December 4, 2004 (later updated) Here is my analysis of the L-1 portion of the new legislation on H-1B/L-1. (This is the omnibus appropriations bill, H.R. 4818, passed by the House and Senate, as of the first writing of this document. The president later signed the bill, on December 8.) See http://heather.cs.ucdavis.edu/Archive/H1BChanges2004.txt for my analysis of the H-1B portion of the legislation. As I have indicated before, I consider the bill's MS/PhD provision unwarranted, and I do not find any of the so-called worker "protections" to be of any real value. In other words, the entire bill is a loser. The current bill incorporates L-1 "reforms" proposed by Sen. Chambliss earlier in the year. Those "reforms" were in turn adapted from (though using slightly different language than) those proposed the previous year by Rep. Mica. Mica made those proposals after there was huge negative press about the L-1 program in connection with Tata Consultancy Services (TCS) and Siemens Corp. in Florida. What happened in that case is that Siemens laid off a number of its American programmers and replaced them by L-1 workers who were working for Tata. Adding insult to injury, Siemens forced the laid-off Americans to train their L-1 replacements (as a condition for the Americans to receive their severance packages). One of the Americans, Mike Emmons, appeared frequently in the media, and also kept pressuring his congressperson, Rep. Mica, to take action. Mica apparently attempted to make it look like he was solving the problem while actually preserving the status quo for his industrial patrons. (Siemens was his biggest campaign contributor.) He came up with a bill which was purely cosmetic in nature. Here's why: Mica claimed that the problem was that the L-1s were for all practical purposes working for Siemens rather than Tata. In other words, Mica was saying that the problem was that Tata had its L-1s working directly for a "third party employer," Siemens. This claim was false; yes, the L-1s probably were working directly for Siemens, but NO, the third-party nature of the arrangment really was NOT the real problem. For example, instead of bringing in programmers from India via Tata, Siemens could have brought in programmers from its own Indian subsidiary (Siemens Information Services, Ltd.). So, if L-1 law had forbidden the use of L-1s by third-party employers, as Mica proposed, it wouldn't have helped people like Mike Emmons at all. The real problem is that the L-1 program allows employers to bring it foreign workers at all, NOT that the program allows the L-1s to work for third-party employers. The third-party issue was just a red herring. Yet that red herring turned out to be an enormously clever deceptive PR tactic. Everyone in the press said, "Ah, all we have to do to help those poor American workers like Mike Emmons is to forbid L-1s from working for third party employers!" So Mica introduced legislation to do this, adapted later by Chambliss and then in the final legislation. Most importantly, the authors of the legislation deliberately drafted it in such a way that it is extremely easy to circumvent. It was clear quite clear that "the fix was in" in this regard. Note that when the new policy was announced in late 2004, Tata and others stated that they would have no trouble complying with the new law, because they were ALREADY in compliance with it. And tellingly, the industry lobbyists advocated the so-called "tightening." (See for example the quote of immigration attorney Greg Siskind in the ironically-titled "Tech Visa Loophole Closed by Congress," San Jose Mercury News, Nov. 25, 2004, and the ITAA document discussed below.) After the legislation was enacted, an article in the Indian press made it quite clear that the new law was only cosmetic ("L-1 Bill Doesn't Bother Tech Majors," by Pragati Verma and Urmi A Goswami, The Economic Times Online, Dec. 06, 2004, http://economictimes.indiatimes.com/articleshow/947633.cms). The article describes the bill as "relatively toothless," making "only cosmetic changes," and "skin-deep." Significantly, it states that the Democrats and Republicans chose this route deliberately, so that it "won't change anything of importance." Here are the details (quotation marks around the word _reform_ in the original, not added by me): The provisions relating to the L-1 visa in the 2005 Appropiations Bill is being seen as "relatively toothless" in Indian software circles. The only restriction it imposes is to have employees transferred to the US under the company's authority even as they are free to work on client's premises, point out insiders. Analysts feel that nothing lesser than a complete ban on working on client's premises will impact the software bigwigs business model. "We will continue to have our people working on L1 visas as earlier under our authority," says Mr Laksham Badiga, chief executive, talent transformation and staffing, Wipro Technologies... This is a feeling that has been previously voiced by Washington insiders as well... The DeLauro and Johnson-Dodd Bills sought to introduce greater control in the L-1 visa programme through an annual cap, greater supervision by the US Department of Labor, abolition of blanket L-1s and stringent qualifying requirements for applicants. However, in what comes as good news for the Indian tech sector, the US Congress opted to base its "visa reform" on the less stringent