Foreign Workers and Offshoring Practices Targeted by Presidential Executive Order

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On August 3, 2020, President Trump signed yet another Executive Order implying that foreign workers harm the U.S. workforce.

The Order applies only to federal contractors or subcontractors.  It requires each agency to review contracts and subcontracts awarded in FY 2018 and 2019 to determine:

• “Whether contractors (including subcontractors) used temporary foreign labor for contracts performed in the United States, and, if so, the nature of the work performed by temporary foreign labor on such contracts; whether opportunities for United States workers were affected by such hiring; and any potential effects on the national security caused by such hiring.”

and

• “Whether contractors (including subcontractors) performed in foreign countries services previously performed in the United States, and, if so, whether opportunities for United States workers were affected by such offshoring; whether affected United States workers were eligible for assistance under the Trade Adjustment Assistance program authorized by the Trade Act of 1974; and any potential effects on the national security caused by such offshoring.”

Each agency is required to submit a report by December 1, 2020.

The order also requires that by September 17, 2020, the Departments of Labor and Homeland Security are to “take action, as appropriate and consistent with applicable law, to protect United States workers from any adverse effects on wages and working conditions caused by the employment of H-1B visa holders at job sites (including third-party job sites), including measures to ensure that all employers of H-1B visa holders, including secondary employers, adhere to the requirements of,” the labor condition application (LCA). We are waiting to see how they will implement this directive.

Doesn’t the LCA already do this?

An LCA is filed with the Department of Labor and the U.S. Citizenship & Immigration Service (USCIS) when requesting approval to hire an H-1B professional worker. In it, the employer attests that it is not using foreign workers to undercut the U.S. job market and is paying the foreign worker the same wage it would pay a U.S. worker.  Employers are required to maintain documentation of their compliance with the attestations for inspection by the Department of Labor, USCIS, or the public.

If certain changes are made in the job, this documentation must be updated.  If the changes are significant, an H-1B amendment must be filed with a new LCA.

Fines and debarment from the H-1B program may be imposed for violations.

Historical background

This order is only the latest installment in two concentric sagas. President Trump’s road to the White House started with derogatory comments about immigrants and this theme has continued throughout his tenure. While all reliable studies show that employers hire foreign workers to complement the U.S. workforce, the spike in unemployment caused by COVID-19 provides more rhetorical umph to the alternative view.  The fact that applications for temporary foreign workers plummeted during the Great Recession (starting in 2008) is evidence that U.S. employers have an interest in preserving jobs for U.S. workers.

The other saga is a decades-long argument about whether H-1B tech workers – and especially those hired by contracting companies and placed at third-party worksites – undermine the U.S. workforce.

The nature of technological advances has created companies that supply tech workers temporarily to upgrade or customize software (for example) and then move on. This work can be undesirable if it involves moving from location to location, even state to state, and provides no job consistency.

While a legitimate and legal business model, some companies have used it in ways that shock the conscience, firing U.S. workers and replacing them with a contracted crew.

USCIS has long tried to find a way to disallow third-party contracting. The thrusts and parries are too numerous to detail here. This order is more of the same but from a new direction.

President’s actions are at cross purposes

The order addresses both hiring temporary foreign workers and outsourcing.  However, restrictions on foreign workers – especially during the COVID-19 outbreak – have encouraged outsourcing.

If employers cannot find sufficient talent in the U.S. workforce, they turn to foreign workers. This is one reason the H-1B and other temporary work programs were created. Before COVID-19, unemployment was at historic lows and, at the same time, the Trump Administration was taking extraordinary steps to reduce the number of foreign workers.

Although a variety of long-term solutions to fill the gap between the skills of available workers and the skills needed for the available jobs exist (re-training programs, guiding students toward jobs in demand, STEM initiatives, having more babies, etc.), one of the few short-term options is outsourcing.

Although outsourcing may lower costs to consumers, it does not have the benefits of hiring foreign workers in the U.S., such as increased U.S. tax revenue and enhancing the declining population.  Given the rhetoric and reality of immigration restrictions – not to mention the entry suspensions imposed under the banner of COVID-19 – no one should be surprised it is happening.

What a federal contractor should do

If you are a federal contractor or subcontractor that employs foreign workers or outsources work, consider the following:

1. Ensure that your LCA documentation is in order and up to date.
2. Contact your immigration attorney to determine if you are in compliance with applicable immigration law. Remote work, wage reductions, layoffs, or furloughs due to COVID-19 may mean you need to take certain actions to comply.
3. Be prepared for a government audit or inspection. Both Department of Labor and USCIS have investigative authority regarding aspects of immigration compliance. Thinking through how you would manage an in-person visit from a federal agent – including how to insist upon representation by counsel – are key to the outcome of a compliance audit. This earlier post about preparing for an ICE visit may help you frame your internal conversations about preparing for a DOL or USCIS investigation.
4. Consider now how to show that your use of foreign workers – including contractors – or outsourcing some work is complementing the U.S. workforce rather than undermining it.
5. Review your third-party contracts to determine if the vendor is required to assist in or bear any costs related to a government audit or other consequences of non-compliance with immigration laws.
6. Before coordinating with vendors, consult with counsel to avoid taking actions that could lead to a finding of joint employment, which could only make matters worse.