businesses that we agree already use the L-1 as Congress
intended. We need the best people in the world to come to the
United States, to bring their skills and innovative ideas, and
to support our business enterprises, and the L-1 visa is an
important tool to achieve these purposes.
We look forward to our witnesses' presentations today, and
before we get to our panels, I want to call on my distinguished
Ranking Member from Massachusetts, Senator Kennedy, for any
comments he wishes to make.
STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR FROM THE
STATE OF MASSACHUSETTS
Senator Kennedy. Thank you very much, Mr. Chairman. Thank
you for having the hearing today.
In today's world, the title of the hearing suggests,
commerce, like communication, is global. Every other country in
the world is within America's reach, and we are within their
reach too. In this new world, Americans earn their livelihood
in peaceful competition and peaceful cooperation with the
entire world. For the good of the Nation and its economy, we
must not adopt an immigration policy whose goal is to isolate
our Nation.
Curtailing legal immigration in a way that impedes the flow
of highly-skilled foreign professionals or top-level foreign
executives and managers may well undermine our economic and
competitive leadership in the world.
At the same time, we must make sure that companies do not
misuse the temporary visa programs to lay off U.S. workers and
replace them with cheaper foreign workers.
There have been a number of media stories about companies
firing talented U.S. employees and replacing them with foreign
workers brought in under L visas, willing to work longer hours
for less pay. In the most flagrant instance, the replaced
workers have even been asked to train their foreign
replacements. Our immigration laws must contain protections to
guards against such abusive layoffs.
The L visa program was created to enable multinational
corporations to transfer their top level executives, managers
or employees with specialized knowledge of the corporation to
assist its affiliates in the United States. The program was not
intended to be used to admit rank-and-file employees who have
no special knowledge of the corporation but who would compete
with U.S. workers.
In contrast, the H-1B visa was designed to admit workers
who possessed a needed specialized skill, even though they did
not have any specialized knowledge of the corporation. To
address the problem of U.S. worker displacement, Congress
required companies seeking H-1B visas to demonstrate they were
not able to find qualified U.S. workers for their positions.
Recent press reports indicate that some international
companies may be misusing L-1 visas to circumvent the worker
protections in the H-1Bs and displace American workers. Others
claim that the press reports exaggerate the problem and that
there is no widespread abuse of the L-1 visa.
The witnesses at our hearing today represent a wide array
of views on the issue. Clearly there is anecdotal evidence of
abuses of the L visa program. The issue is the extent of the
abuses and whether safeguards are needed, either by
administrative changes or statutory reforms. Our immigration
laws, regulation and procedures must be fair and reasonable,
must address the needs of employers and protect the rights of
workers. While this task may not be easy, it will be made
easier if both opponents and proponents of the L-1 visa program
provide this Committee with the assistance in assessing the
extent of the problem and suggesting corrective action.
I look forward to the witnesses. I thank the Chair for
having the hearing.
Chairman Chambliss. Thank you, Senator Kennedy.
Before we move to our panel, we have one of our
distinguished colleagues here, Senator Chris Dodd, who has a
presentation he wishes to make on this particular issue.
Senator Dodd, welcome. We look forward to hearing from you.
STATEMENT OF HON. CHRISTOPHER J. DODD, A U.S. SENATOR FROM THE
STATE OF CONNECTICUT
Senator Dodd. Thank you very much, Mr. Chairman. I will
keep this very, very brief, and I want to extend my
appreciation to you for allowing me to come by and share some
few brief thoughts about the issue.
Let me first of all commend the Committee for looking into
this very specific issue. Like many of my colleagues, while I
do not sit on this Committee, I felt I knew the immigration
laws fairly well, and certainly the H-1B visa program and
others. The L-1 program was something I was not terribly
familiar with until the issues that you have identified and
Senator Kennedy has identified came to my attention in my own
state.
Let me state the obvious at the outset, something I am sure
that every single member of this Committee and our colleagues
would agree with, and that is that we strongly believe that
citizens from other nations have made and will continue to make
a very sound and enormous contribution to the overall well-
being of our Nation. We are after all a Nation that was founded
by immigrants, and we have been sustained, and grown as a
result of the contribution of millions of people who have come
to our shores from around the globe over the last two
centuries, and we have remained vibrant and creative because
our doors have remained open to supplement the talents of a
very gifted and skilled American workforce. I emphasize the
word ``supplement,'' Mr. Chairman. Not that I did not say
``substitute.'' That is really what we are talking about here
today. I am sure that none of us believe that American workers
should be treated as second-class citizens when it comes to the
security of their jobs here at home, and that security should
not be jeopardized by U.S. Government programs and policies
related to the temporary employment of certain nonimmigrant
visa holders. At the very least laws enacted by Congress should
ensure that workers living in my home State of Connecticut or
elsewhere around the country confront a level playing field
when competing for jobs. No member of Congress would knowingly
support Government programs that cause American workers to lose
their jobs, nor do I mean to suggest that this is a stated
purpose of the L-1 visa program that is the subject of this
hearing. The stated purposes of the program, I have now grown
to learn, allow, as you pointed out and Senator Kennedy has,
for intracompany transfers of certain executives, managers and
individuals with specialized skills from foreign offices of
companies to their U.S. operations on a temporary basis.
During the economic boom of the 1990's, when jobs were easy
to find, evidence now suggests that abuses of L-1 and H-1B
visas often went unchecked, but the state of the job market has
changed, of course. Massive layoffs have occurred at companies
both large and small and it now takes months for laid-off
workers to find new jobs. The unemployment rate is now over 6
percent.
There is clearly a growing body of anecdotal evidence to
suggest that both L-1 and H-1B visa programs have been and are
being misused by some employers because of weaknesses in
existing law and implementing regulations, and because of
ineffective or absent Government enforcement. Between 1997 and
2002 some 3.4 million H-1B and L-1 visas were approved by U.S.
Immigration authorities. 70,000 of those visa holders have been
employed in my State of Connecticut. The L-1 visa program has
grown significantly during that time period, from 203,000 visas
issued in 1997 to nearly 314,000 in 2002. This growth in visa
approvals has occurred while domestic unemployment has risen in
the latter portion of that time period.
One of the witnesses that the Committee will hear from this
afternoon will give additional credibility to the belief that
at least some of these employers have not hesitated to take
advantage of weaknesses in the L-1 visa program to replace
American workers with lower cost L-1 visa holders. I have come
to the conclusion, Mr. Chairman, that it is time for Congress
to take a serious look at the L-1 and H-1B visa programs and to
propose remedies for the offensive weaknesses in those
programs, weaknesses that are hurting our own citizens, and
hope these hearings will be the first step in that process.
I sought to take some steps of my own in that direction a
weak or so ago with the introduction of S. 1452, the USA Jobs
Protection Act of 2003. I was pleased to be joined in that
effort by our colleague, my colleague from Connecticut,
Republican House member Nancy Johnson, who I know, Mr.
Chairman, you served with in the House. She and I have brought
together the various House proposals, and have combined it in a
single proposal which she has offered there and I have offered
in the Senate, and I would ask unanimous consent that a copy of
that bill be included in your record if it is all right.
Chairman Chambliss. Without objection.
Senator Dodd. Once enacted into law, we think that this
would ensure the L-1 visa program is utilized, continue to be
utilized for the purposes which it was originally intended, and
that was not to displace American workers with lower-cost
foreign visa holders. This legislation would also tighten the
law with respect to H-1B visa programs, but I will not go into
that today. That is not the subject of your hearing.
Very simply, let me just say what the bill would do, and
you have already commented on some of the suggestions. First,
it would end the practice of allowing L-1 visa holders to be
subcontracted by one employer to another. This is becoming a
growing feature of this program. That was never the intent of
the legislation initially. It would also take away a big
incentive for replacing American workers with L-1 visa holders
by requiring that these new workers are paid the prevailing
wage of the job that they would be replacing. It requires that
before a U.S. employer seeks to bring a specialized worker from
a foreign affiliate of his or her company, that a documented,
good faith effort should be made to fill the position with
American workers. The L-1 visa program was established to allow
companies to temporarily bring to the United States managers
and executives with an institutional memory of the firm's
practices and policies to pass on that knowledge. I agree that
such institutional expertise is invaluable to the success of a
company's operations in the United States. But the individuals
that are granted visas under this provision should have a well-
established work history with a company to qualify for such a
visa. That is why we have included a provision in our bill that
would require individuals seeking L-1 visas must have been
employed by the company seeking their transfer to the United
States for two of the last 3 years, rather than 6 months of 1
year required under existing law.
I mentioned earlier that there is a growing body of
anecdotal evidence that suggested that both the L-1 and H-1B
visa programs are creating problems with certain categories of
American workers. Why do we not have more hard data on this
important issue? I would say to the Committee that this is
because there has been very little Government oversight or
enforcement of these programs, particularly the L-1 program. I
have attended to address this deficiency. Our bill contains
provisions that would require the Labor Department to oversee
this program. It will finally provide the Labor Department with
the authority it currently lacks to investigate potential
violators of the law and to impose sanctions. The bill would
also make a number of reforms in the H-1B visa program. I will
not go into that right now. I will submit some of that for the
record if I may.
I know the Committee has a number of witnesses you are
going to hear from today which I think can offer some
additional light on this subject matter.
Mr. Chairman, based upon many Connecticut families that I
have heard from on the subject, together with the testimony you
are going to hear today, I believe the L-1 and H-1B visa
programs have contributed to the growth in unemployment in
Connecticut and elsewhere. It is within this Committee's
legislative responsibility to analyze these problems created by
the current law and practices, and propose remedies. As you do
so, I would urge members to give consideration to the bill that
Congresswoman Johnson and I have submitted, and I will be
willing to work with you as we try and fashion some remedies
here to try and straighten this situation out. What is self-
evident of course is that the status quo is not acceptable.
American workers have the right to expect the Congress to do
what is necessary to protect their jobs from this kind of
activity so that the will be able to continue to provide for
their families.
I certainly look forward to working with you and other
members of the Committee to provide that kind of leadership on
this issue, and I thank you immensely for allowing me to share
some of these thoughts with you and the Committee.
Chairman Chambliss. Senator Dodd, thank you very much for
being here. We appreciate your insight and your hard work to
this point on the issue, and we look forward to the referral of
your bill and continuing to dialogue and work with you as we
solve this in the way that is most beneficial to the American
worker and the American business community.
Senator Dodd. Thank you very much, Mr. Chairman. I
appreciate it.
Senator Kennedy. May I just thank you for your presence
here. In the H-1B we have a requirement for $1,000 fee.
