    H-1B Visa Program: Labor Could Improve Its Oversight and Increase
    Information Sharing with Homeland Security (22-JUN-06,
    GAO-06-720).

    The H-1B visa program assists U.S. employers in temporarily
    filling certain occupations with highly-skilled foreign workers.
    There is considerable interest regarding how Labor, along with
    Homeland Security and Justice, is enforcing the requirements of
    the program. This report describes: (1) how Labor carries out its
    H-1B program responsibilities; and (2) how Labor works with other
    agencies involved in the H-1B program. We interviewed officials
    and analyzed data from all three agencies.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-06-720
        ACCNO:   A55845
      TITLE:     H-1B Visa Program: Labor Could Improve Its Oversight and
    Increase Information Sharing with Homeland Security
         DATE:   06/22/2006
      SUBJECT:   Data integrity
    	     H-1B Visas
    	     Interagency relations
    	     Internal controls
    	     Pay rates
    	     Program management
    	     Employment of foreign nationals
    	     DOL H-1B Visa Program
    	     INS Computer Linked Application
    	     Information Management System 3.0

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO Product.                                                 **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ******************************************************************
    GAO-06-720

         * Results in Brief
         * Background
         * Labor Has Limited H-1B Authority, but the Agency Could Impr
              * Labor's Review of Employers' Requests Is Fast, but May Overl
              * Labor Investigates Complaints and Has Begun the Process of R
              * Labor Relies Primarily on Education to Promote Employer Comp
         * Labor and Homeland Security Face Challenges Sharing Informat
              * Labor and Homeland Security Coordinate to Process Employers'
              * Justice Handles U.S. Workers' Cases
         * Conclusion
         * Matter for Congressional Consideration
         * Recommendations for Executive Action
         * Agency Comments and Our Evaluation
         * GAO Contact
         * Acknowledgments
         * GAO's Mission
         * Obtaining Copies of GAO Reports and Testimony
              * Order by Mail or Phone
         * To Report Fraud, Waste, and Abuse in Federal Programs
         * Congressional Relations
         * Public Affairs

    Report to Congressional Requesters

    United States Government Accountability Office

    GAO

    June 2006

    H-1B VISA PROGRAM

    Labor Could Improve Its Oversight and Increase Information Sharing with
    Homeland Security

    GAO-06-720

    Contents

    Letter 1

    Results in Brief 3
    Background 5
    Labor Has Limited H-1B Authority, but the Agency Could Improve Its
    Oversight of Employers' Compliance with Program Requirements 12
    Labor and Homeland Security Face Challenges Sharing Information 23
    Conclusion 26
    Matter for Congressional Consideration 26
    Recommendations for Executive Action 26
    Agency Comments and Our Evaluation 27
    Appendix I Scope and Methodology 29
    Appendix II Department of Labor Labor Condition Application 32
    Appendix III Department of Homeland Security USCIS Petition for a
    Nonimmigrant Worker and H-Classification Supplement 35
    Appendix IV Data Tables 42
    Appendix V Comments from the Department of Labor 45
    Appendix VI Comments from the Department of Homeland Security 47
    Appendix VII GAO Contact and Staff Acknowledgments 49
    Related GAO Products 50

    Tables

    Table 1: Labor Condition Applications Electronically Reviewed from 2002
    through 2005 13
    Table 2: Wage Rates and Prevailing Wages from a Sample of Labor Condition
    Applications That Were Incorrectly Certified 14
    Table 3: Possible Penalties for Violations of the H-1B Program 17
    Table 4: H-1B Complaints, Violations, Back Wages Due, and Fines Assessed
    18
    Table 5: Companies Electronically Filing Applications for the Most H-1B
    Workers from January 2002 to September 2005 42
    Table 6: Prevailing Wage Sources Used by Employers on Labor Condition
    Applications 42
    Table 7: Number of H-1B Petitions Approved and Denied 43
    Table 8: Basis for Workers' H-1B Classification 43
    Table 9: Employers' Requested Action on Petitions for H-1B Workers 44
    Table 10: Workers' Education Level on H-1B Petitions 44
    Table 11: Top Five Occupation Codes Requested on H-1B Petitions, FY 2000
    through FY 2005 44

    Figures

    Figure 1: An Overview of the H-1B Visa Process 10
    Figure 2: H-1B Investigatory Process 11
    Figure 3: Willful and Nonwillful Violations from Fiscal Year 2000 through
    Fiscal Year 2005 20
    Figure 4: H-1B Worker Information Card 22

    Abbreviations

    ACWIA American Competitiveness and Workforce Improvement Act of 1998 ALJ
    Administrative Law Judge DHS Department of Homeland Security EIN Employer
    Identification Number ETA Employment and Training Administration ESA
    Employment Standards Administration INA Immigration and Nationality Act
    LCA Labor Condition Application OSC Office of Special Counsel USCIS U.S.
    Citizenship and Immigration Services WHD Wage and Hour Division WHISARD
    Wage and Hour Investigative Support and Reporting Database

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

    United States Government Accountability Office

    Washington, DC 20548

    June 22, 2006

    The Honorable F. James Sensenbrenner, Jr. Chairman Committee on the
    Judiciary House of Representatives

    The Honorable John N. Hostettler Chairman The Honorable Sheila Jackson Lee
    Ranking Minority Member

    Subcommittee on Immigration, Border Security and Claims Committee on the
    Judiciary House of Representatives

    The Honorable Lamar Smith House of Representatives

    Each year employers in the United States generally request more highly
    skilled foreign workers than are able to come into the country under law.
    The H-1B nonimmigrant visa program was established to assist U.S.
    employers in temporarily filling certain positions with these workers.
    Currently, the number of foreign workers authorized to enter the United
    States annually through the H-1B program is 65,000, but in previous years
    the cap has been as high as 195,000. The Congress is currently considering
    legislation to overhaul U.S. immigration policy, which could have an
    impact on the cap in future years.

    To ensure that U.S. workers are not adversely affected by the hiring of
    H-1B workers, all employers must attest to meeting certain labor
    conditions, such as notifying all employees of the intention to hire H-1B
    workers and offering their H-1B workers the same benefits as U.S. workers.
    These conditions are designed to protect both the jobs of domestic workers
    and the rights and working conditions for foreign temporary workers. The
    Departments of Labor (Labor), Homeland Security (Homeland Security), and
    Justice (Justice) each have specifically defined responsibilities during
    certain stages of the H-1B visa process, which range from reviewing and
    approving an employer's request to hire an H-1B worker, to investigating
    complaints from both U.S. and foreign workers regarding employers'
    non-compliance with H-1B program requirements. The Department of State
    also has a role in the process, specifically, to issue the visa. These
    responsibilities help ensure that employers comply with the requirements
    of the program.

    However, there has been considerable interest regarding how Labor, in
    conjunction with the other agencies, is ensuring that employers comply
    with the requirements of the H-1B program. To better understand this
    process, you asked us to describe: (1) how Labor carries out its H-1B
    program responsibilities and (2) how Labor works with other agencies
    involved in the H-1B program.

    To understand the H-1B certification, adjudication, and enforcement
    processes and the responsibilities of each agency involved, we hosted a
    joint meeting with officials from Labor, Homeland Security's U.S.
    Citizenship and Immigration Services (USCIS), and Justice. We also
    reviewed laws and regulations pertaining to the H-1B program. To obtain
    information on the characteristics of employers who filed Labor Condition
    Applications (applications) and the positions they sought to fill with
    H-1B workers, we analyzed Labor's Efile H-1B Disclosure Data from January
    2002 through September 2005.

    To analyze the number and type of H-1B complaints received by Labor's Wage
    and Hour Division (WHD) and the outcomes of the associated investigations,
    we received a data extract from WHD's Wage and Hour Investigative Support
    and Reporting Database (WHISARD). We also interviewed WHD officials on the
    complaint and investigation process, the appeal process, educational
    outreach to improve employer compliance, and the WHD resources used to
    process and investigate complaints.

    To determine the number and type of H-1B petitions submitted by employers
    and adjudicated by USCIS, we analyzed service center data from the
    Computer Linked Application Information Management System, Version 3.0
    (CLAIMS 3) database from fiscal years 2000 through 2005. We conducted site
    visits to two USCIS service centers, including the one that processes the
    most H-1B visa petitions.

    To determine the type of violations and the process for investigations of
    U.S. worker displacement violations we interviewed Justice officials. We
    reviewed complaint and investigation data from Justice. We reviewed and
    analyzed summary reports provided by Justice on the number of employers
    investigated from 2000 through 2005 and the outcomes of those
    investigations.

