Infosys Settlement and the B-1 in Lieu of H-1B Category

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The Indian IT consulting giant, Infosys Ltd., is reported by the major business news wires today to be settling with the U.S. Department of Justice to the tune of over $34 million for immigration law violations.

According to a statement issued by the company, “Infosys denies and disputes any claims of systemic visa fraud, misuse of visas for competitive advantage, or immigration abuse. Those claims are untrue and are assertions that remain unproven.”  It its statement, Infosys also said “There were no criminal charges or court rulings against the company. Furthermore, there are no limitations on the company’s eligibility for federal contracts or access to U.S. visa programs as a result of the settlement.”  The settlement stems from Infosys’s alleged misuse of the controversial “B-1 in lieu of H-1B” visa classification cited in at least one whistleblower lawsuit.

Typically the business model of Infosys and similar IT consulting companies involves having to petition for, and obtain approval of, a large number of H-1B visas for its IT consulting professionals working in the U.S.  Since the employer makes money by assigning these H-1B workers to customers, the more consultants they have working in the U.S., the fatter the bottom line.  According to The New York Times, Infosys employed in 2011 over 15,000 people in the U.S.; over 10,000 of whom were on H-1B visas.

That said, the H-1B visa classification has its limitations.  First, there is a finite number of new H-1B visa numbers issued every fiscal year, known as the “H-1B cap”, which has been proven to be woefully insufficient to meet the demand of U.S. employers.  That said, as compared to U.S. employers employing foreign nationals in non-IT professional (such as engineers, professors, physicians, financial analysts and the like), a disproportionate number of H-1B visa numbers are typically consumed by the large IT firms.  The top five users of H-1B numbers last fiscal year were Cognizant (9,281), Tata (7,469), Infosys (5,600), Wipro (4,304), and Accenture (4,037), in that order.  Even within the IT industry, this proportion of H-1B usage is very high.  For perspective take the IT behemoth Microsoft which consumed less than 1,500 H-1B numbers last fiscal year and ranked #11 in overall usage.

Aside from the annual H-1B cap, the visa category is also limited by how it is used.  The law requires companies employing H-1B workers to retain complete control over them, and to comply with prevailing wage requirements of the geographical location at which they will work.  However, the IT consulting industry  - both consulting companies and their customers - often want the H-1B worker to be more directly controlled by the end-customer.  The nature of the industry is also somewhat mobile, with consultants moving frequently from project to project in different geographic locations.  This movement often requires additional filings with Government agencies, which translates to additional cost to the employer.

One way some employers attempt to sidestep geographic limitations, prevailing wage and general scarcity of the H-1B category is by utilizing the “B-1 in lieu of H-1B” visa classification.  However, as Infosys has discovered, this can be dangerous if an employer is not careful.

In general, “B-1 in lieu of H-1B” is a status which permits employees of overseas companies to enter the U.S. as B-1 business visitors to 1) engage in employment activity while in the U.S. that rises to the level of an H-1B worker in complexity, 2) is short in duration (less than six months), 3) compensated by the employer abroad, and 4) under the complete control and direction of the employer abroad.  While running afoul of any of these four factors can constitute a violation of law, it is the last criterion that may be the most vulnerable to attack - particularly when the employee is being placed at a client’s site.

A skeptical immigration officer must firmly believe that the employee, possibly half a world away from his or her home office, and being assigned to a customer’s place of business in the U.S., is clearly being supervised by the overseas employer and not the client.  Multiply this by hundreds or even thousands workers entering as business visitors on a repeated and ongoing basis, and further consider that the services of these workers are able to be compensated without regard to the prevailing wage requirements at the location of employment, and we see an easy target for scrutiny not only from the Government, but whistleblowers as well.  So, while it is certainly arguable that even extensive use of the “B-1 in lieu of H-1B” visa classification in this manner is lawful, we urge clients to use the category judiciously.

If you have questions about the H-1B visa classification, or proper use of the “B-1 in lieu of H-1B” subclassification, please contact our office.