Bonded Labor in the USA: Large IT Outsourcing Companies Using H-1B as a Tool

Rahul Reddy & Emily Neumann, Attorneys at Law, Reddy & Neumann PC

The H-1B program was created as a way for U.S. employers to meet shortages of skilled workers by allowing them to recruit from an international pool of applicants. The visas, which require an employee to hold a minimum of a Bachelor’s degree and work in a specialty occupation, are used in large part by technology companies as well as computer and IT consulting firms. But, as is the nature of many large government programs, the H-1B visas currently have a potential for extraordinary abuse.

Testimony before the United States Senate Committee on the Judiciary highlighted areas of abuse under the current immigration system with regard to skilled labor visas. One of the main areas of focus was the H-1B program and how employers can use it to the detriment of foreign workers.

While most companies who utilize H-1B visas do so in a manner that preserves jobs in the U.S. and provide at-will employment, many of the companies with the highest numbers of H-1B employees do not. According to the testimony before the Senate committee, most of the companies accused of abusing the visa program are large information technology firms who base almost all of their operations in India. They typically hire a single H-1B worker who is placed at a U.S. location, and then outsource the work of three or four additional employees to India. The pay differential between the U.S. and India lowers the cost of doing business for these companies. They are then able to outbid other companies offering the same services with a U.S.-based staff.

The companies outsourcing jobs from the U.S. are often the same firms who force H-1B workers to sign draconian employment contracts in India before beginning work in the U.S. While these contracts are often unenforceable in the U.S., the company could sue the employee in India for a hefty sum should an H-1B worker leave the company.

Most H-1B workers are seeking to acquire a green card, and receiving H-1B sponsorship is a common first step in this process. Due to the nature of acquiring an employment-based green card, workers holding an H-1B visa are at the mercy of their employer when it comes to gaining legal permanent residency. Most of the outsourcing consulting companies with the largest H-1B workforces have withheld green card applications on behalf of their employees, keeping the employees bound to an H-1B visa and bound the company.

The top ten outsourcing companies obtaining new H-1B visas in 2012 combined to control nearly half of the visas, which are capped at 85,000. At the same time, these companies combined to apply for less than 2,000 green cards for their H-1B employees, a filing rate of less than three percent. One such outsourcing company who applied for over 7,000 initial H-1B visas in 2012, applied for just ten green cards on behalf of its H-1B employees last year.

The Department of Labor reports that 82% of labor certification approvals in 2012 were for employees who had been on H-1B visas (the labor certification is the first step in the green card process). Based on DOL statistics, approximately 57,000 labor certifications were filed on behalf of H-1B visa holders, yet the top ten outsourcing companies filed for less than 2,000 of them. The rest of the applications for labor certifications submitted on behalf of H-1B workers were filed by all other companies, including smaller, domestic computer consulting firms, universities, and non-profit organizations.

The higher rate of green card filings by these non-outsourcing entities reflects their desire to retain the expertise of professionals with advanced degrees for the long-term, rather than to hold them in bonded labor during the short-term. Combined, these companies and organizations filed roughly one green card application for every two initial H-1B petitions. This filing ratio of roughly 50% stands in stark contrast to the outsourcing companies’ paltry 3%.

These outsourcing companies have little incentive to change their practices of holding a large H-1B workforce without offering a path to the green card. The H-1B visa keeps the employee tied to the company for the duration of the visa, whereas a green card holder is at liberty to change employers at any time. If an H-1B employee were to be fired, he could fall out of legal status and be forced to return to his home country. An employee who is able to obtain a green card would be free to seek employment elsewhere. The result is that many of the large IT outsourcing companies hold their H-1B employees in limbo, requiring them to perform a type of bonded labor for the company. Fortunately, many smaller computer consulting firms based in the U.S. avoid this practice and typically apply for green cards for a high percentage of their H-1B employees.


Reddy & Neumann, P.C. is an immigration law firm in Houston, Texas. For over 15 years, our firm has successfully represented corporate clients across the United States in their efforts to bring foreign workers and business professionals to the United States. Our experienced team of immigration lawyers in Houston & Dallas advises clients throughout the H-1B visa application process, including responding to various requests for evidence and consular processing issues. From filing, through approval, and on to appeal, we do everything possible to ensure that your company can bring the best and brightest in the world to the United States.