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Legality of Replacing Americans With H-1Bs

A Study of What the Law Says


ShameH1B contacted a labor expert at the Department of Labor in Washington D.C. and asked the question: Can American citizens be replaced by H-1Bs legally? In short, the answer is YES, YES, YES!!!

Deptartment of Labor:
Except in certain very specific conditions, outlined in
the American Competitiveness and "Workforce Improvement"Act of 1998, it's perfectly legal to replace US workers with H-1Bs.

That response from the DOL motivated this website to do a study of the protections that the H-1B law supposedly has for American workers. Where not noted, all material was copied from


Photo Courtesy of the 

American Engineering Association




HOUSE OF REPRESENTATIVES I believe that the current high demand market for certain technical specialties is that it should encourage us to retrain displaced workers, attract underrepresented women and minorities, better educate our young people and recommission willing and able older workers who have been forced into unemployment.

Ms. Lee acknowledged to a House subcommittee that H-1B will displace workers and says that these workers should be retrained.

In 1995, the DOL Inspector General found widespread abuses of the H-1B program, and former Secretary of Labor Robert Reich argued for changes in the H-1B provisions so DOL could take action against employers who displace U.S. workers with nonimmigrants.

Some, however, think DOL had already gone too far in regulations effective in January 1995, maintaining that they burden firms who hire only a few nonimmigrants with requirements aimed at large scale hiring abuses.

This rather insensitive statement basically says that as long as worker displacement isn't widespread, companies shouldn't be burdened with regulations that protect Americans.

Summary: ACWIA that 8 U.S.C. 1182(n)(1)(E) only applies to applications filed between the time the final implementing regulations are promulgated by DOL and September 30, 2001.

Just in case the loopholes discussed below aren't enough for companies that want to replace Americans with H-1Bs, these meager protections will expire soon.

Summary: ACWIA (8 U.S.C. 1182(n)(1)(E) prohibits H-1B dependent employers and willful violators from hiring an H-1B nonimmigrant if their doing so would displace a U.S. worker from an essentially equivalent job in the same area of employment.

This sounds like a very good protection until you read what the terms "essentially equivalent job" and "H-1B dependent" really means.

A job shall not be considered to be essentially equivalent of another job unless it involves essentially the same responsibilities, was held by a United States worker with substantially equivalent qualifications and experience, and is located in the same area of employment as the other job.'' This definition, thus, requires three comparisons to determine whether displacement occurs: job responsibilities; workers; and locations.

Companies would have no problem shuffling job descriptions to that they would comply with this loophole. They could fire a programmer/analyst with Oracle experience and hire an H-1B software engineer with Oracle and Access experience. As far as location is concerned everybody knows how the corporate shell game works:

Employee A (American) from Department 1 is transferred to Department 2
Department 2 fires Employee A.
Department 1 hires an H-1B.
Result: Employee A lost his job, but the company will claim he wasn't
replaced with an H-1B because the two departments are separated - by an office wall.


Definition of "H-1B dependent employers":

(an employer that has fewer than 26 full-time equivalent employees in the U.S. and more than 7 "non-exempt" H-1Bs, or an employer that has between 26 and 50 full-time equivalent employees in the U.S. and more than 12 "non-exempt" H-1Bs, or an employer that has at least 51 full-time equivalent employees in the U.S. of whom at least 15 percent are "non-exempt" H-1Bs.

If a company isn't H-1B dependent it can legally fire and replace Americans. So how many companies are barred from replacing American employees by this definition? Here is a definition of exempt:

... Exempt H-1B nonimmigrants" includes any H-1B who receives wages (including cash bonuses and similar compensation)of at least $60,000 a year AND any H-1B with a master's or higher degree, "or its equivalent," in a specialty related to the employment.

None of the "exempt" H-1Bs count in determining whether an employer is H-1B dependent!  

DOL Expert

The H1-B doesnt actually have to have a real accredited Masters degree. The company can say that their experience level is equivalent to a Masters degree.

What that means is that companies can give a Master's degree equivalent to any H-1B they want to claim is exempt. How many companies are willing to give a U.S. citizen an associate Master's degree? I doubt if it has ever happened. The prohibition on displacement within the employer's own workforce applies for 90 days before and 90 days after the date of filing of any H-1B petition based on the LCA.

If an employer fires an American worker 91 days before or after filing for an LCA they are totally legal. In many situations the H-1B is already employed at the company before the LCA is filed, so this huge loophole allows companies to hire the H-1B, fire the American, wait 91 days, and then file for an LCA. This seems to be the largest loophole for companies that want to replace Americans with H-1Bs.

The prohibition on displacement within the employer's own workforce applies for 90 days before and 90 days after the date of filing of any H-1B petition based on the LCA. The prohibition on ``secondary'' displacement, at another employer's worksite, applies for 90 days before and 90 days after the placement of H-1B worker(s) at the worksite. These prohibitions do not apply to the placement of ``exempt'' H-1B workers, if the employer's LCA involves only ``exempt'' nonimmigrants.

If a company hires a salaried H-1B, they don't even need to wait 90 days to fire their American employee. Check out my Visa Database and you will see that almost all H-1Bs are salaried (or exempt). employer is prohibited from ``displacing'' a U.S. worker who is ``employed by the employer'' or is employed by some other employer at whose worksite the sponsoring employer places an H-1B nonimmigrant where there are ``indicia of employment'' between the H-1B worker and that other employer.


So you may ask what is an "employed by the employer"? Here is their answer


ACWIA contains no definition of the phrase ``employed by the employer.'' In this circumstance, where Congress has not specified a legal standard for identifying the existence of an employment relationship, the Department is of the view that Supreme Court precedent requires the application of ``common law''..... Mindful of the Supreme Court's teaching that since the common-law test contains ``no shorthand formula or magic phrase that can be applied to find the answer...