    To assess the reliability of the data from Labor, Homeland Security, and
    Justice, we (1) reviewed existing documentation related to the data
    sources, (2) tested the data for completeness and accuracy, and (3)
    interviewed knowledgeable agency officials about the data. We determined
    that the data were sufficiently reliable for the purposes of this report.
    (See app. I for a more thorough discussion of our scope and methodology.)

    We conducted our work between August 2005 and May 2006 in accordance with
    generally accepted government auditing standards.

                                    Results in Brief

    While Labor's H-1B authority is limited in scope, the agency could improve
    its oversight of employers' compliance with program requirements. Labor's
    review of employers' applications to hire H-1B workers is timely, but
    lacks quality assurance controls and may overlook some inaccuracies. From
    January 2002 through September 2005, Labor's Employment and Training
    Administration electronically reviewed more than 960,000 applications and
    certified almost all of them. Approximately one-third of the applications
    were for workers in computer system analysis and programming occupations,
    with the next most frequent request, for college and university education
    workers, at 7 percent. About 30 percent of the positions were located in
    either California or New York. By statute, Labor's review of the
    applications is limited to searching for missing information or obvious
    inaccuracies and it does this through certain data checks. However, in our
    analysis of Labor's data we found certified applications with inaccurate
    information that could have been identified by more stringent checks.
    Although the overall percentage was small, we found 3,229 applications
    that were certified even though the wage rate on the application was lower
    than the prevailing wage for that occupation in the specific location. In
    addition, during this time period, approximately 1,000 certified
    applications contained employer identification numbers with improper
    prefix codes, which raises questions about the validity of the
    applications. In its enforcement efforts, WHD investigates complaints made
    against H-1B employers. From fiscal year 2000 through fiscal year 2005,
    Labor reported an increase in the number of H-1B complaints and
    violations, and a corresponding increase in the number of employer
    penalties. In fiscal year 2000, Labor required employers to pay back wages
    totaling $1.2 million to 226 H-1B workers; by fiscal year 2005, back wage
    penalties had increased to $5.2 million for 604 workers. However, program
    changes, such as a higher visa cap in some years, could have been a factor
    in the increase. In April 2006, WHD began the process of randomly
    investigating employers who have willfully violated the program's
    requirements. Labor uses education as its primary method of promoting
    compliance with the H-1B program. For example, Labor conducts compliance
    assistance programs and posts guidance on its website. To educate workers
    about their rights, Labor is coordinating with the Department of State to
    provide worker information cards with the H-1B visas.

    Labor, Homeland Security, and Justice all have responsibilities under the
    H-1B program, but Labor and Homeland Security could better address the
    challenges they face in sharing information between the agencies. After
    Labor certifies an application for a specific number of workers, the
    employer submits it, along with an H-1B petition for each worker, to
    USCIS. USCIS reviews this information but lacks the ability to easily
    verify whether employers submitted petitions for more workers than they
    originally requested because its system does not match each petition to
    Labor's application case number. Additionally, during the process of
    reviewing H-1B petitions, USCIS staff told us they may find evidence that
    employers are not meeting their obligations. Specifically, USCIS may find
    that a worker's income on the W-2-which may be used as supporting
    documentation to extend an H-1B worker's stay in the United States-is less
    than the wage quoted on the original application. Because an employer is
    not allowed to pay a lower wage than that which was quoted on the original
    application, USCIS may deny the petition if an employer is unable to
    explain the discrepancy. However, USCIS does not have a formal process for
    reporting the discrepancy to Labor. Additionally, current law precludes
    the Wage and Hour Division from using this information to initiate an
    investigation of the employer. Labor also shares enforcement
    responsibilities with Justice, which pursues charges filed by U.S. workers
    who allege that they were not hired or were displaced so that an H-1B
    worker could be hired instead. Justice may assess penalties if it finds
    that an employer hired an H-1B worker over a better-qualified U.S. worker.
    From 2000 through 2005, Justice found discriminatory conduct in 6 out of
    the 97 investigations closed, and assessed a total of $7,200 in penalties
    in 3 of the 6 cases, all in 2003.

    To enhance employer compliance with the H-1B program and protect the
    rights of U.S. and H-1B workers, Congress should consider: (1) eliminating
    the restriction on using application and petition information submitted by
    employers as the basis for initiating an investigation, and (2) directing
    Homeland Security to provide Labor with information received during the
    adjudication process that may indicate an employer is not fulfilling its
    H-1B responsibilities.

    To strengthen oversight of employers' applications to hire H-1B workers,
    we recommend that Labor improve its procedures for checking completeness
    and obvious inaccuracies, including developing more stringent, cost
    effective methods of checking for wage inaccuracies and invalid employer
    identification numbers.

    To ensure employers are complying with program requirements, we recommend
    that as USCIS transforms its information technology system, the Labor
    application case number be included in the new system, so that
    adjudicators are able to quickly and independently ensure that employers
    are not requesting more H-1B workers than were originally approved on
    their application to Labor.

    The agencies gave us technical comments and Homeland Security agreed with
    our recommendations. Labor questioned whether more stringent checks were
    necessary and believes Congress intentionally limited Labor's role and
    placed program integrity with USCIS.

    We believe there are cost-effective methods that Labor could use to check
    the applications more stringently that would enhance the integrity of the
    H-1B process.

                                       Background

    The H-1B program was created by the Immigration Act of 1990, which amended
    the Immigration and Nationality Act (INA).1 The H-1B visa category was
    created to enable U.S. employers to hire temporary workers as needed in
    specialty occupations, or those that require theoretical and practical
    application of a body of highly specialized knowledge. It also requires a
    bachelor's or higher degree (or its equivalent) in the specific occupation
    as a minimum requirement for entry into the occupation in the United
    States.2 The Immigration Act of 1990 capped the number of H-1B visas at
    65,000 per fiscal year.

    1 The H-1 nonimmigrant category was created under the Immigration and
    Nationality Act of 1952 to assist U.S. employers needing workers
    temporarily. Nonimmigrants are foreign nationals who come to the United
    States on a temporary basis and for a specific purpose, such as to attain
    education and work.

    2 Fashion models of distinguished merit and ability also qualify for H-1B
    visas and do not need to meet the definition of specialty occupation.

    Since the creation of the H-1B program, the number of H-1B visas permitted
    each fiscal year has changed several times. Congress passed the American
    Competitiveness and Workforce Improvement Act of 1998 (ACWIA), which
    increased the limit to 115,000 for fiscal years 1999 and 2000. In 2000,
    Congress passed the American Competitiveness in the Twenty-First Century
    Act, which raised the limit to 195,000 for fiscal year 2001 and maintained
    that level through fiscal years 2002 and 2003. The number of H-1B visas
    reverted back to 65,000 thereafter.3 An H-1B visa generally is valid for 3
    years of employment and is renewable for an additional 3 years.

    Filing an application with Labor's Employment and Training Administration
    is the employer's first step in hiring an H-1B worker,4 and Labor is
    responsible for either certifying or denying the employer's application
    within 7 days (see app. II for the Labor Condition Application). By law,
    it may only review applications for omissions and obvious inaccuracies.
    Labor has no authority to verify the authenticity of the information.
    Employers must include on the application information such as their name,
    address, rate of pay and work location for the H-1B worker, and employer
    identification number. All employers are also required to make four
    attestations on the application as to:

               1. Wages: The employer will pay nonimmigrants at least the local
               prevailing wage or the employer's actual wage, whichever is
               higher, and pay for nonproductive time caused by a decision made
               by the employer; and offer nonimmigrants benefits on the same
               basis as U.S. workers.
               2. Working conditions: The employment of H-1B nonimmigrants will
               not adversely affect the working conditions of U.S. workers
               similarly employed.
               3. Strike, lockout, or work stoppage: No strike or lockout exists
               in the occupational classification at the place of employment.
               4. Notification: The employer has notified employees at the place
               of employment of the intent to employ H-1B workers.

    3 However, under the H-1B Visa Reform Act of 2004, some H-1B workers--such
    as those being hired by institutions of higher education, nonprofit or
    government research organizations, or those with a master's or higher
    degree from a U.S. institution--may be exempt from the annual cap.