Actually I thought it ought to be higher. That fund is used for
training Americans so that they can develop those skills over
the period of time. One of the things that we see in short
supply is the resources, even for the Department of Labor, to
look into these abuses, whether it is H-1B or the L visas. Do
you think it would make sense if they were doing a similar kind
of thing, bringing in these foreign workers for the L-1, that
they might also participate in a similar kind of a program in
terms of the skills? You might just take a look at it and let
us know what you might think.
Senator Dodd. In fact, the bill I have introduced has that
provision.
Senator Kennedy. It has that provision?
Senator Dodd. We think that is sound judgment.
Senator Kennedy. Is it $1,000?
Senator Dodd. I think we used $1,000. We can say it pays
for itself. We do not have a dollar amount in the bill.
Senator Kennedy. Okay.
Senator Dodd. I think it is a very good suggestion as well,
and I know that you are going to look into the H-1Bs and I
supported it back a few years ago. I mean my State is a good
example. It is a high-tech State, a lot of information
technology, and there was a real demand back a few years ago.
We raised the caps on the H-1B visa program, and I think we did
so wisely at the time. That is only a 3-year deal. You are
going to have to reconsider that now, and I would hope when you
are looking at it, we take a look at this new environment we
are operating in now before allowing that number to go back up
to the years we have had previously, just as a suggestion.
Chairman Chambliss. You are correct. It has to be
reauthorized by the end of September, and Senator Kennedy and I
intend to make sure we thoroughly review it between now and
then.
Senator Dodd. Good. Thank you very much.
Chairman Chambliss. Again, thanks very much.
We will now call panel members up. Patricia Fluno, who is a
former Siemens Technologies employee from Lake Mary, Florida;
Beth R. Verman, President, Systems Staffing Group, a member of
the National Association of Computer Consultant Businesses from
Bala Cynwyd, Pennsylvania. I hope I said that right. Michael W.
Gildea, Executive Director, Department for Professional
Employees from the AFL-CIO here in Washington, D.C.; Daryl
Buffenstein, General Counsel, Global Personnel Alliance from
Atlanta, Georgia; Mr. Austin T. Fragomen, Jr., Chairman,
American Council of International Personnel, Washington, D.C.;
and Mr. Stephen Yale-Loehr, Adjunct Professor, Cornell Law
School, Ithaca, New York.
As we introduce you individually here, we will recognize
you for opening statements. We are going to start over here
with you, Mr. Yale-Loehr. Excuse me. We are starting over here
with Ms. Fluno. And if you will, due to the size of our panel,
we will be happy to take any statements you want to put in the
record, but if you will limit your opening comments to 5
minutes or less, we will greatly appreciate it so we can get to
questions from the members to you.
So, Ms. Fluno, welcome. Thank you for coming up from Lake
Mary, Florida, and we look forward to hearing your story, which
we have all read about, and we appreciate you being here today.
Thank you.
STATEMENT OF PATRICIA FLUNO, FORMER SIEMENS TECHNOLOGIES
EMPLOYEE, LAKE MARY, FLORIDA
Ms. Fluno. Thank you very much. My name is Pat Fluno. I am
a computer programmer from Orlando, Florida. My coworkers and I
lost our jobs to visa holders from India. I would like to begin
by reading excerpts from a letter I wrote to Representative
John Mica in August of 2002, asking for help.
We are employees in the data processing department of
Siemens ICN, at both the Lake Mary and Boca Raton sites. We are
all U.S. citizens and full-time salaried computer programmers
and analysts ranging in age from 33 to 56.
Approximately 15 employees have letters dated August 19,
2002, indicating a layoff date in conjunction with the
restructuring of IT. At that time, employee meetings were held
informing us that the department would be outsourced. During
the months of May and June management had meetings with
outsourcing companies on site. We were interviewed by several
of those companies and all expressed surprise that we had
already been given definitive layoff dates. During the last
week of June, the outsourcing company was announced as Tata
Consulting Services of India. People from TCS were on site July
1st. They immediately begin interviewing us on how to do our
jobs. Layoffs of Americans began on July 15 and were scheduled
to continue through August 30.
We are being laid off and TCS personnel are taking our
jobs. Siemens management has told us to transition our work to
TCS and show them how to continue the development and support
work already begun by Americans. My letter to Representative
Mica ends by asking for help to prevent this injustice.
We lost our jobs and we had to train our replacements so
there would be little interruption to Siemens. This was the
most humiliating experience of my life.
Our visa-holder replacements are sitting at our old desks,
answering our old phones, and working on the same systems and
programs we did--but for one third the cost. This is what a
manager at Siemens told me. 15 people were laid off. At an
average high-tech salary of $75,000 each, that is over $1.1
million of gross wages lost to Federal and State income taxes,
from just 15 people. The visa holders do not pay income taxes.
Representatives of TCS will tell you that their programmers
make $36,000 per year, which is just under the average starting
salary range for American programmers. But what is the
breakdown of that money? $24,000 of that is nontaxable living
expenses for working out of town. That leaves just $12,000 of
real salary paid to them in equivalent Indian rupees. $12,000,
close to the U.S. minimum wage. An American having an income of
$36,000 would have to pay taxes, but not these visa holders.
There are no salary rules for L-1 visas.
How can they come to the U.S. so easily? The L-1 states
that they must be a specialized knowledge worker familiar with
the products and services of the company. There are many
legitimate uses for the L-1 to transfer employees from one
company subsidiary to another. But transferring a worker from
Tata India to Tata U.S. for work at Siemens is not what was
intended by the L-1 visa. They are not working on Tata's
computer systems, but on those of Siemens. In our particular
case, Tata knew Americans were being laid off, so they did not
use the H-1B visas. Instead they fraudulently used the L-1.
There are no regulations regarding the misuse of L-1s and only
limited penalties for H-1B abuse. Where is the INS? Where is
the DOL? There are hundred of thousands of L-1 and H-1B workers
in the United States taking jobs that Americans can do and that
Americans want to do. Every H-1B and L-1 visa given to
outsourcing companies like Tata is a job an American should
have.
What is happening here? In a time when our National
security is paramount, we are making ourselves dependent on
third world nations for our computer technology. We are giving
these countries the ability to access, modify and break the
very computer systems that run the U.S. economic
infrastructure.
Yet, we have an even greater parasite on our economy, and
it comes from American companies. U.S. corporations are taking
entire departments and relocating them to an Indian subsidiary.
Hundreds of data processing, payables, and call center jobs are
lost at one time. Ask Microsoft. Ask IBM. Ask Cigna. Ask almost
any large U.S. corporation and you will find they have sent
jobs offshore. The term ``offshore'' is just a euphemism for
American jobs that are lost and will never return. What is the
economic impact of this? In the short term these companies say
they are cutting costs, but in the long term they are
undermining their consumer base. Where will our children find
jobs? In marketing perhaps? Marketing to whom?
We need incentives to keep jobs in the U.S. We need
monitoring of visa holders. We need fines for abuse and
punitive damages for affected American workers. Current H-1B
penalties only apply to certain types of companies. Misuse is
misuse. It must apply to all situations equally. We need to
enforce the laws we already have. Why can a company like Tata,
operating in the United States, mock our equal opportunity and
ethnic diversity laws? Where is the EEOC?
I have one question to ask all the CIOs and all the CEOs
who have laid off U.S. citizens in favor of cheap labor. How
does it feel to know you have personally contributed to the
decline of the American economy? How does it feel?
Thank you.
[The prepared statement of Ms. Fluno appears as a
submission for the record.]
Chairman Chambliss. Thank you very much.
Ms. Verman, welcome.
STATEMENT OF BETH R. VERMAN, PRESIDENT, SYSTEMS STAFFING GROUP,
INC., ON BEHALF OF THE NATIONAL ASSOCIATION OF COMPUTER
CONSULTANT BUSINESSES, BALA CYNWYD, PENNSYLVANIA
Ms. Verman. Thank you, Chairman Chambliss, members of the
Subcommittee.
My name is Beth Verman. I am President of Systems Staffing
Groups, Inc. My company is located just outside of
Philadelphia, and I am appearing today on behalf of the
National Association of Computer Consultant Businesses, the
NACCB. The NACCB has approximately 300 member firms with
operations in over 40 States and is the only national trade
association exclusively representing information technology, IT
services companies. On behalf of NACCB we thank you for
allowing us to address this important issue.
My company, like other IT services firms, serves the need
for flexibility in the IT workforce. It does not make economic
sense for most clients to stay fully staffed for all potential
IT development projects. That would be like permanently
employing every construction trade for an office building
project that may be needed some time in the future. Most large
companies maintain a split between in-house employees and
outside consulting resources. Consulting resources can be
shifted to respond to a client's needs for different skill sets
and different levels of demand. IT consultants are utilized to
both augment existing in-house personnel as well as provide
teams to help develop and integrate technology projects. This
staffing flexibility helps make full-time employees more secure
and gives their employer the flexibility needed in our rapidly
changing environment.
After over 12 years in the IT staffing business, I founded
Systems Staffing Group, a certified woman-owned business, in
September 2000. My company specializes in placing IT
professionals such as java programmers and software engineers
with Fortune 500 insurance and financial services companies.
Most of my clients are located in Pennsylvania, Delaware, New
York, New Jersey and Connecticut. I am a small business,
averaging 20 consultants on billing, and I anticipate doing
over $2.5 million in gross revenue this year. I was honored to
have recently received one of Philadelphia's top ``40 under
40'' minority executive awards.
While I am proud of my firm's progress to date,
particularly in light of becoming a new mother this year, I
have been frustrated that its growth has been hampered because
of unfair competition with large foreign-based consulting
companies that are not playing by the same set of rules my
domestic company plays by. Let me give you a specific example.
In prior years we typically place 12 or more consultants a year
at a major insurance company. Since January 1st of this year,
we have only placed 2 consultants at the same client site. This
is not a result of lack of demand. Rather, many of the
consultants we have placed at this large insurance company,
along with many direct employees of the company, have been
replaced by individuals brought into the United States by large
foreign consulting companies on L-1B intracompany transfer
visas reserved for persons with specialized knowledge. I have
personally seen similar arrangements at other client sites, and
the NACCB has reports from other members experiencing the same
kind of displacement.
The L-1B visa was established to allow multinational
companies to bring persons with specialized knowledge of the
petitioning company's products, procedures and processes to the
U.S. to work for a related U.S. company. The specialized
knowledge is supposed to be an advanced level of skill that
does not involve skills readily available in the U.S. labor
market. The foreign IT workers that have been placed at some of
my client sites are not utilizing any specialized knowledge.
