Relief for Indian techies, IT firms as US court ruling blocks H-1B rule changes

In a huge relief to the Indian techies and IT industry, a US court, on December 1, blocked the H-1B visa rule changes that made it tough to recruit H-1B workers.

IT industry body National Association of Software and Services Company (NASSCOM) said in a statement: “We welcome the court decision that clearly recognises the importance of the high skill visa programs to the United States.” The judgement, the agency said, would help US businesses access talent critical to the economic recovery phase in the post-COVID-19 world.

The Department of Homeland Security (DHS) was set to implement the H-1B rule changes on December 7. It had implemented the wage hikes on October 8. The judgement blocks the agencies from implementing these rules.

The rule changes include increasing the scope of site visits by the US Citizenship Immigration Services, limiting the qualification criteria for H-1B visa workers and reducing the validity of H-1B visa at a third party site to one year.

What the order said?

On October 6, the DHS and the Department of Labor (DOL) announced two rules that would make it tough to recruit H-1B workers by making the rules tighter and increasing the wages substantially, by as much as 50 percent in certain regions, respectively.

They were implemented as Interim Final Rules (IFR) without the notice and comment period.  The agencies said that this was in a bid to protect American jobs at the back of rising unemployment due to COVID-19.

A lawsuit filed by the US Chamber of Commerce and other organisations challenged both the rules. This was supported by 46 tech companies, including Google, Amazon and Facebook.

On December 1, Judge Jeffrey S White, in his order, said: “Defendants failed to show there was good cause to dispense with the rational and thoughtful discourse that is provided by the APA (Administrative Procedure Act) notice and comment requirements.”

Judge White further pointed out in the order that the government did not show enough evidence that proved that the pandemic made it necessary to implement rules without the notice and comment period.

“This decision effectively enjoins DOL and DHS from further implementing the rules unless an appeals court finds otherwise,” NASSCOM’s statement added.

It is definitely a good news for the IT industry. For, they are one of the largest beneficiaries of the visa.

H-1B visas and IT industry

Every year, the US issues 85,000 H-1B visas. Indian IT industry accounts for about a significant share, though it had come down over the last three years under the Trump administration. According to USCIS data, Indians accounted for about 1.3 lakh of the 1.8 lakh H-1Bs visas issued in FY19.

Over the last three years, Indian IT firms have increased their localisation efforts, which stands at more than 60 percent in top IT firms. This came at the back of rising scrutiny over H-1B visas that resulted in increased denials and request for additional documentation.

To make it even tougher, the Trump administration implemented the two rules. The wage hike rule, however, would also make recruiting local talents expensive.

DOL’s wage hike increased the salary of H-1B workers by as much as 50 percent in some regions. Reports had pointed out that there could be an average 30 percent increase in wages for H-1B workers employed in computer-related occupations.

C Vijayakumar, CEO, HCL Tech, in a recent interaction with Moneycontrol, had said: “When you increase the wages for H-1B workers, the expectation will be to have that parity in place. That is going to result in wage inflation overall.”

So, if a company has 20,000 employees in the US, and if only 5,000 of them are H-1B visa holders, the wage increase to the tune of 30-50 percent has to be done for all the 20,000 since you cannot discriminate between employees.

“…there is going to be a cost impact. There are no two ways about it,” he pointed out.

So what now?

Kellen Powell, immigration attorney in the US, said: “That should be the end of that, unless they can get an appeals court to stay the order.”

Apart from appealing the judgement, the Trump administration does not have enough time to issue the rule and implement it, given that there are only 50 days before Joe Biden is sworn in as the President, said immigration experts.

For IT firms, it is not clear if these wins would mean change in their H-1B strategy, though it does put them at ease.

Recent conversations with IT executives indicate that localisation drive is likely to continue as IT firms look to decrease their visa dependency in the US.

Infosys had said that it would add another 12,000 people, primarily freshers, by 2022. The company currently employs 13,000 locals in the US. TCS has about 20,000 locals in the US workforce.

At the back of COVID-19 and remote working taking shape, offshoring (moving workforce to low cost countries like India) will continue as well. “Since it has been proven that a lot of onsite requirements can be done remotely, there is going to be more traction for offshore volumes,” Vijayakumar pointed out.