    4 Employers can submit applications to Labor up to 6 months prior to the
    H-1B worker's intended employment date.

    Certain employers are required to make three additional attestations on
    their application. These additional attestations apply to H-1B employers
    who: (1) are H-1B dependent, that is, generally those whose workforce is
    comprised of 15 percent or more H-1B nonimmigrant employees; or (2) are
    found by Labor to have committed either a willful failure to meet H-1B
    program requirements or misrepresented a material fact in an application
    during the previous 5 years. These employers are required to additionally
    attest that: (1) they did not displace a U.S. worker within the period of
    90 days before and 90 days after filing a petition for an H-1B worker; (2)
    they took good faith steps prior to filing the H-1B application to recruit
    U.S. workers and that they offered the job to a U.S. applicant who was
    equally or better qualified than an H-1B worker; and (3) prior to placing
    the H-1B worker with another employer, they inquired and have no knowledge
    as to that employer's action or intent to displace a U.S. worker within
    the 90 days before and 90 days after the placement of the H-1B worker with
    that employer.5

    After Labor certifies an application, the employer must submit to USCIS an
    H-1B petition for each worker it wishes to hire (see App. III for the H-1B
    petition and supplement). On March 1, 2003, Homeland Security took over
    all functions and authorities of Justice's Immigration and Naturalization
    Service under the Homeland Security Act of 2002 and the Homeland Security
    Reorganization Plan of November 25, 2002. Employers submit to Homeland
    Security the application, petition, and supporting documentation along
    with the appropriate fees. When Congress passed ACWIA in 1998, it imposed
    a filing fee of $500 on H-1B petitions. In 2000, Congress passed
    legislation to increase the amount of filing fees to $1,000 then increased
    the amount again to $1,500 in 2004.6 Along with a $1,500 filing fee, an
    employer must also submit a $500 fraud prevention and detection fee to
    Homeland Security.7 Information on the petition must indicate the wages
    that will be paid to the H-1B worker, the location of the position and the
    worker's qualifications. Through a process known as adjudication, Homeland
    Security reviews the documents for certain criteria, such as whether the
    petition is accompanied by a certified application from Labor, whether the
    employer is eligible to employ an H-1B worker, whether the position is a
    specialty occupation, and whether the prospective H-1B worker is qualified
    for the position.

    5 These additional requirements first applied from January 19,
    2001--September 30, 2003. However, the provision requiring these
    attestations sunsetted, or expired, and was not reinstituted until March
    8, 2005. Consequently, from October 1, 2003, to March 7, 2005, H-1B
    dependent employers and willful violator employers were not required to
    make the additional attestations, and, in effect, were able to hire H-1B
    workers even if they displaced U.S. workers and did not make efforts to
    recruit U.S. workers.

    6 Pub. L. No. 106-311 (Oct. 17, 2000); The H-1B Visa Reform Act of 2004,
    Pub. L. No. 108-447 (Dec. 8, 2004).

    The Wage and Hour Division of Labor's Employment Standards Administration
    performs investigative and enforcement functions to determine whether an
    employer has complied with its attestations on the application. An
    aggrieved individual or entity8 or certain non-aggrieved parties may file
    a complaint with Labor that an employer violated a requirement of the H-1B
    program. To conduct an investigation, the Administrator must have
    reasonable cause to believe that an employer did not comply with or
    misrepresented information on its application. Employers who violate any
    of the attestations on the application may be subject to civil money
    penalties or administrative remedy, such as paying back wages to H-1B
    workers or debarment, which disqualifies an employer from participating in
    the H-1B program for a specified period of time. Employers, the person who
    filed the complaint, or other interested parties who disagree with the
    findings of the investigation then have 15 days to appeal by requesting an
    administrative hearing.

    The Office of Special Counsel for Immigration Related Unfair Employment
    Practices (OSC) of the Department of Justice also has some enforcement
    responsibility. Under statutory authority created by the Immigration
    Reform and Control Act of 1986, OSC pursues charges of citizenship
    discrimination brought by U.S. workers who allege that an employer
    preferred to hire an H-1B worker.

    7 The H-1B Visa Reform Act of 2004, Pub. L. No. 108-447 (Dec. 8, 2004).

    8 An aggrieved individual can be an H-1B worker, a U.S. worker, or a
    bargaining representative for workers; an aggrieved entity can be another
    federal agency, such as the Department of State, or a competitor who is
    adversely affected by the employer's alleged non-compliance with the
    application.

    Figure 1 gives an overview of the H-1B visa process. The figure highlights
    the major steps that an employer takes when hiring an H-1B worker. Figure
    2 highlights the process for investigations when a violation has been
    alleged.

    Figure 1: An Overview of the H-1B Visa Process

    Figure 2: H-1B Investigatory Process

    Labor Has Limited H-1B Authority, but the Agency Could Improve Its Oversight of
                    Employers' Compliance with Program Requirements

    Labor's H-1B authority is limited in scope, but the agency could improve
    its oversight of employers' compliance with program requirements. While
    Labor's review of employers' applications to hire H-1B workers is timely,
    it lacks quality assurance controls and may overlook some inaccuracies,
    such as applications containing employer identification numbers with
    invalid prefix codes. Labor's Wage and Hour Division investigates
    complaints made against H-1B employers and keeps a database of employers
    with prior violations. Labor has the authority to conduct random
    investigations of some of these employers and began doing so in April
    2006. Labor uses education as the primary method of promoting compliance
    with the H-1B program. In addition to conducting compliance assistance
    programs for employers, it also coordinates with the Department of State
    to provide H-1B workers with information about their employee rights.

    Labor's Review of Employers' Requests Is Fast, but May Overlook Some
    Inaccuracies

    Labor has reduced the time it takes to certify employers' applications by
    reviewing them electronically and subjecting them to data checks. Labor
    increased the percentage of applications reviewed within the required
    seven days from 56 percent in fiscal year 2001 to 100 percent in fiscal
    year 2005. As of January 2006, all applications must be submitted
    electronically9 and Labor's website informs employers that it will certify
    or deny applications within minutes based on the information entered. Our
    analysis of Labor's data found that of the 960,563 applications that Labor
    electronically reviewed from January 2002 through September 2005, 10 99.5
    percent were certified, as shown in table 1. Not all applications continue
    through the process and result in H-1B visas-employers can withdraw their
    applications, petitions can be denied, or the visa may not be issued.
    Therefore, Labor officials told us the number of applications submitted
    represents employers' interest in the H-1B program rather than the actual
    number of H-1B visas that are issued.

    9 Special mail application filing procedures are available for employers
    without Internet access or with physical disabilities.

    10 Our analysis included applications filed electronically from January
    14, 2002, through September 30, 2005, except for five applications with a
    decision date of October 2, 2005.

    Table 1: Labor Condition Applications Electronically Reviewed from 2002
    through 2005

    Fiscal     Total number of Applications Percentage Applications Percentage
    yeara         applications   certifiedb  certified      deniedb     denied
    2002               123,060      122,305       99.4          755        0.6
    2003               221,262      220,234       99.5        1,026        0.5
    2004               308,470      306,645       99.4        1,040        0.3
    2005               307,771      306,927       99.7          844        0.3

    Source: GAO analysis of Department of Labor data.

    aRepresents data from January 2002 through September 2005, with the
    exception of five applications that were reviewed by Labor on October 2,
    2005.

    bNumber of applications certified and denied may not equal the total
    number of applications because some applications were not recorded as
    either certified or denied.

    In addition to agreeing to certain attestations on the application,
    employers must provide information about themselves, such as address and
    employer identification number, as well as information about each position
    they are seeking to fill, the time period they will need the worker, the
    prevailing wage and location for the position, the wage the worker will be
    paid, and the number of workers they want to hire. On the applications
    submitted electronically from January 2002 through September 2005,
    approximately 90 percent of employers requested only one worker even
    though they are allowed to request multiple workers for the same
    occupation on an application. Approximately one-third of the applications
    were for workers in computer system analysis and programming occupations,
    with the next most frequent request, for college and university education
    workers, at 7 percent. About 30 percent of the positions were located in
    either California or New York.11 See appendix IV for more information on
    H-1B workers.

    Labor's review of the application is limited by law to identifying
    omissions or obvious inaccuracies. Labor will not certify an application
    if the employer has failed to check all the necessary boxes or not filled
    in required information such as wage rate, prevailing wage or period of
    intended employment. Labor's system will also deny an application if it
    contains obvious inaccuracies. In addition to checks to ensure that data
    fields have the correct number of digits or are numerical when required,
    Labor has defined obvious inaccuracies as when an employer:

    11 Does not include additional or subsequent work locations.

               o  files an application after being debarred, or disqualified,
               from participating in the H-1B program;
               o  submits an application more than 6 months before the beginning
               date of the period of employment;
               o  identifies multiple occupations on a single application;
               o  states a wage rate that is below the Fair Labor Standards Act
               minimum wage;
               o  identifies a wage rate that is below the prevailing wage on the
               application; and
               o  identifies a wage range where the bottom of the range is lower
               than the prevailing wage on the application.

    Despite these checks, Labor's system does not consistently identify all
    obvious inaccuracies. For example, although the overall percentage was
    small, we found 3,229 applications that were certified even though the
    wage rate on the application was lower than the prevailing wage for that
    occupation in the specific location. Table 2 shows the wage rates and
    corresponding prevailing wages from a sample of applications Labor
    incorrectly certified because the wage rate was not equal to or greater
    than the prevailing wage.