They are in effect staffing assignments at a third party client
site. Although these firms often package their services as
fixed price or time and material projects, the L-1B IT workers
they employ are performing the same jobs, sitting at the same
desks as consultants I had placed on a staff augmentation basis
with the same client. Based on my observations, the IT workers
brought in on L-1B visas possess no unique skills; their skill
sets are readily available in this country. By simply posting
an available position to a major Internet job board, my
recruiters could quickly generate hundreds of qualified
candidates who possess the required skills being filled by
workers who have entered the country on L-1B visas. Why then
are so many of these foreign companies using the L-1B
specialized knowledge visa? The answer is it gives them an
unfair competitive advantage in selling IT services against
U.S. based companies.
By squeezing IT workers into the L-1B visa category, it
appears that these companies are circumventing many of the
requirements of the H-1B visa program. Under the L-1B program,
unlike the H-1B program, there is no obligation to pay a
prevailing wage, no obligation to pay $1,000 fee to support
education and training of U.S. workers, no obligation to attest
an effort has been made to recruit a U.S. worker or attest that
there has not and will not be a layoff of a U.S. worker for H-
1B dependent companies. Finally, by its nature, the L-1B visa
is only available to companies with an offshore presence,
leaving firms such as my company with only a U.S. presence at a
competitive disadvantage.
By utilizing the L-1B program, large foreign consulting
companies are able to undercut my client billing rates by 30 to
40 percent. The only way to undercut billing rates to that
extent is to pay IT workers significantly less than an
equivalent U.S. worker. Further, NACCB has serious concerns
whether L-1B visa holders and their petitioning employers are
meeting all of their U.S. tax obligations.
While I believe there are flaws in the current L-1B visa
program, NACCB and I remain strong supporters of business
immigration. During the talent shortage that this country
experienced in the late 1990's and into 2000, which was
particularly acute in technology-related positions, NACCB
supported an increase in the H-1B visa cap. While most of the
consultants I place with clients are U.S. citizens or legal
residents, I do place H-1B consultants brought in by other
firms. NACCB and I believe that responsible business
immigration contributes to U.S. competitiveness and is an
essential business tool in a global economy.
As this Subcommittee considers the current L-1B program, I
would hope you would consider some modest changes that will
allow the legitimate use of the L-1 visa to continue, but
eliminate the current abuses of the visa. NACCB has provided
you in our legislative changes, those changes that we would
like to see.
Some have called for more drastic measures such as
prevailing wage requirements and annual caps. NACCB and I
believe that these measures are neither necessary nor
advisable. Given the differences in pay scales between the
United States and many other nations, prevailing wage
requirements would exclude the entry of many executives,
managers and individuals with substantial knowledge of
proprietary processes that contribute to U.S. competitiveness.
Likewise, annual caps, which are notoriously difficult to set
with any degree of accuracy, would potentially restrict the
legitimate use of the L-1 visa without addressing the problem.
By limiting the use of the visa for the purposes for which it
was originally intended through modest statutory changes, the
abuses can be eliminated without overly restricting the
movement of individuals for legitimate business purposes.
Mr. Chairman, in conclusion, I am ready, willing and able
to compete aggressively in the marketplace. I not only welcome
competition, I relish it. I have always succeeded in highly-
competitive environments. Such an environment requires me to
continually improve and deliver greater value to my clients.
However, I am being asked to compete against foreign consulting
companies that are provided an unfair competitive advantage by
stretching my own country's immigration laws. To use a football
metaphor, the L-1B visa program as it is currently being used
allows foreign IT services companies the ability to start with
the ball on my 10 yard line, whereas I must start with the ball
on my own 20. All we ask is that U.S. laws are clarified,
upheld and enforced so we have a level playing field. I urge
this Subcommittee to begin the process of leveling this playing
field. Thank you for the opportunity to express my views and
the views of many U.S.-based IT services companies.
[The prepared statement of Ms. Verman appears as a
submission for the record.]
Chairman Chambliss. Thank you very much.
Mr. Gildea, pleased to have you today.
STATEMENT OF MICHAEL W. GILDEA, EXECUTIVE DIRECTOR, DEPARTMENT
FOR PROFESSIONAL EMPLOYEES, AFL-CIO, WASHINGTON, D.C.
Mr. Gildea. Thank you, Mr. Chairman.
My name is Mike Gildea, and I am the Executive Director of
the Department for Professional Employees for the AFL-CIO, a
consortium of 25 national units representing nearly 4 million
professional and technical employees in both the public and
private sectors.
Mr. Chairman, we appreciate the opportunity to present our
views here today. Mr. Chairman, we also appreciate your
comments and those of Senator Feinstein and other members of
the Subcommittee during full Committee deliberations on the
Chile-Singapore Free Trade Agreements. Hopefully, the USTR will
refrain from dabbling in immigration law in future agreements
in light of the bipartisan bicameral backlash that has
resulted.
That confrontation did serve to raise a much larger issue
related to guest worker visa policies, and that is that there
is no coherent national policy regarding professional guest
workers.
Whether it is L-1, H-1B, TN visas or other such programs,
each operates under different standards, limitations and rules
of accountability where they may exist. Given the adverse
impact that these programs are having on U.S. professionals,
perhaps now is the time to develop a more holistic coordinated
Federal policy in this regard.
What is particularly baffling about these programs is there
is no nexus between the unusually high current of unemployment
among professional and technical workers, and the fact that the
guest worker population now numbers over 1 million according to
some estimates. As a result, well-qualified American
professionals are forced to compete against foreign workers
here in the us for domestic jobs. In our opinion, there is
something seriously wrong with this picture.
I strongly urge the Subcommittee to address these and other
public policy anomalies as you consider badly-needed reforms in
both the L-1 and H-1B programs. Key policy questions need to be
addressed. What is the total number of guest workers that
should be allowed into the U.S. under all such programs? To
what extent should there be uniformity across all programs with
regard to protections, eligibility, qualifications, enforcement
protocols, et cetera? Should employers be limited in the total
number of temporary foreign workers they can have on a payroll
from all guest worker programs?
As to L-1, it is intended to facilitate intracompany
transfer for purposes of training strategic personnel with
global corporations that have U.S. facilities.
We have no problem with this concept. But now it has
morphed into something that has victimized highly-skilled,
well-educated American professionals like Patricia Fluno.
The L-1 program has few limitations, and such, it is ripe
for fraud and abuse. There are no statutory prohibitions
against using L-1s to replace an American worker. Such
replacements should be banned, and stiff penalties including
civil fines and debarment for violation should be imposed along
with strengthening DOL enforcement tools. In addition, the
relevant sections of the ``dependent employer requirement''
under H-1B should also be applied.
There is no annual limit on the number of L-1 visas that
can be issued. According to State Department statistics from
1995 to 2001 the number of L-1 visas doubled from 29,000 to
over 59,000. Given these numbers, we suspect that some
employers are job-churning the L-1s, that is, bringing them in
for 3, 4, or 5 years, and then replacing them with second and
third general L-1s. We would recommend that a cap be imposed
that reflects the utilization average over the last decade,
about 35,000.
Another problem is the renewability of the visa, an issue
that was a major point of controversy regarding the misnamed
``temporary entry'' provisions of the trade agreements. L-1 has
a two-tier renewal scheme for the 1-year visa. For those with
specialized knowledge it is 5 renewals. We do not believe that
5 years is a temporary program. 2 to 3 years is sufficient,
especially if these L-1s posses a high degree of specialized
knowledge.
Subcontracting by outsourcing firms is another abuse. I
doubt that Congress envisioned the likes of Tata Consultancy
Services, Wipro and Infosys Technologies, all Indian-owned
firms, when it created the program 33 years ago. As some of the
more senior members of this Subcommittee know, some of these
firms and others like them have a troubled history under H-1B.
Today they are among the biggest users of the L-1 program.
Their outsourcing under it appears to contradict the original
intent of the program. On this point, the statutory language
seems clear, so it would be a reasonable clarification of law
to specifically prohibit subcontracting.
During deliberations on the trade agreements, Congress
forced the USTR to agree to the same fee that is applicable
under H-1B, $1,000 per visa, and that should be applied to the
L-1 program with the bulk of the proceeds going to oversight
and enforcement by the appropriate Federal agencies. The
imposition of the $1,000 fee would serve as a modest
disincentive to discourage overuse of the program and
accomplish a better degree of fee uniformity across all
professional guest worker programs.
In the Siemens case, according to the San Francisco
Chronicle, Tata Consultancy acknowledged that it paid wages
below the average local wages for basic programmers, which was
far below the wages paid to U.S. employees who were fired.
Requiring the payment of a prevailing wage to L-1 workers would
discourage those who would try to use the program as a back
door to cheap labor.
Mr. Chairman, we have detailed for the Subcommittee other
problem areas and reform proposals in our written submission. I
would therefore like to close by raising one final concern that
your Judiciary Committee colleague, Senator Lindsey Graham,
reference at each of the recent full Committee sessions on the
trade agreements, the outsourcing of professional and technical
jobs overseas. This matter was the subject of a recent hearing
in the House Small Business Committee.
Recently there has been a spate of news article about this
troubling phenomenon. The reason I raise it in the context of
your hearing is that there is a connecting thread and that is
Tata, Wipro and Infosys, the firms I mentioned earlier. They
are not just brokerage houses for L-1B and H-1B visas, they are
among the primary players involved in the transfer of tens of
thousands of U.S. jobs and tens of millions in payroll.
A recent study by Forrester Research estimates that if
current trends continue over the next 15 years, the U.S. will
lose 3.3 million high-end service jobs and $136 billion in
wages. Today major U.S. firms from many sectors are falling all
over themselves to get into the outsourcing exodus.
As they used to say in one of this Nation's greatest
technology initiatives, the space program, ``Houston, we've got
a problem,'' and I would suggest it is a big one. One this time
it is not textile, steel, machine tool and other manufacturing
jobs. Many of them are long gone. Now it is the high-tech,
high-paying jobs that are headed out of town. The question for
this Subcommittee is to what extent are guest worker programs
under your jurisdiction contributing to the outsourcing tidal
wave? I would suggest that it is significant.
In conclusion, professional technical workers in this
Nation have made enormous personal sacrifices to gain the
education and training necessary to compete for the knowledge
jobs in the so-called new American economy. They deserve better
than to be victimized by immigration programs like L-1 and H-
1B. Congress can make a long-overdue start in cleaning up guest
worker visa programs by implementing badly-needed reforms.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Gildea appears as a
submission for the record.]
Chairman Chambliss. Thank you very much, Mr. Gildea.
Mr. Buffenstein, welcome, and we look forward to your
testimony.