Is this hilarious or what? Whomever wrote this section will never have to fear being unemployed because Jay Leno's can always use good comedy script writers!!!

In a provision described herein as the ``secondary displacement prohibition,'' the ACWIA prohibits the displacement of U.S. workers employed by another (``secondary'') employer, if an H-1B-dependent employer (or willful violator) intends or seeks to place its own H-1B workers with that other employer in a situation where, among other things, there are ``indicia of an employment relationship between the nonimmigrant and such other employer.''

The Department, after careful consideration, has concluded that this term--``indicia of an employment relationship''--identifies a relationship which is less than an employment relationship but more than the H-1B worker's mere performance of duties at the secondary employer's worksite (such as being dispatched for a brief part of a work day to diagnose or repair equipment at that other employer's location).

This sounds like a way to give bodyshops a great loophole as well as companies that loan their H-1Bs to other divisions. Companies can always claim that they are "less than more". H-1B employer may be debarred for a secondary displacement ``only if the Secretary of Labor found that such placing employer knew or had reason to know of such displacement at the time of the placement of the nonimmigrant with the other employer.''

So all the placing employer had to say is that they didn't know. Both employers can point fingers at each other and nothing will ever be proved.

The ACWIA's secondary displacement prohibition requires that certain H-1B employers (H-1B-dependent; willful violator) not place any H-1B worker at another employer's worksite (to work under ``indicia of employment'' with such secondary employer), ``unless the [H-1B] employer has inquired of the other employer as to whether, and has no knowledge that ... the other employer has not displaced or intends to displace a United States worker employed by the other employer'' within the period of 90 days before and 90 days after the H-1B worker's placement at that worksite. The ACWIA further specifies (in the enforcement and penalties provisions) that the H-1B employer may be debarred for a secondary displacement ``only if the Secretary of Labor found that such placing employer ... knew or had reason to know of such displacement at the time of the placement of the nonimmigrant with the other employer.''

The requirement that a company has to admit that they are a willful violator is moot because no company would be that stupid. If a complaint is lodged against a company, it will come down to one employer's word that against another. That is almost impossible to prove in court. The secondary employer (bodyshop) can claim that they were never told that an American worker was to be replaced. Try proving that! 

If the case can't be resolved in court, and it won't, it is up to the Secretary of Labor to decide which employer is lying. Big deal! The Secretary won't be able to arbitrate a dispute like this any better than a judge. I would be willing to bet that the Secretary of Labor has never once made a decision of this kind.

In the cases where finding a violation of the non-displacement provision comes down to one employer's word against another (as in the secondary displacement scenario), it is unlikely that DOL would ever get far enough to into the penalty process to have to choose which employer was lying. Before DOL can even institute a hearing on an alleged violation, it has to decide whether there is a "reasonable basis" to believe a violation has been committed. It is likely that DOL would require serious documentation of a violation before it would find a reasonable basis, and only then would it proceed to the hearing stage.

The language and structure of these provisions demonstrates that Congress intended for the H-1B employer to take proactive steps to ascertain whether placement of H-1B workers would correspond with the lay off of similarly-employed U.S. workers. In enacting this provision, Congress clearly intended that the employer make a reasonable inquiry and...... blah, blah blah

This is a feel good paragraph that attempts to make the American public feel good about the intentions of the DOL and our Samaritan corporations. I don't feel good and neither should you!

The Department recognizes that the ACWIA obligation concerning ``secondary displacement'' could easily be subverted if a placing H-1B employer were merely to make a pro forma inquiry and rely on a pro forma reply.

The DOL recognizes that employers will lie and cheat. The problem is that they don't  intend to do anything about it.

The ACWIA specifies that, even though an H-1B worker may be placed in a job similar to one formerly held by a U.S. worker, no ``displacement'' or ``lay off'' is considered to have occurred if the U.S. worker left the job through ``voluntary departure or voluntary retirement.'' As a logical and obvious matter, the requirement of ``voluntariness'' is crucial to the effectiveness of this provision in assuring appropriate protections of U.S. workers' jobs in situations where nonimmigrants are being hired.

Companies all over the United States are forcing employees to "volunteer" to retire. Older employees are told that they can either "volunteer" to retire and they will get a severance, or they may be subjected to a lay off with no benefits. This corporate blackmail is the easiest and most favored way to eliminate over 40 year old employees. Basically the DOL is giving companies the right to fire older employees and replace them with H-1Bs.

Further, the employer is required to keep all documents concerning the departure of such employees... These records are necessary for the Department to determine whether the H-1B employer has displaced similar U.S. workers with H-1B nonimmigrants.

Companies are required to document the firing of their American workers. Since the DOL almost never investigates these cases, and since the records can use any of the above mentioned loopholes, these records are meaningless. The DOL doesn't check employers to make sure they keep these records. When violations are found, the Administrator of the Wage and Hour Division of ESA may assess a civil money penalty not to exceed $1000 per violation and impose other appropriate remedies, including payment of back wages.

The $1,000 fine won't strike fear in any Fortune 500 company that saves $20,000 a year by replacing an American worker with an H-1B. 

The ACWIA contains some new civil penalties: regular failures and "substantial" failures to meet the requirements still merit only a $1000 fine; willful failures can be punished with a fine of up to $5000; and willful failures that resulted in the illegal displacement of U.S. workers within the 90-day period (assuming they can be proved!) can be punished with a fine of up to $35,000.



The politicians that wrote these laws methodically put in loopholes to provide companies with legal protection when they fire U.S. employees and replace them with H-1Bs. These loopholes are no accident; companies have lobbied to prevent these loopholes from being removed.