    Table 2: Wage Rates and Prevailing Wages from a Sample of Labor Condition
    Applications That Were Incorrectly Certified

    Sample           Application wage Application      Application
    applications     rate             prevailing wage  certification status
    Application 1 FY $60,163 per year $83,833 per year Certified
    2002
    Application 2 FY $37,784 per year $52,876 per year Certified
    2003
    Application 3 FY $32,000 per year $35,000 per year Certified
    2004
    Application 4 FY $55,000 per year $75,000 per year Certified
    2005

    Source: GAO analysis of Department of Labor data.

    Additionally, Labor does not identify other errors that may be obvious.
    Specifically, Labor told us its system reviews an application's employer
    identification number12 to ensure it has the correct number of digits and
    that the number does not appear on the list of employers who are
    ineligible to participate in the H-1B program. However, our analysis of
    Labor's data found that Labor's review may not identify numbers that are
    erroneous. For example, we found 993 certified applications with invalid
    employer identification number prefixes. While an invalid employer
    identification number could indicate a fraudulent application, Labor does
    not consider it an obvious inaccuracy. Officials told us that in other
    programs, such as the permanent employment program, Labor matches the
    application's employer identification number to a database with valid
    employer identification numbers; however, they do not formally do this
    with H-1B applications because it is an attestation process, not a
    verification process.

    According to Labor, most of the process of reviewing applications is
    automated-the primary reason an analyst will review an application is if
    the employer's prevailing wage source is not recognized by Labor's
    database. The analyst reviews the source of the prevailing wage provided
    by the employer just to ensure the source meets Labor's criteria, not to
    verify that the prevailing wage is correct. The employer may obtain a
    prevailing wage from a state workforce agency, a collective bargaining
    agreement, or another source, such as a private employment survey. If the
    employer uses a private employment survey and the analyst finds the survey
    meets Labor's criteria-such as having been conducted in the last 2 years
    and using a statistically valid methodology to collect the data-the survey
    will be added to Labor's database and used to approve future applications.
    Officials also told us that analysts review from three to five
    applications per day. In an effort to promote consistency in prevailing
    wage determinations, Labor has issued guidance for its state workforce
    agencies as well as for employers using surveys. Labor officials told us
    they always advise employers to obtain prevailing wage rates from the
    state workforce agency, but they also said that because the application is
    an attestation process, employers are responsible for doing the required
    analysis to determine the prevailing wage and maintaining the proper
    documentation to support the prevailing wage provided on the application.

    12 The employer identification number is used by the Internal Revenue
    Service to identify taxpayers who are required to file business tax
    returns. The number has nine digits and is issued in the XX-XXXXXXX
    format.

    We and others have previously reported that Labor's review of the labor
    condition application is limited and provides little assurance that
    employers are fulfilling their H-1B responsibilities. In 2000, given
    Labor's limited review of the application, we suggested Congress consider
    streamlining the H-1B approval process by requiring employers to submit
    the application directly to the Immigration and Naturalization Service,
    now the USCIS.13 Similarly, in 2003, Labor's Inspector General reported
    that either Labor should have authority to verify the accuracy of the
    application information or employers should file their applications
    directly to USCIS.14 While Labor officials told us they frequently review
    the application process to determine where improvements can be made, they
    rely on a system of data checks rather than a formal quality assurance
    process because of the factual nature of the form and the number of
    applications received. Additionally, they said if they conducted a more
    in-depth review of the applications, they could overreach their legal
    authority and increase the processing time for applications. Officials
    also said the integrity of the H-1B program is ensured through enforcement
    and by the fact that there is actual review by staff when the employer
    submits the paperwork to USCIS.

    Labor Investigates Complaints and Has Begun the Process of Randomly
    Investigating Previous Violators

    Labor enforces H-1B program requirements primarily by investigating
    complaints filed against employers. H-1B workers or certain others with
    knowledge of an employer's practices who believe an employer has violated
    program requirements can file a complaint with Labor's Wage and Hour
    Division, which received 1,026 complaints from fiscal year 2000 through
    fiscal year 2005. If the complaint meets certain criteria-such as being
    filed within 12 months of the violation-Labor said it notifies the
    employer of the investigation and requests information, including payroll
    records, prevailing wage determinations, and Labor's certified
    applications. Labor also interviews the employer and workers, checks its
    violations database to determine if the employer has any previous
    violations, and assesses the employer's compliance with all H-1B program
    requirements. As a result, an investigation may result in more than one
    violation. Once the investigation is complete, Labor told us it meets with
    the employer to explain the findings and follows up with a letter to the
    employer listing violations and penalties, such as payment of back wages
    due to H-1B workers who were not paid the required wage, civil money
    penalties, debarment, or other administrative remedies (see table 3).

    13 GAO, H-1B Foreign Workers: Better Controls Needed to Help Employers and
    Protect Workers, GAO/HEHS-00-157 (Washington, D.C.: September 2000).

    14 Department of Labor, Office of Inspector General, Overview and
    Assessment of Vulnerabilities in the Department of Labor's Alien Labor
    Certification Programs, 06-03-007-03-321 (Washington, D.C.: September
    2003).

    Table 3: Possible Penalties for Violations of the H-1B Program

                                                       Civil money   Debarment
    Violation/penalties               Back wages    penalties     period
    Failure to meet certain           Due to        Not to exceed For at least
    attestations or misrepresentation employees not $1,000 per    1 year
    of fact in an application         paid the      violation
                                         required wage
    Willful failure to meet           Due to        Not to exceed For at least
    attestations or a willful         employees not $5,000 per    2 years
    misrepresentation of fact in an   paid the      violation
    application                       required wage
    Willful failure to meet           Due to        Not to exceed For at least
    attestations or a willful         employees not $35,000 per   3 years
    misrepresentation of fact in an   paid the      violation
    application that resulted in the  required wage
    displacement of a U.S. worker
    either 90 days before or after
    hiring an H-1B worker

    Source: GAO analysis of 8 U.S.C. S: 1182(n)(2)(C).

    While the number of H-1B complaints and violations has increased from
    fiscal year 2000 through fiscal year 2005, the overall numbers remain
    small and may have been affected by changes to the program. As shown in
    table 4, our analysis of Labor's data found the number of complaints
    increased from 117 in fiscal year 2000 to 173 in fiscal year 2005. The
    number of cases with violations more than doubled over the same period.
    The most common violation was not paying H-1B workers the required wage.
    With the increase in violations, the amount of penalties also increased.
    In fiscal year 2000, 226 H-1B workers were found to be due back wages of
    $1.2 million, by fiscal year 2005 the number had increased to 604 workers
    with back wages due of $5.2 million. In addition to the payment of back
    wages, employers were required to pay civil money penalties of more than
    $400,000 over the same period.

    Table 4: H-1B Complaints, Violations, Back Wages Due, and Fines Assessed

                                                     Number of     Civil
                          Number of   Amount of back employees     money     H-1B
    Fiscal  Number of cases with        wages due  due back penalties   fiscal
    year   complaints violations       (millions)     wages  assessed year cap
    2000          117         93             $1.2       226   $21,000  115,000
    2001          192         67              0.6       135    17,750  195,000
    2002          238        210              3.8       830    48,350  195,000
    2003          148        264              4.0       552   136,890  195,000
    2004          158        271              4.2       390   114,125   65,000
    2005          173        217              5.2       604   103,350   65,000
    Total       1,026      1,122            $19.0     2,737  $441,465

    Source: GAO analysis of Department of Labor, Wage and Hour Division data,
    the American Competitiveness and Workforce Improvement Act of 1998, and
    the American Competitiveness in the Twenty-First Century Act of 2000.

    From fiscal year 2002 through fiscal year 2005, Labor requested over 50
    debarment periods from Homeland Security for employers that committed
    certain violations-for example, willfully failing to pay an H-1B worker
    the required wage-that resulted in their being disqualified from
    participating in the H-1B program for a specified period of time.15 Labor
    officials told us it is difficult to attribute changes in complaints and
    violations to any specific cause because of multiple legislative changes
    to the program, such as the temporary increase in the number of H-1B
    workers allowed to enter the country and the additional attestations for
    certain employers that expired and then were reinstated.