STATEMENT OF DARYL R. BUFFENSTEIN, GENERAL COUNSEL, GLOBAL
PERSONNEL ALLIANCE, ATLANTA, GEORGIA
Mr. Buffenstein. Thank you, Mr. Chairman.
The Global Personnel Alliance, Mr. Chairman, is a group of
companies, a loose consortium of companies that are very
interested in immigration and global mobility issues because of
the effect on generating employment in the United States and on
maintaining the competitiveness of U.S. industry abroad.
Mr. Chairman, we would like to commend your comments and
the comments of Senator Kennedy to the extent that they reflect
a sincere intention to look carefully at this problem before
rushing to legislation.
We are not here to dispute or question any facts that have
been asserted by any witnesses today. Indeed, everyone should
have profound sympathy with anyone who has lost their job for
whatever reason. There may well be circumstances where people
on L-1 visas have been improperly classified. But if I may
borrow a term that Al Simpson used on this Committee when he
chaired it many years ago. Professor--Senator Simpson, sorry.
Senator Kennedy. Better be careful now which one you use.
[Laughter.]
Mr. Buffenstein. He is now a professor, that is correct.
But as Senator Simpson would have said, ``We are a couple of
tacos short of a combination plate.''
[Laughter.]
Mr. Buffenstein. The issue we have heard about today, Mr.
Chairman, is a small slice of a very big picture, and that
picture is the story of international investment creating jobs
in this country in small towns across the country, the very
kind of jobs Mr. Gildea talked about having disappeared,
manufacturing jobs, bread and butter, meat and potatoes jobs
throughout the country, the story of how American companies
keep competitive on international markets by bringing in a
select cadre of specialists, managers, executives,
technologists, who bring the technologies here so that we can
export, who bring the technologies for research and development
facilities that stay here so that we can keep jobs here rather
than sending them offshore. In all the cited instances that we
have heard about today, all the articles that have been written
on this subject recently, and there have been a good number of
them, reflect a very specific and particular phenomenon, and
that is a phenomenon where an L-1 visa holder is working off
site at another company that is not the company that brought
the L-1 visa holder in, using knowledge that more often than
not, as Ms. Fluno mentioned, appears to be generic knowledge
and not specialized knowledge.
So we ask you not to throw the baby out with the bath
water. If there is legislation it needs to be focused exactly
on that problem. In looking at that problem it should be
remembered that many of the instances in which an employee
works off site, as we will show in a while, are very legitimate
instances.
Mr. Chairman, there is not one Governor in this country I
think that has not taken a trip abroad. Many States have
offices simply to encourage foreign investment, to encourage
international investment. Georgia has 250,000 jobs attributable
to foreign companies. Massachusetts has almost exactly the same
amount. Texas has something like 475,000 jobs, New York close
to 500,000 jobs, and California a whopping 750,000 jobs
attributable to international companies. That investment would
not be here without the people that bring it, the specialists
who bring in the know-how, and the technologies.
There is a small German-owned company in South Carolina
that set up a manufacturing facility to manufacture
transmission belts that has manufacturing operations in Ohio as
well, that has 470 workers and just one L-1 visa holder. But
that person is necessary to bring in technology from a
manufacturing facility in Sweden that is now used to
manufacture in the United States.
There is a Belgian company that is based on Georgia that
just bought a manufacturing company in Utah that already has
100 employees. By bringing in specialized digital signage
technologies from Europe, that company believes it can increase
that manufacturing facility to 300 people within two to 3
years.
These are not unique examples, Mr. Chairman. They are
examples that are bound. There are as many examples as they are
foreign companies operating in each State, and in Georgia,
there are 1,500 with 600 manufacturing facilities counted in
that number. But the role of the L visa in creating American
exports and developing American competitiveness abroad is even
more compelling. A major airline with 60,000 employees, 58,000
of them in the United States, used the L visa to bring in a
pricing analyst who had competitive knowledge of foreign
markets, confidential knowledge of that airline's position on
foreign markets. That airline, out of 58,000 employees, has
only 12 L-1s, .0002 of its workforce. A major manufacturer in
Ohio has a select cadre of some 30 L-1s in a workforce of
60,000, that bring in key knowledge of its foreign markets so
it can customize equipment for sale abroad.
In many instances, or at least some instances, Mr.
Chairman, there are circumstances where people are placed, as I
have said, at other employers. A California developer of
optical lenses needed to bring in a key global developer of
that lens coating and have that person work as a joint venture
partner. That development will create hundreds of jobs and
would not have been possible without that person. The State
Department, in its operating guidelines, has developed a
scenario whereby those situations should be differentiated.
Maybe sometimes it has not been honored, but many other
limitations on the L visa that have been suggested go way
beyond that initial scenario we have talked about. What we need
here is a surgical instrument to look at the problem and devise
legislation, not a sledge hammer that will knock off every
company from its competitive advantage.
Mr. Chairman, thank you for the opportunity to talk to you
today.
[The prepared statement of Mr. Buffenstein appears as a
submission for the record.]
Chairman Chambliss. Thank you very much, Mr. Buffenstein.
Mr. Fragomen, welcome. We look forward to hearing from you.
STATEMENT OF AUSTIN T. FRAGOMEN, JR., CHAIRMAN, AMERICAN
COUNCIL ON INTERNATIONAL PERSONNEL, INC., WASHINGTON, D.C.
Mr. Fragomen. Good afternoon, Chairman Chambliss, Senator
Kennedy, distinguished members of the Committee.
The American Council on International Personnel is a
nonprofit corporation founded in 1972 with over 300 members,
all of whom are large global corporations, who collectively
thousands of L petitions. For over 30 years the L-visa category
for intracompany transfers has been essential to international
investment and economic expansion. It is a tool that allows
U.S. companies to participate in the global economy, and it has
become a model for other countries seeking to capture a share
of the global marketplace by facilitating the international
transfer of knowledge, skills and talent. ACIP shares a concern
of the Committee and of the previous witnesses regarding
possible fraud and abuse in the program, and I think we all
agree that appropriate sanctions should be imposed upon those
who misuse the immigration system. However, the L visa is
critical to the continued participation of U.S. companies in
the 21st century global economy, and we urge Congress to move
forward deliberately and with caution, which we can take from
this hearing seems to be the predisposition of the Committee.
To understand the L visa, it is important to understand the
scope of international personnel transfers which fall in the
general category of global mobility. I mention in my paper that
a recent survey of 181 companies revealed that they have a
combined expat population of over 35,000 employees. Unlike
years past when primarily upper level executives were
transferred abroad for a few years to gain international
perspective and broader knowledge of markets and business
practices abroad, today's transferees include professionals
from all levels and operating units within the company.
Where the problem has been created is, as pointed out by
several witnesses and recent media articles, Congressional
hearings, focusing on L visa usage in the context of
outsourcing information technology and other professional
services. A company may choose to outsource for a variety of
reasons including where it wishes to limit in-house services to
core competencies, to obtain enhanced services from expert
service providers, or simply to reduce cost and maintain
profitability. Outsourcing is not a new business model, but we
acknowledge that it often comes with painful adjustments for
U.S. workers.
What has changed is that increasingly outsourced work is
going to offshore firms or offshore subsidiaries of U.S. firms.
Immigration laws, in particularly the L-1B, certainly
facilitate these business arrangements, but are a by-product
rather than an impetus for the offshoring model. Congress
should consider what efforts must be made to ensure that the
U.S. is an attractive locale for investment, that wages and
working conditions of U.S. workers are not unfairly undercut,
and that U.S. workers are prepared to meet the challenges and
opportunities of the new economy.
Proponents argue that while offshoring may cause some
temporary dislocation in the U.S. workforce, it will also keep
industries competitive, provide investment in developing
countries and eventually create new markets for U.S. goods and
services that will spur future economic growth. Whether one
agrees with this assessment or not, the trend toward
outsourcing and offshoring will not be halted by changes to the
immigration laws.
We have few recommendations. First, allegations that U.S.
workers have been laid off and replaced by cheaper foreign
workers extend to a very limited group of L-1B specialized
knowledge employees who work off site. Therefore, any
correction should be targeted at this perceived problem and not
at the L visa category as a whole. The most effective approach
to meet this objective would be to clearly delineate what does
and does not constitute specialized knowledge. For example,
knowledge of generic programming languages should not
constitute specialized knowledge. ACIP firmly believes that
with the appropriate guidance from Congress, BCIS and DOS are
well-equipped to make determinations regarding eligibility for
an appropriate usage of L-1 visas. It is not necessary to
rewrite the entire L law, add significant new regulatory
burdens for all L visa employers or create a new regulatory
scheme.
Second, the detection of fraudulent credentials,
questionable business entities and inappropriate use of the
program can be enhanced through precertification programs where
companies frequently filing L visa applications under the L-
blanket petition of established criteria and protocols, limited
resources demand that we increase information sharing and
cooperation between the Government and employers.
Finally, ACIP believes that the issues spurring many of the
concerns expressed today derive from changes in the global
economy and not deficiencies in the L category or regulations.
Congress has a duty to consider the impact of new business
models such as offshoring and opportunities for U.S. workers.
However, the L visa is but a small piece of the puzzle. ACIP
and member companies have and will continue to work on and
support a variety of education and workforce initiatives to
ensure we have access to the talent needed to compete in the
21st century global economy. We should not let short-term
economic difficulties blind us to long-term economic
opportunities. ACIP recommends that Congress commission a study
with the input of business experts that examines emerging
economic trends and examines the array of policies necessary to
ensure future economic growth and opportunities for U.S.
workers.
The L visa program, particularly the blanket program, is
extremely important in facilitating global commerce for U.S.
companies and has been for over 30 years. It is a model of
success in an often broken immigration system. Our challenge is
to create a secure and efficient immigration system that
protects U.S. workers while anticipating employers' needs for
access to talent from around the world. ACIP stands ready to
work with you in building such a system.
So I thank you for your time and consideration, and request
that our full statement be included in the record. Thank you.
[The prepared statement of Mr. Fragomen appears as a
submission for the record.]
Chairman Chambliss. Certainly we will be happy to include
your full statement, and thank you, Mr. Fragomen.
Professor Yale-Loehr, we are pleased to have you and look
forward to your testimony.
STATEMENT OF STEPHEN YALE-LOEHR, ADJUNCT PROFESSOR OF LAW,
CORNELL LAW SCHOOL, ITHACA, NEW YORK
Mr. Yale-Loehr. Thank you very much. Mr. Chairman,
distinguished members of the subcommittee, I teach immigration
law at Cornell Law School. I am also a co-author of a 20-volume
immigration law treatise that is the standard reference work in
the field. So I am testifying today from an academic background
to try to give you some overview and perspective about the L-1
visa category. Much of what is in my written testimony has
already been mentioned before so I am not going to tell you
about the differences between the L-1A or the L-1B. Instead let
me first focus on how the L-1 visa category is being used.