Chambliss/Mica Bill. Both these Bills make only cosmetic changes to the programme, as observers put it, "Republicans and Democrats would rather support Mr Mica's Bill since it won't change anything of importance." Given that the "reform" is only "skin deep", big companies are not worried. Big players like Infosys, Wipro, TCS and Satyam who have come under fire previously for allegedly violating the provisions of the programme have little to worry. They have people working on customer's sites under their company's supervision. In other words, the strategy of the lobbyists--and of the Democratic and Republican parties--was to tell the nation that a loophole had been closed but craft the language of the legislation in a manner which would ensure that those firms that had been using the loophole would still be able to do exactly the same thing. To understand how they will circumvent the new statute, you must first understand its language: An alien [who] will be stationed primarily at the worksite of an employer other than the petitioning employer or its affiliate, subsidiary, or parent shall not be eligible for classification [as an L-1] if (i) the alien will be controlled and supervised principally by such unaffiliated employer; or (ii) the placement of the alien at the worksite of the unaffiliated employer is essentially an arrangement to provide labor for hire for the unaffiliated employer, rather than a placement in connection with the provision of a product or service for which specialized knowledge specific to the petitioning employer is necessary. The "petitioning employer" refers to an L-1 firm like Tata, and the "unaffiliated employer" would be like Siemens. To make things easier to follow below, I'll simply use Tata and Siemens as my running example. Condition (i) is obviously easy to circumvent. Tata and Siemens would merely agree that any direction which Siemens wants to give the L-1s must go through a Tata manager as intermediary. Concerning condition (ii), the key term is "specialized knowledge." Rest assured (sic), the industry has that covered too. Bear with me here as you see the story unfold, showing that the industry lobbyists, notably the ITAA, had already prepared for this situation. Basically what they did was set up a definition of "specialized knowledge" long ago. In June of 2003, Tata told the Dallas Morning News ("Controversy Surrounds Employees on L-1 Visas", June 15, 2003) that all its work for U.S. clients like Siemens uses software unique to Tata: India-based Tata Consultancy Services uses the L-1 visa program to transfer employees to the United States and send them out on consulting projects across the country. The primary reason is that its workers in India are trained in Tata software - training not available to U.S. workers, said resident manager of personnel Girish Surendran. "We've got more than 50 research and development centers spread across India in multiple locations," he said. "When they come to the U.S. on this basis, they bring that knowledge with them." When I saw that quote, I raised the question as to what the heck Tata's "special software, training [for which is] not available in the U.S." might be, and I speculated that it is project management software. I noted that this seemed to be the likely explanation, since the Indian firms make such a big deal out certified process methodologies. (Itself a red herring; see http://heather.cs.ucdavis.edu/Archive/CMUHype.txt) But in any case, it would mean that the bill would not threaten Tata's operations. Since Tata's remark came just a month after Chambliss introduced his bill, it is clear that Tata's statement to the Dallas Morning News was aimed at "prequalifying" to operate "business as usual" should the bill ever be enacted. In fact, around that same time (with development presumably coming considerably earlier), the ITAA industry lobbying group released a policy paper, proposing what should count as "specialized knowledge" (www.itaa.org/itserv/docs/l1bposition.pdf), and distributed it in Congress. By some weird coincidence, ha, ha, the ITAA's wording is the same as what Tata used in its statement to the Dallas Morning News: 5. The alien beneficiary has advanced knowledge of his/her employer's special process or methodology that is not generally held throughout the industry. For example: ... c. The employer's specific process or methodology that is used to perform a certain service is different than the processes or methodologies used by many other companies in the industry in that the employer's process or methodology has been certified as meeting SEI or Six Sigma standards (level of Total Quality Management) and the beneficiary has been trained in such employer specific process. Aha! So, as long as it is "not generally held throughout the industry," it qualifies as "specialized knowledge, specific to the company." This matches exactly the Tata statement to the Dallas Morning News. (And the ITAA refers to certified project management methodologies, exactly what I speculated that "special Tata software, not available in the U.S." consisted of.) So the much-vaunted "reform" of L-1 in the late-2004 legislation was a sham, through and through. This of course should have been clear from the fact that the industry lobbyists such as the ITAA actively promoted the "reform," so it's amazing that so many people--in the press and even critics of H-1B/L-1--were fooled.