    In addition to investigating complaints, Labor's Wage and Hour Division
    has recently begun randomly investigating employers who have willfully
    violated the program's requirements. Labor has had the statutory authority
    to conduct random investigations of these employers since 1998. Under this
    authority, Labor can subject employers on a case-by-case basis to random
    investigations up to 5 years from the date the employer first willfully
    violated the requirements of the H-1B program or willfully misrepresented
    a material fact in the labor condition application. Officials told us that
    the WHD did not schedule random H-1B investigations of willful violators
    until recently because, by definition, such employers are debarred from
    employing H-1B workers for a fixed number of years (they often go out of
    business due to the debarment), the number of such employers is very small
    (the total didn't reach 50 nationwide until late in fiscal year 2005) and
    trained H-1B investigators have heavy case loads. However, Labor said that
    it will initiate random investigations nationwide in fiscal year 2006.
    Labor has an existing database that it plans to use for targeting
    employers for investigations. The database contains information about
    employers who have previously violated their obligations under the H-1B
    program, including the types of violations and the penalties that were
    assessed. Although cases with willful violations represent a small number
    of all cases with violations, they have increased from 8 percent in fiscal
    year 2000 to 14 percent in fiscal year 2005. (See fig. 3) Officials said
    that they now have 59 cases on which they can follow-up to determine if
    the employer has committed another violation. Labor said that, in addition
    to initiating random investigations of willful violators nationwide, it
    will set up a system to track the data in its database and train its
    employees in fiscal year 2006. In April 2006, Labor sent a letter to its
    regional offices directing them each to initiate an investigation of at
    least one case prior to September 30, 2006.

    15 Homeland Security does not have a record of the number of debarment
    requests received in fiscal years 2000 and 2001. Labor does not have a
    record of its number of debarment requests for fiscal year 2000.

    Figure 3: Willful and Nonwillful Violations from Fiscal Year 2000 through
    Fiscal Year 2005

    Labor Relies Primarily on Education to Promote Employer Compliance

    Labor uses education as the primary method of promoting employer
    compliance with the H-1B program. For example, Labor conducts compliance
    assistance programs, posts guidance on its website, and explains
    employers' obligations under the law during complaint investigations.

    Labor held a total of 6 H-1B compliance assistance programs for H-1B
    employers from fiscal year 2000 through fiscal year 2005. Typically,
    compliance assistance programs are conducted by Labor's district offices
    based upon requests by employers, employer associations, or employee
    groups. For example, in fiscal year 2002, Labor gave two presentations in
    Massachusetts, attended by 290 participants, mostly attorneys. In
    addition, Labor presented at two continuing education events for attorneys
    in Los Angeles and New Jersey in fiscal year 2004. Labor also holds
    seminars in response to requests for compliance information from employer
    associations and discusses compliance with H-1B program requirements with
    companies that do not have pending lawsuits related to the H-1B program.

    Labor provides information to employers through its website, such as
    employer guidance and fact sheets that describe employer responsibilities
    and employee rights under the H-1B program. Some of the fact sheets have
    not been updated since the program was amended by the H-1B Visa Reform Act
    in 2004, but officials told us they have developed 26 new fact sheets that
    will be made available on the agency's website this fiscal year. Labor
    also publicizes violation cases by issuing press releases on its website,
    particularly when it debars an employer. Labor officials told us that the
    purpose of the press releases is to show that there are consequences for
    not complying with the law.

    Labor takes the opportunity to explain employer obligations under the law
    during its investigations of complaints filed against H-1B employers. At
    the beginning, an investigator sends the employer the regulations that
    pertain to the H-1B program and, during the investigation, highlights the
    law and regulations that are relevant to the case. The investigator also
    answers any questions the employer may have. At a final conference, Labor
    tells the employer which parts of the law the employer violated.
    Additionally, Labor always asks the employer it is investigating how it
    plans to change to come into compliance with the program.

    Labor is working with the Department of State to provide information cards
    to H-1B workers about their employment rights. Workers receive the
    information cards with their visas. Labor also distributes the cards to
    employers so that they are aware of an H-1B worker's rights. The cards
    include information on employees' rights regarding wages and benefits,
    illegal deductions, working conditions, records, and discrimination. (See
    fig. 4.)

    Figure 4: H-1B Worker Information Card

    Homeland Security and Justice also provide information to employers in a
    variety of ways such as publishing newsletters, responding to written
    inquiries from employers and their counsel, informational bulletins,
    answering questions for employers who call, and providing information on
    their websites. Homeland Security publishes informational bulletins for
    employers seeking to hire foreign workers. The Department also uses its
    website to advise the public of any changes in the H-1B program regarding
    filing fees or eligibility resulting from changes in the law. Justice
    engages in educational activities through public service announcements
    aimed at employers, workers, and the general public. The agency also
    trains employers, and works with other federal agencies to coordinate
    education programs for employers. Justice also has a telephone
    intervention hotline for U.S. workers and H-1B employers to call when
    disputes arise. Justice uses the hotline to quickly address questions and
    to resolve problems. In addition, Justice answers e-mails, issues
    guidance, and provides information on its website.

            Labor and Homeland Security Face Challenges Sharing Information

    Labor, Homeland Security, and Justice all have responsibilities under the
    H-1B program, but Labor and Homeland Security could better address the
    challenges they face in sharing information. After Labor certifies an
    application, Homeland Security's USCIS reviews the information but cannot
    easily verify how many times the employer has used the application. Also,
    USCIS staff told us that, during their review, they may find evidence that
    employers are not meeting their H-1B obligations. However, current law
    precludes the Wage and Hour Division from using this information to
    initiate an investigation of the employer. In addition to Homeland
    Security, Labor also shares enforcement responsibilities with Justice,
    which pursues charges filed by U.S. workers who allege that they were not
    hired, or were displaced, so that an H-1B worker could be hired instead.
    From 2000 through 2005, Justice entered six out-of-court settlements to
    remedy violations and assessed $7,200 in penalties.

    Labor and Homeland Security Coordinate to Process Employers' Requests to Hire
    H-1B Workers, but Do Not Use Certain Information to Investigate Possible
    Violations

    Homeland Security's USCIS reviews Labor's certified application as part of
    the adjudication process; however, it lacks the ability to easily verify
    whether employers have submitted petitions for more workers than
    originally requested on the application. Labor can certify applications
    for multiple workers and, therefore, employers can use one application in
    support of more than one petition. However, USCIS' data system, CLAIMS 3,
    does not match each petition to its corresponding application because the
    system does not include a field for the unique number Labor assigns each
    application. As a result, USCIS cannot easily verify how many times the
    employer has used a given application or which petitions were supported by
    which application, potentially allowing employers to use the application
    for more workers than they were certified to hire. USCIS staff told us
    that when employers do not provide the names of the other H-1B workers
    approved using the same certified application, the adjudicator may request
    it from the employer. USCIS staff also told us that a letter is sent to
    the employer requesting the information and the employer has approximately
    12 weeks to respond. Consequently, a request for information requires
    staff time and slows down the adjudication process. While USCIS told us it
    has attempted to add Labor's application case number to its database, it
    has not been able to because of the system's memory limitations. USCIS
    told us it is currently transforming its information technology system;
    however, it will be several years before the new system is operational.

    During the process of reviewing employers' petitions, USCIS may find
    evidence the employer is not meeting the requirements of the H-1B program,
    but current law precludes the Wage and Hour Division from using this
    information to initiate an investigation of the employer.16 For example,
    to extend an H-1B worker's stay in the United States, an employer may
    submit a petition with the worker's W-2 form17 as supporting
    documentation. USCIS staff told us they have reviewed petitions where the
    wage on the W-2 form was less than the wage the employer indicated it
    would pay on the original Labor application. In these cases, USCIS asks
    the employer to explain the wage discrepancy. If the employer has a
    legitimate explanation and documentation-for example the worker was on
    some type of extended leave-the petition may be approved. However, if the
    employer is unable to adequately explain the discrepancy, USCIS said it
    may deny the petition but generally does not report these employers to
    Labor for investigation. USCIS does not have a formal process for
    reporting the discrepancy to Labor. According to officials from Labor, it
    does not consider Homeland Security to be an aggrieved party; therefore,
    Labor would not initiate an investigation based on information received
    from, or a complaint filed by, Homeland Security.

    Labor and Homeland Security also coordinate when employers have committed
    violations resulting in debarment. After Labor's Wage and Hour Division
    determines that an employer has committed a debarrable offense-such as
    willfully not paying an H-1B worker the required wage-Labor notifies
    USCIS, which in turn provides dates for the period of time that it will
    automatically deny petitions from the employer. Labor's Wage and Hour
    Division then sends a letter informing the employer that it is ineligible
    to sponsor workers for the H-1B program for that period of time. A copy of
    the letter is sent to Labor's Employment and Training Administration so
    that it will not certify any applications from the employer for the same
    period.

    16Under the INA, as amended, information submitted by an employer for
    purposes of securing the employment of an H-1B nonimmigrant is prohibited
    from being considered a receipt of information for purposes of initiating
    an investigation based on a credible source under the INA. 8 U.S.C. S:
    1182(n)(2)(G).

    17The W-2 form is the Internal Revenue Service's wage and tax statement.