As my grasp in statistics and my testimony indicate, L-1
visa usage has waxed and waned over the last 10 years or so. It
has always been much less used than another common visa
category, the H-1B. At its peak in fiscal year 2001 the State
Department issued 59,000 L-1 visas. Even that, though it sounds
like a lot, was only 37 percent of the H-1B visa usage for that
year, and that 59,000 L-1 visas constituted less than 1 percent
of all nonimmigrant visas issued that year. Moreover, as you
have heard from the other witnesses, the controversy within the
L-1 context focuses on one subset of L-1s, and that is L-1B's.
The State Department does not separately categorize how many L-
1B visas it breaks out, and that is one thing that I would
recommend, is to try to find out how the L-1B visa usage has
increased over the years, because I think that it is common
consensus that there is no real problem with the L-1A visa
category for executives and managers.
Similarly, on numbers, I want to point out, some people
have said, for example, that there ar 300,000 L-1s that come
into the country every year. That number derives from
statistics by the Bureau of Citizenship and Immigration
Services as to the number of entrants, admissions each year by
L-1 visa users, and L-2 spouses and children. Therefore, that
number is exaggerated because on average the BCIS estimates L-1
visa holders come in about 5 times a year. So that is not a
true picture of the usage. It is rather how many times they are
coming in back and forth. Therefore, it gives you an idea of
how often L-1 visas are used for multiple travel over the years
rather than being here just one time continuously in the United
States.
One other thing I want to focus on is the difference
between the L-1 category and the H-1B visa category because I
think it is important they are for two different reasons, and
we need to keep those differences distinct.
The H-1B visas are granted to professionals who have at
least a college degree or equivalent. They are needed to
provide unique skills, relieve temporary worker shortages or
supply global market expertise. By contrast, the L-1 visa is
designed for a narrower purpose, as we have heard, to help
international companies bring in managers, executives or people
with specialized knowledge on a temporary basis to assist their
U.S. operations. There is no degree required for L-1
eligibility because general educational requirements are not
relevant for this category. Instead what we need are people who
have inside knowledge about the company's operations and who
bring that kind of background to bear when they come to the
United States. A degree may be irrelevant, and as Mr.
Buffenstein's written testimony indicates, in some instances
there are people who do not have college degrees, but because
of their unique knowledge of the company's operations, the L-1
visa category is the only way they can come into the United
States. So we should not impose a professional degree
requirement on the L-1 visa category.
Similarly, there are differences between the H-1B and the
L-1 such as there is no portability of employment to
unaffiliated entities in the L-1 category, and there are no
extensions of L-1 stay beyond the statutory cap of 5 or 7
years. Thus, in these respects the L-1 category is in fact more
restrictive than the H-1B visa category.
I also want to talk a little bit about globalization
because that is sort of the sub-theme of this hearing. It is
certainly an important characteristic of this century and
affects all countries. Rather than paint too broad a brush, I
want to point out that globalization contains both potential
pitfalls and advantages for the United States.
Assistant Secretary of Commerce for Technology Policy
Mehlman, testified before the House of Representatives last
month overseas outsourcing of IT, which is one subset of
globalization, can actually benefit the United States and
create jobs for U.S. workers. He stated in his testimony that
so far the majority of work sent offshore is low-wage,
represents a small fraction of the overall market for software
and IT services and does not displace a large majority of the
work done here in the United States. He continued that the
Bureau of Labor Statistics projected in December of 2001 that
the number of professional IT jobs in the United States will
grow by 72 percent between then and 2010. The Bureau of Labor
Statistics have also indicated that there is going to be a
shortage of service sector jobs of about 9 million by 2010. So
even though there is some overseas offshoring going on, on the
whole the prospects for employment in the IT and service areas
is still bright.
Obviously, Congress needs to consider globalization and
offshore outsourcing, but in my view the L-1 visa category, if
properly administered and monitored, can be an anecdote to
concerns about overseas outsourcing. Use of L-1 visas
encourages both foreign investment in the United States and can
help keep and grow jobs in the United States.
In conclusion, like others have stated here, I think that
we need to take a surgical approach to considering changes to
the L-1 visa category. The narrow area of concern and possible
abuses in the L-1B area where people claim to have specialized
knowledge but do not really when they come into the United
States and they are placed at third-party sites. We need to
look at that narrow issue and see what we need to do about it,
and it is possible that we can do that administratively rather
than through legislation.
Thank you very much.
[The prepared statement of Mr. Yale-Loehr appears as a
submission for the record.]
Chairman Chambliss. Thank you very much.
To all of our witnesses, we certainly have the spectrum
covered here, which is great. That is exactly what we wanted to
try to do.
Ms. Fluno, let me start with you. Your displacement took
place in the year 2002. What has been the result or the follow
on with you and your coworkers at Siemens with respect to
finding other employment in this high-tech community?
Ms. Fluno. About one third of the people managed to get
positions within Siemens, but another third are--they have been
employed, but most are under employed, meaning that they are
making less than they used to, and in fact, one gentleman
cannot get a job in programming. He is mowing lawns. About one
third are still unemployed.
But I have learned a new term here this afternoon. I am
going to tell them that they are having a short-term economic
difficulty, and to tell that to the mortgage company.
Chairman Chambliss. Do you know whether or not your
replacement had ever previously been employed by Siemens?
Ms. Fluno. I do not believe so.
Chairman Chambliss. Mr. Fragomen, your firm represents Tata
Services which has been mentioned here any number of times.
Could you explain what kind of specialized knowledge Tata's
products or services that Tata L-1 workers have?
Mr. Fragomen. I can make a few general remarks. I am not
really testifying on behalf of Tata, but I would be happy to
address the Chairman's question.
Essentially the standard that is used by the American
Consulate in India for the various consular posts in issuing L-
1 visas, which is pretty much followed by other consular posts
around the world, is that the job applicant has to have two
things. First of all, L-1 blanket petitions require the
applicant to have a professional degree, so they have to have a
degree in computer science or a degree that is very, very
specifically related to what they are doing. Secondly, they
have to have experience working with the software of the
company with whom they are going to be placed, or
alternatively, working with proprietary software that Tata has
developed that would be utilized within specific industries. So
it is very, very narrow in terms of defining specialized
knowledge.
The consul would not grant a visa to someone who just had
generic programming skills, for instance. It has to be a
situation where the person is both a professional and has prior
experience with the specific proprietary software. That would
be the answer to the question.
Now, I cannot relate that specifically to the Siemens
situation because I do not have knowledge, but I would be happy
to make an inquiry and see whether I could provide some
information to the Committee.
Chairman Chambliss. If you could provide some specifics on
that, we would appreciate that.
Mr. Fragomen. I would be pleased to do that.
Chairman Chambliss. Ms. Verman, as a businesswoman running
a competitive consulting company, do you believe that too much
Government interference and over regulation is a concern with
legislation that would tighten up the L-1 visa, and could you
give us any example of how you might think that would
interfere?
Ms. Verman. I believe your question is how do I feel that
the Government interference on the L-1 visa will affect my
business?
Chairman Chambliss. Will affect the issuance and the
practical day-to-day operation of L-1 visa issuance.
Ms. Verman. I think it would affect it tremendously. I
think that it is not an even playing field at this point in
time, that I am asked to compete against, at a disadvantage
against foreign consulting companies where they have
competitive advantage of transferring L-1B visa foreign workers
here, and they put them here at a lower cost. I cannot compete
with U.S. workers here for the same price.
Chairman Chambliss. Are most of your workers that you
obtain visas for domestic workers? Are they U.S. citizens?
Ms. Verman. Most are U.S. citizens, legal residents, or I
do also employ H-1B visa consultants as well.
Chairman Chambliss. Mr. Buffenstein, would you explain how
Global Personnel Alliance members use L-1 visas, and
particularly what ways L-1 benefits American interests as those
companies use it?
Mr. Buffenstein. Mr. Chairman, a classic example is a U.S.
company, such as the airline I mentioned, that needs to remain
competitive on international markets and needs to bring in a
key process or some confidential knowledge about the operations
abroad to the United States in order to fuel exports or to make
that company more competitive. The manufacturer that I
mentioned in the Midwest is a good example. They make truck
drive parts and axles. They need to customize them for Latin
American or Asian markets. In order to do that they need to
bring in a couple of key people with specialized user
requirement knowledge for those markets in order to facilitate
those exports.
In another circumstance, the same company brought in a key
individual who had knowledge of a European manufacturing
process of a design modification that had been done in Europe
that they wanted to bring back to the United States to
introduce it into this manufacturing facility because they
thought it something that would help their exports. Again, we
are talking about 30 people, 35 people in a workforce of
60,000. One of the examples in that same company, Mr. Chairman,
I think is instructive. It is a Canadian individual who is the
global leader for Brand Management and Marketing, and he is on
an L-1, but he divides his time between Canada and the United
States. That is something that I think is greatly ignored, that
many L-1s are not in the United States on a full-time basis,
but rather divide their time between the United States and
abroad. There is a paper company, small paper company with
2,000 employees based in the Southeast that has a number of key
experts, just 4 of them on L-1 visas, but these people are
probably here once a month, or every 3 months they come here in
order to attend to some very complex and expensive machinery
that that company needs in order to sustain its 2,000
employees.
For example, one of our companies has a managing director
who is British, who comes to the United States and works here
just one week out of every quarter. So for a total of 4 weeks a
year that person is working here. Because the person is
employed in the United States and actually performing a job
when he is here, he cannot use a B or other kind of visa. He
needs to get an L-1. So he gets an L-1, but that is literally
for 4 weeks a year.
What this all points out, Mr. Chairman, is that there
really needs to be some study of some of the circumstances.
Where are these L-1s working? Are they in California? Are they
mainly in Georgia? What do they do? What occupations are they
in? This kind of information is sorely lacking, and I would
hope that as any part of the action that your Committee takes,
that you would solicit some of this kind of information before
too drastic a remedy is taken.
Chairman Chambliss. Thank you.
Senator Kennedy?
Senator Kennedy. Thank you very much.
Of course, the Immigration Service is supposed to know that
when they grant the visa. I mean we do not need to go back in
and all have another study. They are supposed to meet the
requirements. The idea basically is if you have a specialized
worker, the basic concept was because they are going to provide
some specialized knowledge which means it is going to mean more
workers and more jobs for people, but what we are talking about
are the abuses I think here we have seen.