    Both Labor and USCIS officials said they are working to improve
    communication between the two agencies. For example, Labor, Homeland
    Security, and the State Department convened a multi-agency fraud working
    group, which met in March 2006, to discuss strategies for dealing with
    fraud in the H and L visa programs.18

    Justice Handles U.S. Workers' Cases

    Justice pursues charges filed by U.S. workers who allege that an H-1B
    worker was hired in their place. The Immigration and Nationality Act, as
    amended, gives U.S. workers the right to file a charge against an employer
    when they believe an employer preferred to hire an H-1B visa holder. When
    a charge has been filed, Justice's Office of Special Counsel opens an
    investigation for 120 or 210 days, as determined by statute. Charges may
    be resolved through a complaint before an administrative law judge, an out
    of court settlement, or a dismissal for lack of reasonable cause to
    believe a violation has occurred. Between 2000 and 2005, no cases were
    heard in court by an administrative law judge. Most of the 101
    investigations started by Justice from 2000 through 2005 were found to be
    incomplete, withdrawn, untimely, dismissed, or investigated without
    finding reasonable cause for a violation. If Justice finds that an
    employer hired an H-1B worker instead of a U.S. worker, Justice may assess
    penalties, impose debarment, or seek administrative remedies such as back
    wages. Justice may assess penalties on cases settled out of court if it
    finds that an employer hired an H-1B worker over a better-qualified U.S.
    worker. From 2000 through 2005, Justice found discriminatory conduct in 6
    out of the 97 investigations closed. Justice assessed a total of $7,200 in
    penalties in three of the six cases, all in 2003.19

    18 The H visa program also includes categories for other types of
    temporary workers, including agricultural workers (H-2A) and
    non-agricultural (H-2B) workers. The L visa program allows companies to
    transfer employees into the United States.

    19 In the three cases where penalties were assessed, employers advertised
    for only H-1B workers for various IT positions. Upon receiving notice of
    the charges, the employers immediately agreed not to post discriminatory
    advertising in the future and to take steps to recruit U.S. workers (as
    well as permanent and temporary residents, refugees, and asylees). In
    these cases, minimum penalties were imposed because there were no
    identifiable victims and by law, penalties are capped at $2,200 per
    violation or individual. In the three cases where penalties were not
    assessed, discrimination against U.S. workers appeared to be inadvertent,
    not intentional.

                                       Conclusion

    U.S. employers continue to request high numbers of foreign temporary
    workers under the H-1B nonimmigrant visa program. Labor, along with
    Homeland Security and Justice, must address the desires of U.S. employers
    for skilled foreign workers as well as ensure the program's integrity and
    protect both domestic and foreign workers. Labor's authority to review the
    Labor Condition Application is restricted to looking for completeness and
    obvious inaccuracies, but it could improve its oversight of employers'
    compliance with program requirements. Additionally, USCIS may find
    information in the materials submitted by an H-1B employer that indicates
    the employer is not complying with program requirements. However, current
    law restricts Labor from using such evidence to initiate an investigation
    of the employer. USCIS also has an opportunity to improve its oversight of
    employers' petitions to hire H-1B workers by matching information from its
    petition database with Labor's application case numbers to detect whether
    employers are requesting more H-1B workers than they were originally
    certified to hire. As Congress deliberates changes to U.S. immigration
    policy, ensuring that employers are in compliance with the program's
    requirements that protect both domestic and H-1B workers is essential.

                         Matter for Congressional Consideration

    To increase employer compliance with the H-1B program and protect the
    rights of U.S. and H-1B workers, Congress should consider (1) eliminating
    the restriction on using application and petition information submitted by
    employers as the basis for initiating an investigation, and (2) directing
    Homeland Security to provide Labor with information received during the
    adjudication process that may indicate an employer is not fulfilling its
    H-1B responsibilities.

                          Recommendations for Executive Action

    To strengthen oversight of employers' applications to hire H-1B workers,
    we recommend that Labor improve its procedures for checking completeness
    and obvious inaccuracies, including developing more stringent,
    cost-effective methods of checking for wage inaccuracies and invalid
    employer identification numbers.

    To ensure employers are complying with program requirements, we recommend
    that as USCIS transforms its information technology system, the Labor
    application case number be included in the new system, so that
    adjudicators are able to quickly and independently ensure that employers
    are not requesting more H-1B workers than were originally approved on
    their application to Labor.

                           Agency Comments and Our Evaluation

    We provided a draft of this report to the Departments of Labor, Homeland
    Security, and Justice for their review and comments. Each agency provided
    technical comments, which we incorporated as appropriate. Justice did not
    have formal comments on our report.

    Homeland Security agreed with our recommendations and stated that USCIS
    intends to include Labor's application case number in its new information
    technology system.

    Labor questioned whether our recommendation for more stringent measures is
    supported by the magnitude of the error rate that was found, as well as
    whether the benefits of instituting such measures would equal or exceed
    the added costs of implementing them. In addition, Labor said that
    Congress intentionally limited the scope of Labor's application review in
    order to place the focus for achieving program integrity on USCIS.

    We believe that Labor is at risk of certifying H-1B applications that
    contain more errors than were found in the scope of our review. For
    example, we checked only for employer identification numbers with invalid
    prefix codes, and did not look for other combinations of invalid numbers
    or data. Therefore, we do not know the true magnitude of the error rate in
    the certification process. We continue to believe there are cost-effective
    methods that Labor could use to check the applications more stringently
    that would enhance the integrity of the H-1B process.

    We are sending copies of this report to the Secretary of Labor, the
    Secretary of Homeland Security, the Attorney General, relevant
    congressional committees, and others who are interested. Copies will also
    be made available to others upon request. The report will be available on
    GAO's web site at http://www.gao.gov .

    If you or your staff have any questions about this report please contact
    me on (202) 512-7215 or nilsens@gao.gov . Contact points for our Offices
    of Congressional Relations and Public Affairs may be found on the last
    page of this report. GAO staff who made major contributions to this report
    are listed in appendix VII.

    Sigurd R. Nilsen Director, Education, Workforce and Income Security Issues

    Appendix I: Scope and Methodology Appendix I: Scope and Methodology

    To understand the H-1B certification, adjudication, and enforcement
    processes and the responsibilities of each agency involved, we hosted a
    joint meeting with officials from the Departments of Labor, Homeland
    Security U.S. Citizen and Immigration Services (USCIS), and Justice. We
    also reviewed laws and regulations related to the H-1B program.

    To obtain information on the characteristics of employers who filed Labor
    Condition Applications (applications) and the positions they sought to
    fill with H-1B workers, we analyzed the Efile H-1B Disclosure Data from
    the Employment and Training Administration (ETA) of the Department of
    Labor. These data included all the applications filed electronically from
    January 2002 through September 2005.1 We analyzed the data from a total of
    960,563 applications to determine (1) the number that had been certified
    or denied, (2) the employers who requested the most workers, (3) the most
    frequently requested occupation codes, (4) the locations of the H-1B
    positions, (5) the source of the prevailing wage used by employers, and
    (6) how many applications were certified with invalid employer
    identification number prefixes when compared with a list of valid prefix
    codes obtained from the Internal Revenue Service. We also analyzed how
    prevailing wages compared to actual wage rates. The H-1B Visa Reform Act,
    which was passed on December 8, 2004, requires employers to pay H-1B
    workers at least 100 percent of the prevailing wage for each specific
    occupation and location. Prior to the enactment of this law, Labor's
    regulations permitted employers to pay actual wages that were only 95
    percent of the prevailing wage. Accordingly, to ensure we did not
    incorrectly identify any applications as erroneously certified during the
    time between the passage of the H-1B Visa Reform Act and Labor's
    implementation of the new 100 percent requirement, our analysis only
    identified those cases where the actual wage rate was less than 95 percent
    of the prevailing wage.

    Additionally, we interviewed officials from ETA regarding the application
    approval process, including the circumstances under which applications are
    reviewed by an analyst for discrepancies, how prevailing wage sources are
    determined to be legitimate, and the ETA resources that are used to
    process and review applications. Additionally, we accessed the application
    online system to determine when the employer would receive error notices
    when filling out the application. We conducted a data reliability
    assessment of the H-1B Disclosure Data by testing for completeness and
    accuracy, reviewing documentation, and interviewing knowledgeable
    officials. We found it to be sufficiently reliable for our purposes.

    1 Our analysis included applications filed electronically from January 14,
    2002, through September 30, 2005, with the exception of five applications
    that were reviewed by Labor on October 2, 2005.

    To analyze the number and type of H-1B complaints received by Labor's Wage
    and Hour Division (WHD) and the outcomes of the associated investigations,
    we received a data extract from WHD's Wage and Hour Investigative Support
    and Reporting Database (WHISARD). From fiscal years 2000 through 2005, we
    analyzed the number of H-1B complaints, violations, and the penalties
    assessed including the number of employees due back wages, the amount of
    back wages due, civil money penalties, the most common violation, and the
    trend in the number of willful violations as a percentage of all
    violations. We also interviewed WHD officials on the complaint and
    investigation process, the appeal process, educational outreach to improve
    employer compliance, and the WHD resources used to process and investigate
    complaints. We conducted a data reliability assessment of the WHISARD data
    by testing for completeness and accuracy, reviewing documentation, and
    interviewing knowledgeable officials. We found it to be sufficiently
    reliable for our purposes.

    To determine the number of employers who had been debarred, or
    disqualified from participating in the H-1B program for a specified period
    of time, we requested that WHD officials provide the number of times per
    fiscal year from 2000 through 2005 that they sent a letter to USCIS
    requesting a debarment period. We also requested that USCIS provide the
    number of request letters it had received from WHD.

    To determine the number and type of H-1B petitions submitted by employers
    and adjudicated by the Department of Homeland Security US Citizenship and
    Immigration Service, we analyzed service center data from the Computer
    Linked Application Information Management System, Version 3.0 (CLAIMS 3)
    database from fiscal years 2000 through 2005. We analyzed (1) the number
    of petitions approved or denied; (2) the basis for the classification of
    the worker, such as whether the petition was for a new H-1B employee or
    for a continuation of a worker's stay; (3) the employer's requested
    action; (4) the educational level of the H-1B workers; (5) the number of
    H-1B workers requested on each petition; and (6) the occupation codes
    requested. Additionally, we conducted a data reliability assessment of
    selected variables by testing for completeness and accuracy, reviewing
    documentation, and interviewing knowledgeable officials. We reported on
    the variables that we found to be reliable enough for our purposes. To
    understand the policies and procedures of the program, we interviewed
    officials at USCIS headquarters. To understand the petition adjudication
    process, we conducted site visits at the USCIS Service Centers in Saint
    Albans, Vermont, and Laguna Niguel, California. According to USCIS, from
    October 2004 through December 2005 these service centers combined
    processed 63 percent of the H-1B petitions. To obtain context and
    facilitate our understanding of the electronic CLAIMS 3 data, we requested
    to review a non-probability sample of 48 petition files representing a
    variety of H-1B adjudication processes. During our site visits, we
    reviewed those that were available.

    To determine the type of violations and the process for investigations of
    U.S. worker displacement allegations we interviewed Department of Justice
    officials. We analyzed a summary report provided by Justice of the number
    of employers investigated from 2000 through 2005 and the outcomes of those
    cases. To determine the number and outcomes of investigations, and the
    types and amounts of penalties assessed on employers, we obtained
    documentation from Justice.

    Appendix II: Department of Labor Labor Condition Application Appendix II:
    Department of Labor Labor Condition Application

    Appendix III: Department of Homeland Security USCIS Petition for a
    Nonimmigrant Worker and H-Classification Supplement Appendix III:
    Department of Homeland Security USCIS Petition for a Nonimmigrant Worker
    and H-Classification Supplement

    Appendix IV: Data Tables Appendix IV: Data Tables

    The following tables provide additional information on analyses conducted
    on the application data from the Department of Labor's Efile H-1B
    Disclosure Database and the petition data from USCIS's Computer Linked
    Application Information Management System, Version 3.0.1

    A. Analyses on the application data obtained from the Department of
    Labor's Efile H-1B Disclosure Data:

    Table 5: Companies Electronically Filing Applications for the Most H-1B
    Workers from January 2002 to September 2005

    Company Number of workers requested
    1                           187,337
    2                            39,569
    3                            29,353
    4                            20,062
    5                            20,039
    6                            19,791
    7                            18,523
    8                            18,446
    9                            17,200
    10                           16,717

    Source: GAO analysis of Department of Labor data.

    Table 6: Prevailing Wage Sources Used by Employers on Labor Condition
    Applications

    Fiscal yeara State workforce agency Collective bargaining agreement Other
    2002                            24%                              2%   74%
    2003                            21%                              2%   77%
    2004                            18%                              1%   80%
    2005                            16%                              2%   82%

    Source: GAO analysis of Department of Labor data.

    aJanuary 2002 through September 2005.

    bOther sources of prevailing wages used by employers include the
    Department of Labor's Occupational Employment Statistics Survey and
    private employment surveys.

    1 Values may not total to 100 percent due to rounding.

    B. Analyses on the H-1B petition data obtained from USCIS's Computer
    Linked Application Information Management System Version 3.0 (CLAIMS 3):

    Table 7: Number of H-1B Petitions Approved and Denied

    Fiscal           Total    Petitions    Percentage   Petitions   Percentage
    year         petitions    approveda      approved     denieda       denied
    2000           293,857      284,845            97       9,012            3
    2001           329,972      316,894            96      13,078            4
    2002           209,746      199,410            95      10,336            5
    2003           225,768      216,225            96       9,543            4
    2004           307,466      294,544            96      12,922            4
    2005           258,142      253,450            98       4,692            2
    Total        1,624,951    1,565,368            96      59,583            4

    Source: GAO analysis of Department of Homeland Security data.

    aPetitions were included in the fiscal year based on the date they were
    received by USCIS.

    Table 8: Basis for Workers' H-1B Classification

                             Continued
                            employment                    New
    Fiscal        New     with same  Change in  concurrent Change of   Amended
    year   employment      employer employment employmenta employerb petitionb
    2000          71%           15%        13%        0.8%       N/A       N/A
    2001          73%           15%        12%        0.7%       N/A       N/A
    2002          66%           21%        12%        0.9%       N/A       N/A
    2003          60%           29%        11%        0.8%       N/A       N/A
    2004          64%           27%         8%        0.7%       N/A       N/A
    2005          55%           31%         6%        0.6%        6%      0.6%

    Source: GAO analysis of Department of Homeland Security data.

    Note: N/A=not applicable.

    aConcurrent employment is when an H-1B worker is employed by multiple
    employers with overlapping approved dates of employment.

    bThe change of employer and amended petition categories were not on the
    Form I-129 H-1B petition until March 2005.

    Table 9: Employers' Requested Action on Petitions for H-1B Workers

                   Notify the       Change and extend    Extend the     Amend the
    Fiscal year    officea                  status worker's stay worker's stay
    2000               32%                     24%           44%          0.4%
    2001               33%                     27%           41%          0.1%
    2002               18%                     34%           48%          0.2%
    2003               20%                     29%           52%          0.1%
    2004               26%                     27%           47%            0%
    2005               21%                     23%           54%          1.6%

    Source: GAO analysis of Department of Homeland Security data.

    aEmployers check `notify the office' to indicate whether the petition
    approval should be sent to a consulate, a port of entry, or preflight
    inspection.

    Table 10: Workers' Education Level on H-1B Petitions

    Fiscal   Less than a Bachelor's Bachelor's Master's Professional Doctorate
    yeara                    degree     degree   degree       degree    degree
    2003                         2%        50%      30%           6%       12%
    2004                         1%        50%      34%           5%       10%
    2005                         1%        44%      37%           5%       12%

    Source: GAO analysis of Department of Homeland Security data.

    aWe did not report on fiscal year 2000 through fiscal year 2002 because of
    missing data.

    Table 11: Top Five Occupation Codes Requested on H-1B Petitions, FY 2000
    through FY 2005

                                                                  Number of times
                                                                     requested on
         Occupational code title                  Occupation code       petitions
    1 Occupations in Systems Analysis and                  030         674,805
         Programming
    2 Occupations in College and University                090          94,685
         Education
    3 Accountants, Auditors, and Related                   160          68,256
         Occupations
    4 Electrical/Electronics Engineering                   003          65,974
         Occupations
    5 Other Computer Related Occupations                   039          58,429

    Source: GAO analysis of Department of Homeland Security data.

    Appendix V: Comments from the Department of Labor Appendix V: Comments
    from the Department of Labor

    Appendix VI: Comments from the Department of Homeland Security Appendix
    VI: Comments from the Department of Homeland Security

    Appendix VII: A Appendix VII: GAO Contact and Staff Acknowledgments

    GAO Contact

    Sigurd R. Nilsen, Director, 202-512-7215, nilsens@gao.gov

    Acknowledgments

    Alicia Puente Cackley, Assistant Director; Gretta L. Goodwin, Senior
    Economist; Amy J. Anderson, Senior Analyst; and Pawnee Davis, Analyst,
    made significant contributions to all phases of this report. In addition,
    William J. Schneider, Intern, assisted with data collection and analysis;
    Sheila R. McCoy provided legal assistance; Luann M. Moy provided
    methodological assistance; Susan F. Baker, Cynthia L. Grant, Lynn M.
    Milan, and Melinda L. Cordero provided data analysis; and Rachael C.
    Valliere, Communications Analyst, assisted in report development.