I remember very clearly the 1965 debate on the immigration
issue, eliminated the national origin quota system. We had the
western hemisphere compromise. We eliminated the Asia-Pacific
triangle. In 1970 the needs came because we had the beginning
of the internationalization, and this was a very specialized
kind of a program. I was trying to look back in the debates.
They are virtually nonexistent because we were just trying to
fill a very specialized concept, and that is the highly-skilled
people for companies that are coming in here who had been a
part of the company family, may not have the degrees, but had
that special knowledge that was very important for that company
to be expanding and expanding employment here.
The concern that we have is whether they are growing with
all of these abuses, and how extensive are they. That is what
we are trying to get at today.
But I an enormously sympathetic to Beth Verman, what she
has said, and that is, if we let abuses go on, here is a
company that is trying to compete, and if they can jiggle the
system, whether it is the L-1 or whether the H-1B, and they can
jiggle the system and get people in there and pay them a hell
of a lot less, how is an American company, who is trying to
play by the rules, trying to employ Americans, trying to deal
and compete, they are at a significant disadvantage. I mean I
may be putting more in your mouth than you said, but I hear the
argument and have heard it for a long time, and I think that
that is being unfair to American companies. So this is a
complicated issue and question.
I would like to get back to the issue about the definition
of ``specialized knowledge.'' We have not got a lot of time.
But a number of you talked about specialized knowledge. Is
there a general understanding? Maybe Beth and Michael, you will
be able to talk about it. Is there a sense that specialized
knowledge is being abused? And we ought to understand what that
specialized knowledge is and come back? I mean I would be
interested. Ms. Verman, could you comment on it again?
Ms. Verman. I feel that the term ``specialized knowledge''
is very broad, and it needs to be more defined. That seems to
be where one of the abuses are.
Senator Kennedy. Mr. Gildea?
Mr. Gildea. If you look at the Siemens case, you wonder
what kind of specialized knowledge they had when the workers,
who were later to be displaced, were asked to train these
folks, so what was the specialized knowledge base there for
those workers? We are concerned about that under this program.
Senator Kennedy. How much of this, Mr. Gildea, is the
enforcement? I think we have had hearing after hearing, year
after year after year, Department of Labor, under Democrats and
Republicans. There are not a lot of resources. The restrictions
in terms of the enforcement. We tried attestation, was sort of
a newer concept, thinking that the business community would
play by the rules, and I think the great majority have. There
are abuses on it, and I do not know how we are going to be able
to deal with it, but how much of this is the fact that we are
not getting enforcement? We ought to try and hold accountable,
or try to provide additional resources or do whatever we can
with the Labor Department in terms of enforcement. How much of
it is an enforcement problem, and how much of it do you think
is the definition, how much of it is legislative? Is there any
way to quantify it?
Mr. Gildea. I think it is a little of each. In the case of
enforcement you had OIG reports from the Department of Labor,
GAO reports as well, looking at both L-1s and H-1Bs, and they
do not have sufficient authority to enforce in some cases. The
issue of blanket petitions, you wonder if the volume is such in
the consular offices that they do not have time to look at
these petitions in the way they need the kind of oversight.
I do think that your suggestion regarding the fee makes
sense. It is what we have recommended. And that the bulk of
that should go into enforcement functions for DOL, for BCIS and
for the consul offices to do the job that needs to be done in
terms of screening and monitoring and data collection,
gathering the information that they can report to you so that
the Congress, House and Senate can do its oversight
responsibilities and know exactly what is going on in these
programs, and hopefully before these kinds of abuses set in,
take action to prevent the abuses.
Senator Kennedy. I had a favorite of 3,000. Then we got to
2,000, and then we are down to 1,000. These are just a small
number, but they are highly specialized. The company needs
them. We talked about training and enforcement, and it does not
seem to be unreasonable.
Let me ask you on sort of an issue, Mr. Gildea, and then
any of the others on the panel, as I see that time is going on.
I listened to what Professor Yale-Loehr talked about in terms
of the foreign investment and basically low wages. You know,
enormously interesting, it caught my eye last night, in
Newsweek, a long article in Newsweek. They talked about the
shift, not just about low-wage jobs, but about the handling
customer service, telemarketing, paperwork, biggest
corporations, firms like GE, American Express, prefers to use
them now. Now Fortune 500, Microsoft, is sending not just low
wage, but are talking about the managerial and above workers,
or at least those kinds of jobs overseas. In this case it
mentioned particularly in India, and used the comparison in
terms of what managers were getting, some managers were
getting, an enormous disparity. How should we be dealing with
this? That is a little bit off this, although some have
referred that this is not unrelated. I have been listening and
trying to understand better how it is related. I would be
interested in what ideas you have on this, where are we going
with it? Maybe you would take a crack at it, and I will ask Mr.
Gildea and if anybody else has a comment. Then my time is up.
Mr. Yale-Loehr. Yes, Senator Kennedy. I think globalization
is a large issue that needs to be addressed by Congress
comprehensively. As other witnesses have said, immigration
restrictions are not going to stop globalization. That is a
phenomenon that is too big that one little immigration
legislation is going to be able to stop. I think we need to
look at that comprehensively. I think within globalization the
L-1 visa category is actually one way to try to keep jobs in
the United States. By bringing in key people, managers,
executives, people with true specialized knowledge that will
enhance and create jobs in the United States, that can offset
some of the negative aspects of globalization.
Mr. Gildea. Senator, we do not see it that way. What we see
some of these outsourcing firms doing is bringing in the lower
wage workers, particularly from India, bring them in to get the
skills and jobs of people like Patricia Fluno, and over time
taking the knowledge and the skills back to India and working
with the same companies that are responsible for setting up
huge high-tech centers in India, and shipping hundreds of jobs
going in the reverse direction. That is what our concern is
with respect to these higher level jobs.
Senator Kennedy. What do we do about that?
Mr. Gildea. In terms of the visa fix we are--
Senator Kennedy. I am thinking of going the other way. I am
interested in what you think about what is happening here, but
I mean, how in the world are you going to stop companies from
going and shipping these managerial jobs and higher-paying jobs
over to India or these other countries? They are going to be
appealing to what is a 30,000 or $40,000 job here, goes for
3,000 or 4,000 jobs over in these other countries. They are
going not just do it for low income, but they are looking at
these other skilled jobs. Should we be worried about it, and
what are we going to do about it?
Mr. Gildea. I think you should be worried about it. It is
what indeed has happened in the manufacturing sector, where
those jobs have gone to the lower wage rates. Even now you see,
as a result of NAFTA and the maquilladora developers in Mexico,
even those jobs, as Mexican workers' wages rise, those jobs are
headed out of Mexico. If globalization, which for many U.S.
workers means the unemployment line, is about that, we have got
a tough problem in front of us, and it is not just the
manufacturing jobs any more.
Chairman Chambliss. Mr. Buffenstein, do you have a comment?
Mr. Buffenstein. Mr. Chairman, I think in response to
Senator Kennedy's question, it is not really possible to
legislate a macroeconomic phenomenon. The problem with the
globalization phenomenon, especially in the information
technology industry, is that that is an industry which is
highly mobile. It so opens that India has got a population
fluent in English and proficient in this regard. We cannot
legislate against companies moving businesses to India.
But we can do, in information technology and elsewhere, is
help U.S. business and industry be as competitive as
conceivably possible and make sure that we have the ability to
bring jobs here in industries where it is close to markets and
where companies want the manufacturing to be.
If you take the members of this Subcommittee, Mr. Chairman,
alone, just the States represented by the members of this
Subcommittee, 3 million jobs in those States are attributable
directly to income-producing, employment-generating
international investment, and lots of their manufacturing
facilities in Massachusetts and Georgia that specifically are
close to market, optical equipment, transmission equipment, all
kinds of bread-and-butter manufacturing jobs that we need to
encourage and bring to this country.
In the information technology area, for example, one of our
members has a developer in Ireland that they have brought to
the United States that is helping educational proprietary
software be developed here, whereas otherwise those jobs would
have gone abroad. We need to encourage and facilitate that.
Senator Kennedy. Thank you very much, Mr. Chairman.
Chairman Chambliss. Thank you.
Senator Feinstein?
STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR FROM THE
STATE OF CALIFORNIA
Senator Feinstein. Thank you very much, Mr. Chairman. I
think it is correct that we take a good look at the L visa.
I am sorry to be late. I was on the floor speaking on the
trade agreement. You know, it is interesting, the more I am
really looking into the trade agreement, having immigration
staff look into it, it really is a stealth permanent
immigration program. These visas are renewable forever. What I
did not know is L visas do not pay taxes. So you are going to
have people here that do not pay taxes, and replaces. Ms. Fluno
said she makes $98,000 a year--
Ms. Fluno. Did. Did, that is past tense.
Senator Feinstein. Did. Trained the worker that is going to
make a third what she makes. And this is good for us?
Four years ago, and I represent California, I had a whole
bunch of CEOs come to me, how they needed more H-1B visas, et
cetera, et cetera. I bought the argument and I went along with
it. So now we are faced with a trade agreement, Singapore,
Chile, that has this L-1 visa program attached to it. Then I
began taking a big look at some of the numbers involved in
these so-called temporary worker programs. What you find is, at
this time in the country, we have 5.2 million people taking
jobs in this country under temporary visa categories, and
40,400 are Chileans, and 29,400 are Singaporeans, for a total
of 70,000 workers in these other visa categories.
So I have to wonder why are we increasing this L-1 visa? I
understand the L-1A, which I thought was the purpose of the
program, that if you want to send a manager temporarily to give
some advice to their counterparts in this country and then
return, that is fine. But I do not really think that is what is
happening. I think what is happening is, through this treaty,
which I gather was to be a precedent for other treaties, to
have a program where there is no labor certification, there is
no labor investigation, and therefore, Ms. Fluno cannot even
complain and have that complaint investigated as to whether she
is being replaced for monetary reason. And I hazard a guess
that is exactly what this program is going to be used to do.
What I have also found, that fraud is increasing in all of
these programs, and I just documented that on the floor of the
Senate with numbers and dollars in fines.
Now, I appreciate global competition. I come from a State
that is a high-cost State, and the American dream has always
been for a worker to be able to own a home and buy a car and
educate their kids, and it is very hard to do it on $32,000
paying taxes. Now we are going to have $32,000 and no taxes. I
really think to have workers that are able to come into this
country--and that is the second part of the L program, the L-
1B--and be here for 7 years and pay no taxes and replace
American workers, that is not something I want to be a part of.
I come from the State that has the biggest, I guess, technology
industry, and I would hope that computer firms and chip firms
and others in my State would not do that.
As a matter of fact, when we expanded the L-1 visa program,
it was really TechNet in California--and Senator Kennedy will
remember this--that came up with the $1,000 fee that they would
match and create a program to better educate domestic workers.
Suddenly, 5 years later, we have lost all that.
So I would like anybody to tell me that, give me a better
reason why there should be an L-1B program where you do not pay
taxes, where you can replace an American worker, where there is
no prevailing rate? Why should we have that in this country?
Somebody defend it.
Mr. Buffenstein. Senator, I would like to take a shot if I
may. I am not aware of any manufacturer in this country--and
over 25 years I have worked with many of them that bring in L-1
workers--who have L-1 workers that are not paying taxes in this
country. The IRS regulations specifically require that if
someone is resident here, meaning that they are more than a
certain 181 days a year, or over a period of time, 3 months,
120 days, 4 months, that they are residents, and they have to
pay taxes just like you and me.
There may be some financial arrangements involving the
specific instances of abuse that have been cited, where people
are not complying or where they have arranged certain
mechanisms, but that certainly is not the mainstream of
manufacturing. So the problem is, when you have a
manufacturer--
Senator Feinstein. Would you just clarify that? Are you
speaking to the L-1B or the L-1A?
Mr. Buffenstein. The L-1B and the L-1A.
Senator Feinstein. To both.
Mr. Buffenstein. Both.
Senator Feinstein. You are saying neither pays any taxes.
Mr. Buffenstein. No, ma'am. I am saying that in both
circumstances the overwhelming number of manufacturers,
certainly every one that I have worked with, those individuals,
if they are resident in the United States have to pay taxes as
residents, just as you and I do.
Senator Feinstein. What is the definition of ``residency?''
What do we mean by that?
Mr. Buffenstein. Well, it gets into a complex regulatory
issue, but the definition of residency is quite simple. Anyone
who in any 1 year is here more than 181 days, or someone who
over a period of time is here more than--it is a complex
formula, whereby you add a sixth of the previous year and third
of the year before. Basically, if you are here for more than
120 days a year, you are a resident. There are some treaties
that exempt you in certain circumstances, if you are being
taxed by the other country.
But the point I am making here--because I do not know, and
I am not disputing, what the circumstance was that Ms. Fluno
encountered in Florida. What I am saying is that the vast
majority of companies are neurotically desperate to be
compliant with the law, both from a tax standpoint and from an
immigration standpoint. They employ batteries of internal
compliance people and outside lawyers who try to do this. And
the manufacturers, like the one that I mentioned in the Midwest
or like the optical lens manufacturer in Northern California,
are companies that need an L-1B in order to bring in a needed
technology to integrate that technology into the United States
so that manufacturing can occur here.
Mr. Fragomen. I would like to--
Senator Feinstein. Please, go ahead, and then I will come
back.
Mr. Fragomen. I just wanted to add to Mr. Buffenstein's
remark, that even if a person is not a resident for tax
purposes, as a nonresident they pay tax at a statutory 30
percent rate without deductions. So virtually everybody pays
taxes.
On the issue of the--on the other issue--
Senator Feinstein. Not if it is the product of a trade
agreement.
Mr. Fragomen. To my knowledge--and we would be happy to
submit some information for the Committee to the record, but to
my knowledge, even if it is pursuant to a trade agreement, that
taxes are still paid. It is just a question of whether they are
paid as resident or as a nonresident.
Senator Feinstein. I am told something else, so I would
really appreciate any information you could provide, specific
information of specifics involving what kind of taxes people
pay, and we are going to ask CRS to clarify this for us so that
we know exactly.
Mr. Buffenstein, let me ask you this. I think many U.S.
companies see the L-1 program as a way to import foreign
workers without the restrictions and costs of the H-1B program.
Restrictions that apply to H-1B but not L-1 include an annual
limit on the number of visas issued and a requirement that the
visa applicants have a bachelor degree or higher. H-1B visa
applicants, as you know, have to pay the $1,000 fee we have
just talked about, toward training American workers. L-1
applicants do not. Visa law also requires workers with H-1Bs to
be paid the prevailing wage in the region where they work,
while L-1 visa carries no salary requirements. Would you be
supportive of a prevailing rate requirement?
Mr. Buffenstein. Senator, firstly, the airline that I
mentioned earlier that employs 60,000 workers and brought in a
pricing analyst to the United States, that individual who
helped them be competitive on international fare markets and
brought very specialized and in many respects confidential
knowledge about their fares on European markets did not have a
degree and would not have qualified if some of the proposals
that are flying around now were enacted.
In addition if there was a quota and the quota had been
reached for that particular year, we would have had to tell
that airline, well, sorry, you cannot have this person now. You
have to wait a year, by which time the foreign carriers would
have got the financial advantage. So some of those issues I
think are best addressed qualitatively rather than
quantitatively. In terms of--
Senator Feinstein. That was not my question, sir.
Mr. Buffenstein. I am sorry, ma'am. You mentioned in terms
of prevailing wage requirements specifically.
Senator Feinstein. The question was, would you support a
prevailing rate attached to the L-1 visa?
Mr. Buffenstein. As long as the mechanism was one in which
international companies could continue to pay home country
benefits, continue to keep people on international compensation
systems, and there were a way of devising that that the
Department of Labor certainly has not shown with respect to the
current H-1B program. Because when you have someone who is
brought, for example, for 6 months to the United States or for
9 months, and then taken to Canada for a few months, you cannot
keep on moving that person onto a different payroll. There are
apples and oranges questions with respect to benefits. It is
enormously expensive to transfer personnel to the United
States. Many of these multinational companies that bring these
key experts here pay enormous amounts of money and equalize
compensation and tax burden for their individuals.
The pricing analyst that I mentioned with respect to the
major airline, is one who was relocated abroad earlier, because
once the person's sojourn was complete in the United States, it
is an expensive thing to keep the person here, so they were
sent back immediately. So it all depends. The devil is very
much in the detail on that issue, Senator.
Senator Feinstein. But if the individual were here, I do
not know what portion of L-1 visas that are here utilize the
entire 7-year period, but I suspect it is a large number. Does
anyone know?
Mr. Fragomen. We did a study among our member companies,
and the average stay in the United States on L-1 visas is
approximately 2 years, and there are very few persons who stay
more than 3 years, so very much, unlike the H-1, where there
are a large percentage of persons who convert to permanent
residents, it is very large in the L visa category. It may
interest you that among the companies that do the offshore
development work, for instance, that many of them have no
permanent residents program at all. Everyone is rotated out
within a year or two of when they come to the United States.
Senator Feinstein. Then let me ask you this. Why, in the
two trade agreements we have before us, are they providing for
unlimited years, you can renew the visa forever? Why would that
be necessary if people do not stay that length of time?
Mr. Fragomen. Basically in the trade agreements you have
two categories. You have your L visas, and then you have your
free trade entries, the TNs, as in the North American Free
Trade Agreement. The TNs are much more an abbreviated H-1
essentially, and those people frequently stay for a long time.
But there is not any particular reason that there would have to
be a cap on L-1 time. I mean most L-1s just do not remain in
the United States. Statistically, the number that convert to
permanent residence is very small.
Senator Feinstein. Do you have data on how many countries
that would allow the same thing in reverse?
Mr. Fragomen. Actually, I do. One of the practice areas in
which we are engaged is global immigration, and I can give you
a rundown of 10 or 20 countries. You will see that every one of
them has the equivalent of an L visa category to facilitate
international mobility.
Senator Feinstein. That are not limited in number?
Mr. Fragomen. No, they are not limited in number. The basic
concept behind L visas is to try to limit usage by defining the
category sufficiently narrowly so there are not negative
competitive impacts on the local labor market. That is the
basic concept, unlike the H-1, which is driven much more by
labor market tests or at least creating a level playing field
in terms of a labor market. But I would be happy to provide
this information.
Senator Feinstein. I would appreciate that, because again,
in the trade agreement we have before us, they dropped the word
``highly'' before ``specialized'' and actually provided for a
number of occupational categories that do not require a
bachelor's degree as well, which is rather interesting. So it
is clearly meant to be a broader L-1 program, I guess not like
what you are saying if what you are saying is right, that
individuals can come in and effectively remain for the rest of
their lives. It is mandatory that they are able to bring their
families. And if there is any different point of view on the
pattern of entry, we have to submit it to an international
tribunal for decision, a very unusual agreement in that regard.
Thank you, Mr. Chairman.
Chairman Chambliss. Senator Cornyn.
STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM THE STATE OF
TEXAS
Senator Cornyn. Thank you, Mr. Chairman. One benefit to
being a junior member of this Subcommittee is most of the
obvious questions are already asked by the time it gets to me.
Chairman Chambliss. But you are a lot smarter about L-1.
[Laughter.]
Senator Cornyn. Thank you. I would just like to make an
observation perhaps, and that is this whole subject of this
hearing and also the hearings that you have held previously in
this Subcommittee, I think have demonstrated how broken in so
many respects our immigration system is, and certainly I hope
what comes out of this hearing and the other hearings that you
have convened is that we address not only the policy but
obviously the enforcement issues, because no matter what
Congress does in terms of writing a new law, if it is not
enforced, that policy not only fails to be implemented, but it
also breeds, I believe, disrespect for the law generally. Right
now I am sorry to say I do not see our immigration laws being
adequately enforced pretty much across the board.
I think what we need to make sure we do is to make sure
that any changes in this area obviously are fair to domestic
workers, that it is predictable for employers and those
workers, and that it is enforced diligently, as I think we all
agree it should be.
The amazing thing about this is that it seems to cut across
so many different policy areas. One reason of course we bring
in foreign workers, particularly those with specialized
knowledge, because our education system some say is not
producing those workers, so it implicates that. Obviously, it
implicates our domestic economy and the global economy, as we
have heard. It implicates homeland security concerns as we have
heard previously, where some 300,000 people are currently in
this country under final orders of deportation and we simply do
not know where they are.
In the hearing last Friday before Senator Graham's
Subcommittee on the Judiciary Committee on Crime, the Border
Patrol told us that they apprehend about 1 million people who
come into this country illegally each year, but they cannot
tell us how many they do not apprehend, but the best estimate
is between 8 and 10 million undocumented immigrants are
currently in the United States now. While we hope, and
certainly I would expect that most are here because they want
what immigrants have always wanted, which is an opportunity for
a better life for themselves and their families, in a post 9/11
world the demands of border security and homeland security I
think require us to be far more diligent in that area.
As we have heard Senator Feinstein, in the two free trade
agreements that we have before us, I think could even be
tonight, with Chile and Singapore, we have concerns that now
the Executive Branch wants to get involved in immigration
policy, which under the Constitution is reserved to the
Congress.