    Related GAO Products Related GAO Products

    Homeland Security: Better Management Practices Could Enhance DHS's Ability
    to Allocate Investigative Resources. GAO-06-462T . Washington, D.C.: March
    28, 2006.

    Immigration Benefits: Additional Controls and a Sanctions Strategy Could
    Enhance DHS's Ability to Control Benefit Fraud. GAO-06-259 . Washington,
    D.C.: March 10, 2006.

    Homeland Security: Visitor and Immigrant Status Program Operating, but
    Management Improvements Are Still Needed. GAO-06-318T . Washington, D.C.:
    January 25, 2006.

    Immigration Benefits: Improvements Needed to Address Backlogs and Ensure
    Quality of Adjudications. GAO-06-20 . Washington, D.C.: November 21, 2005.

    Immigration Enforcement: Weaknesses Hinder Employment Verification and
    Worksite Enforcement Efforts. GAO-05-813 . Washington, D.C.: August 31,
    2005.

    Department of Homeland Security, U.S. Citizenship and Immigration
    Services: Allocation of Additional H-1B Visas Created by the H-1B Visa
    Reform Act of 2004. GAO-05-705R . Washington, D.C.: May 18, 2005.

    Homeland Security: Some Progress Made, but Many Challenges Remain on U.S.
    Visitor and Immigrant Status Indicator Technology Program. GAO-05-202 .
    Washington, DC: February 23, 2005.

    Alien Registration: Usefulness of a Nonimmigrant Alien Annual Address
    Reporting Requirement Is Questionable. GAO-05-204 . Washington, D.C.:
    January 28, 2005.

    Highlights of a GAO Forum: Workforce Challenges and Opportunities For the
    21st Century: Changing Labor Force Dynamics and the Role of Government
    Policies. GAO-04-845SP . Washington, D.C.: June 1, 2004.

    H-1B Foreign Workers: Better Tracking Needed to Help Determine H-1B
    Program's Effects on U.S. Workforce. GAO-03-883 . Washington, D.C.:
    September 10, 2003.

    Information Technology: Homeland Security Needs to Improve Entry Exit
    System Expenditure Planning. GAO-03-563 . Washington, D.C.: June 9, 2003.

    High-Skill Training: Grants from H-1B Visa Fees Meet Specific Workforce
    Needs, but at Varying Skill Levels. GAO-02-881 . Washington, D.C.:
    September 20, 2002.

    Immigration Benefits: Several Factors Impede Timeliness of Application
    Processing. GAO-01-488 . Washington, D.C.: May 4, 2001.

    H-1B Foreign Workers: Better Controls Needed to Help Employers and Protect
    Workers. GAO/HEHS-00-157 . Washington, D.C.: September 7, 2000.

    (130515)

    GAO's Mission

    The Government Accountability Office, the audit, evaluation and
    investigative arm of Congress, exists to support Congress in meeting its
    constitutional responsibilities and to help improve the performance and
    accountability of the federal government for the American people. GAO
    examines the use of public funds; evaluates federal programs and policies;
    and provides analyses, recommendations, and other assistance to help
    Congress make informed oversight, policy, and funding decisions. GAO's
    commitment to good government is reflected in its core values of
    accountability, integrity, and reliability.

    Obtaining Copies of GAO Reports and Testimony

    The fastest and easiest way to obtain copies of GAO documents at no cost
    is through GAO's Web site ( www.gao.gov ). Each weekday, GAO posts newly
    released reports, testimony, and correspondence on its Web site. To have
    GAO e-mail you a list of newly posted products every afternoon, go to
    www.gao.gov and select "Subscribe to Updates."

    Order by Mail or Phone

    The first copy of each printed report is free. Additional copies are $2
    each. A check or money order should be made out to the Superintendent of
    Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more
    copies mailed to a single address are discounted 25 percent. Orders should
    be sent to:

    U.S. Government Accountability Office 441 G Street NW, Room LM Washington,
    D.C. 20548

    To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
    512-6061

    To Report Fraud, Waste, and Abuse in Federal Programs

    Contact:

    Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov
    Automated answering system: (800) 424-5454 or (202) 512-7470

    Congressional Relations

    Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 U.S.
    Government Accountability Office, 441 G Street NW, Room 7125 Washington,
    D.C. 20548

    Public Affairs

    Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800 U.S.
    Government Accountability Office, 441 G Street NW, Room 7149 Washington,
    D.C. 20548

    www.gao.gov/cgi-bin/getrpt? GAO-06-720 .

    To view the full product, including the scope

    and methodology, click on the link above.

    For more information, contact Sigurd R. Nilsen at (202) 512-7215 or
    nilsens@gao.gov.

    Highlights of GAO-06-720 , a report to congressional requesters

    June 2006

    H-1B VISA PROGRAM

    Labor Could Improve Its Oversight and Increase Information Sharing with
    Homeland Security

    The H-1B visa program assists U.S. employers in temporarily filling
    certain occupations with highly-skilled foreign workers. There is
    considerable interest regarding how Labor, along with Homeland Security
    and Justice, is enforcing the requirements of the program. This report
    describes: (1) how Labor carries out its H-1B program responsibilities;
    and (2) how Labor works with other agencies involved in the H-1B program.
    We interviewed officials and analyzed data from all three agencies.

    What GAO Recommends

    The Congress should consider eliminating the restriction on Labor using
    information from Homeland Security to initiate an investigation and
    directing Homeland Security and Labor to share information on employers
    that may not be fulfilling program requirements. GAO also recommends that
    Labor improve its checks of employers' applications and that Homeland
    Security's U.S. Citizenship and Immigration Services (USCIS) include
    Labor's application case number in its new information technology system.
    Homeland Security agreed with our recommendations. Labor questioned
    whether more stringent checks were necessary and believes Congress
    intentionally limited Labor's role and placed program integrity with
    USCIS. We believe there are cost-effective methods that Labor could use to
    check the applications more stringently that would enhance the integrity
    of the H-1B process.

    While Labor's H-1B authority is limited in scope, the agency could improve
    its oversight of employers' compliance with program requirements. Labor's
    review of employers' applications to hire H-1B workers is timely, but
    lacks quality assurance controls and may overlook some inaccuracies. From
    January 2002 through September 2005, Labor electronically reviewed more
    than 960,000 applications and certified almost all of them. About
    one-third of the applications were for workers in computer systems
    analysis and programming occupations. By statute, Labor's review of the
    applications is limited to searching for missing information or obvious
    inaccuracies and it does this through automated data checks. However, our
    analysis of Labor's data found certified applications with inaccurate
    information that could have been identified by more stringent checks.
    Although the overall percentage was small, we found 3,229 applications
    that were certified even though the wage rate on the application was lower
    than the prevailing wage for that occupation. Additionally, approximately
    1,000 certified applications contained erroneous employer identification
    numbers, which raises questions about the validity of the applications. In
    its enforcement efforts, Labor's Wage and Hour Division (WHD) investigates
    complaints made against H-1B employers. From fiscal year 2000 through
    fiscal year 2005, Labor reported an increase in the number of H-1B
    complaints and violations, and a corresponding increase in the number of
    employer penalties. In fiscal year 2000 Labor required employers to pay
    back wages totaling $1.2 million to 226 H-1B workers; by fiscal year 2005,
    back wage penalties had increased to $5.2 million for 604 workers. Program
    changes, such as a higher visa cap in some years, could have been a
    contributing factor. In April 2006, WHD began the process of randomly
    investigating willful violators of the program's requirements.

    Labor, Homeland Security, and Justice all have responsibilities under the
    H-1B program, but Labor and Homeland Security could better address the
    challenges they face in sharing information. Homeland Security reviews
    Labor's certified application but cannot easily verify whether employers
    submitted petitions for more workers than originally requested on the
    application because USCIS's database cannot match each petition to Labor's
    application case number. Also, during the process of reviewing petitions,
    staff may find evidence that employers are not meeting their H-1B
    obligations. For example, Homeland Security may find that a worker's
    income on the W-2 is less than the wage quoted on the original
    application. Homeland Security may deny the petition if an employer is
    unable to explain the discrepancy, but it does not have a formal process
    for reporting the discrepancy to Labor. Additionally, current law
    precludes the Wage and Hour Division from using this information to
    initiate an investigation of the employer. Labor also shares enforcement
    responsibilities with Justice, which pursues charges filed by U.S. workers
    who allege they were displaced by an H-1B worker. From 2000 through 2005,
    Justice found discriminatory conduct in 6 out of the 97 investigations
    closed and assessed $7,200 in penalties.
    *** End of document. ***