So I commend you for this hearing. I found it very
edifying, like others here. It is also disconcerting in a lot
of ways, and I hope and I expect that this Subcommittee and the
Judiciary Committee, and hopefully the Senate as a whole will
address these concerns, not just in a piecemeal fashion but in
a comprehensive way so that our immigration system can be
credible and fair, predictable and enforced.
Thank you.
Chairman Chambliss. Thank you, Senator Cornyn.
Let me direct this to Mr. Buffenstein, Mr. Fragomen and Mr.
Yale-Loehr. You know Ms. Fluno's story. You know the facts. She
has related them again today. In my mind the use of L-1 visa is
not consistent with the allowance of an individual to come in
and replace an existing worker. You have all talked about the
need for bringing in technical workers to engage from the
standpoint of being able to assist with productivity or assist
in the high-tech end of the manufacturing segment, but they
should not be allowed to come in to replace a worker. Am I
wrong about that, or do you disagree with that? Would you all
take a shot at that?
Mr. Buffenstein. Mr. Chairman, I think you are precisely
correct because the definition of specialized knowledge would
be violated if the knowledge was readily available here and was
generic, where someone could just come and replace someone in a
job which if the company could have found some people in the
United States who were qualified for it. And that is the point
I made earlier, and I would like to reiterate it, is that every
instance of cited abuse, most particularly, Ms. Fluno's, but
every instance of cited abuse, whether in the articles, what
the people have talked about on this panel, all relate to the
specific circumstance where there has been a contracting out or
a leasing out of employment to a second employer, where there
is no affiliation between the first and the second employer
than a contractual agreement, and where the knowledge is
generic knowledge, not to suggest that Ms. Fluno's knowledge
was not substantial, but it is not knowledge that is possessed
within that company or specifically by that company abroad, and
that is what distinguishes the L-1.
So if there is going to be a legislative solution, and not
an administrative one, it should be targeted very specifically
at that situation, bearing in mind that there are situations
where it is very valid for a company, for example, an airline,
to send someone to a code share airline in order to conduct a
project, and not to throw that baby out with the bath water,
but that is where it should be targeted. So I agree with you
100 percent.
Mr. Fragomen. I would agree with Mr. Buffenstein as well. I
would just like to perhaps try to draw the distinction between
maybe slightly different uses of L-1B visas. In a typical job
shop situation, where a company is essentially just providing
employees in the U.S., importing them and then essentially
contracting them out, where they are working on another
employer's premises and they become absorbed in the workforce
or displace U.S. workers, and they have generic computing
skills, software, hardware, et cetera, I think we all agree
that that is not an appropriate L-1 usage because they do not
possess specialized knowledge.
But in an offshoring situation, we talked a little bit
about how the development centers are created abroad, and these
development centers actually do the software development,
programming, et cetera. The companies send persons to the U.S.
as part of a team, and part of this team is to feed information
back to the development centers abroad, and the personnel of
the companies come over and have very specialized knowledge of
the particular software involved, meaning the proprietary
software of the company for whom they are rendering this
service, come and feed information back, and it is a
cooperative kind of an effort.
Now, in that kind of a situation, that is very different
than the situation of a job shop. Now, personnel in those
circumstances might only be in the United States for 6 months,
for a year. Then they go back abroad. Then they are frequently
reassigned to projects in other countries. So it is not a
matter of just working the U.S.
Now, this offshoring model can result, and frequently does
result, unfortunately, in that it constitutes a form of
outsourcing, it results in U.S. workers losing their jobs
because the entire function is contracted out to this company
who performs part of the work abroad and then has employees in
the U.S. as well. That is why it is a complicated issue because
it is really a subset of the outsourcing phenomena, which is
actually what causes the loss of jobs. So it is not a one-to-
one displacement situation.
Mr. Yale-Loehr. I could add two things to that. I agree
with the previous two statements, but adding two things to
that. Number one is in 1996 the State Department sent out
guidance to its consular posts about this use of the L-1B visa
usage, where they are placing them at third-party sites. That
policy guidance, under which circumstances it is acceptable and
when it is not acceptable is quoted in my testimony. Therefore,
to the extent that you want to look at that particular aspect
of L-1B usage, you might look at that State Department guidance
and see if either administratively or legislatively that would
be a good starting point to try to curb the abuse in that
particular area.
Second and more broadly, I think that you might consider
seeing ways that you could encourage foreign countries to adopt
legislation that meets international standards for protecting
workers, and that way the economic advantages of outsourcing
work in countries that do not honor employment norms will be
lessened and the corresponding disadvantage of doing business
in the United States will be overcome.
Chairman Chambliss. Ms. Feinstein's question to you
relative to prevailing wage, if I understand what you just
said, and my understanding of L-1, prevailing wage really is
irrelevant because we are not replacing somebody, if this thing
works the way it is supposed to work, we are not replacing
somebody, so prevailing wage really should not be of any import
to us. Am I correct in that?
Mr. Buffenstein. Precisely, Senator.
Chairman Chambliss. Obviously, it looks as though what is
going on is that we have got, from a conceptual standpoint, a
program that was needed, probably is still needed to whatever
extent companies need to bring in highly-skilled people for
specific assignments, but we are seeing an abuse of that
program, and the practical day-to-day operation of it has
affected Ms. Fluno and Ms. Verman particularly directly.
I think what we are going to do, we have a number of bills
out there now. You all have seen these bills. When you get back
and you put your feet on the table and have an opportunity to
think about it, if you want to give us any comments on what you
think with respect to those bills. My guess is we are going to
try to hone in on tightening this law up to try to prevent the
abuse that somebody like Ms. Fluno is having to go through
right now.
This type of thing really does generate a lot of emotion
out of politicians especially, because Ms. Fluno's story is
very, very real, and there are a lot more of Ms. Flunos out
there. You probably know a lot more examples about it than we
do.
We are going to make every effort to try to tighten this
thing up, so we would appreciate any comments any of you have
with respect to what we might specifically look at it as we
move forward. We do not want to destroy the whole program. It
obviously is a good program conceptually and is something that
we need to continue, but we certainly do need to tighten it up.
I want to thank all of you for being here today. I know
some of you have made a very special effort to be here, and we
appreciate your written as well as your verbal testimony.
I ask unanimous consent that we keep the record open until
5:00 o'clock this Friday for any additional information. If any
of you wish to submit any additional information or any member
of the Subcommittee wishes to, we will accept it.
That being the case, we will stand adjourned. Thanks again.
[Whereupon, at 4:22 p.m., the Subcommittee was adjourned.]
[Submissions for the record follow.]
[GRAPHIC] [TIFF OMITTED] T1789.001
[GRAPHIC] [TIFF OMITTED] T1789.002
[GRAPHIC] [TIFF OMITTED] T1789.003
[GRAPHIC] [TIFF OMITTED] T1789.004
[GRAPHIC] [TIFF OMITTED] T1789.005
[GRAPHIC] [TIFF OMITTED] T1789.006
[GRAPHIC] [TIFF OMITTED] T1789.007
[GRAPHIC] [TIFF OMITTED] T1789.008
[GRAPHIC] [TIFF OMITTED] T1789.009
[GRAPHIC] [TIFF OMITTED] T1789.010
[GRAPHIC] [TIFF OMITTED] T1789.011
[GRAPHIC] [TIFF OMITTED] T1789.012
[GRAPHIC] [TIFF OMITTED] T1789.013
[GRAPHIC] [TIFF OMITTED] T1789.014
[GRAPHIC] [TIFF OMITTED] T1789.015
[GRAPHIC] [TIFF OMITTED] T1789.016
[GRAPHIC] [TIFF OMITTED] T1789.017
[GRAPHIC] [TIFF OMITTED] T1789.018
[GRAPHIC] [TIFF OMITTED] T1789.019
[GRAPHIC] [TIFF OMITTED] T1789.020
[GRAPHIC] [TIFF OMITTED] T1789.021
[GRAPHIC] [TIFF OMITTED] T1789.022
[GRAPHIC] [TIFF OMITTED] T1789.023
[GRAPHIC] [TIFF OMITTED] T1789.024
[GRAPHIC] [TIFF OMITTED] T1789.025
[GRAPHIC] [TIFF OMITTED] T1789.026
[GRAPHIC] [TIFF OMITTED] T1789.027
[GRAPHIC] [TIFF OMITTED] T1789.028
[GRAPHIC] [TIFF OMITTED] T1789.029
[GRAPHIC] [TIFF OMITTED] T1789.030
[GRAPHIC] [TIFF OMITTED] T1789.031
[GRAPHIC] [TIFF OMITTED] T1789.032
[GRAPHIC] [TIFF OMITTED] T1789.033
[GRAPHIC] [TIFF OMITTED] T1789.034
[GRAPHIC] [TIFF OMITTED] T1789.035
[GRAPHIC] [TIFF OMITTED] T1789.036
[GRAPHIC] [TIFF OMITTED] T1789.037
[GRAPHIC] [TIFF OMITTED] T1789.038
[GRAPHIC] [TIFF OMITTED] T1789.039
[GRAPHIC] [TIFF OMITTED] T1789.040
[GRAPHIC] [TIFF OMITTED] T1789.041
[GRAPHIC] [TIFF OMITTED] T1789.042
[GRAPHIC] [TIFF OMITTED] T1789.043
[GRAPHIC] [TIFF OMITTED] T1789.044
[GRAPHIC] [TIFF OMITTED] T1789.045
[GRAPHIC] [TIFF OMITTED] T1789.046
[GRAPHIC] [TIFF OMITTED] T1789.047
[GRAPHIC] [TIFF OMITTED] T1789.048
[GRAPHIC] [TIFF OMITTED] T1789.049
[GRAPHIC] [TIFF OMITTED] T1789.050
[GRAPHIC] [TIFF OMITTED] T1789.051
[GRAPHIC] [TIFF OMITTED] T1789.052
[GRAPHIC] [TIFF OMITTED] T1789.053
[GRAPHIC] [TIFF OMITTED] T1789.054
[GRAPHIC] [TIFF OMITTED] T1789.055
[GRAPHIC] [TIFF OMITTED] T1789.056
[GRAPHIC] [TIFF OMITTED] T1789.057
[GRAPHIC] [TIFF OMITTED] T1789.058
[GRAPHIC] [TIFF OMITTED] T1789.059
[GRAPHIC] [TIFF OMITTED] T1789.060
[GRAPHIC] [TIFF OMITTED] T1789.061
[GRAPHIC] [TIFF OMITTED] T1789.062
[GRAPHIC] [TIFF OMITTED] T1789.063