If you are a U.S. company that wants to bring business visitors to the U.S., be aware of the fallout caused by an Alabama whistleblower lawsuit. This recent case has created havoc for many companies and has resulted in B-1 visa denials for numerous potential visitors.
The whistleblower alleged that Infosys, an international IT consulting company, committed fraud by employing foreign nationals in B-1 business visitor status rather than properly obtaining H-1B work visas for them (Palmer v. InfoSys Technologies Ltd., Inc., Case No. 45-CV-2011-900009.00, Circuit Court of Lowndes County, Alabama Feb. 23, 2011). In addition to this civil suit, a federal court in Texas has begun a grand jury investigation into the immigration practices at Infosys. The U.S. government is currently re-examining its B-1 business visitor program, resulting in more scrutiny and increased denials in B-1 business visitor cases, increased worksite enforcement efforts, and wage and hour, immigration, and tax audits.
B-1 business visitor visas are generally issued for foreign nationals coming to the U.S. for a short period of time, typically up to 3 months, for business-related activities. The activities can include attending seminars, board meetings, conferences, sales meetings, training sessions, etc. B-1 is not a work visa, and, generally, business visitors are not permitted to “work” in the U.S.; they cannot be paid by a U.S. company (except a stipend and reimbursement for travel expenses). In contrast, the H-1B is a work visa, allowing foreign nationals to work and be paid in the U.S. While the B-1 visa is restricted in use and duration, it is thousands of dollars cheaper and months faster to obtain than the H-1B. In addition, unlike the H-1B visa, a B-1 visa is not subject to H-1B statutory restrictions, including: 1) prevailing wage requirement (the employer must pay the H-1B worker at least the prevailing wage); and 2) no-benching requirement (barring employers from putting employees in between assignments on unpaid leave). For these reasons, many employers take advantage of the B-1 option when it is appropriate. Infosys has been accused of improperly taking advantage of the B-1 program, using it to employ regular workers in the U.S. for longer-term projects, alongside regular U.S. and H-1B employees, without paying prevailing wages and without normal withholding and payroll taxes. To add insult to injury, InfoSys has been one of the top users of H-1B visas over the last several years. In fiscal 2008, for example, InfoSys received almost 4,600 H-1B visas, more than any other employer.
Fallout from InfoSys
Restriction/Elimination of B-1 in Lieu of H-1B Category
Fallout from the InfoSys case began immediately. The Department of State issued a letter to Senator Grassley in response to his inquiry into the misuse, stating its intention to substantially restrict or eliminate the “B-1 in Lieu of H-1B” visa option. Currently, the Foreign Affairs Manual states that “in certain circumstances,” foreign nationals employed by foreign companies can come to “work” in B-1 status as long as they remain on the foreign payroll and are not paid any remuneration in the U.S. This has allowed flexibility to international companies to bring employees to the U.S. to work on short-term projects, inexpensively and quickly. However, the Department of State has now stated that it intends to severely limit or eliminate this B-1 option. This will make it much more costly for some companies to fill project assignments, and will delay start dates and lengthen the process of filling these U.S. project assignments.
Increased Scrutiny of Visa Applicants at U.S. Posts
In addition, those traveling for legitimate B-1 business visitor activities are facing greater scrutiny and experiencing greater denial rates, particularly in India and China. The Department of State’s Consular Offices worldwide, the Office of Fraud Prevention Programs, the Department of Homeland Security, and ICE are all increasing their vigilance when examining B-1 applications. Other nonimmigrant visa categories including the L-1 and H-1B are also being more closely scrutinized. In India, the Department of State suspended five large employers from the Business Executive Program at the Consulate due to fraud discovered in visa applications. At the Chennai post in India, the refusal rate for B-1 visa applications has increased by 25%. This increased scrutiny leads to greater risk and uncertainty for both foreign nationals and businesses. It may also prevent businesses and foreign nationals from trying the B-1 option for legitimate purposes since it may put that business “on the radar” for possible fraud.
Increasing Compliance Audits (I-9, Wage and Hour, and IRS)
I-9 and Department of Labor (DOL) Wage and Hour audits have become more prevalent in the wake of InfoSys. Generally, all U.S. employees must complete an I-9 form within 3 days of employment, proving with acceptable documents their identity and work authorization. B-1 workers in H-1B or regular employment positions may be in violation of the I-9 rules, leading to penalties. In addition, if the foreign worker was supposed to be in H-1B status, not in B-1 status, he may not be paid the correct wage, which is the higher of the actual or prevailing wage for the job. In such cases, the employer may owe back wages and be assessed penalties. DOL Wage and Hour auditors looking at B-1 wages have the discretion to broaden their audits to other wage and hour areas, increasing the potential exposure and liability to businesses. In addition, B-1 workers who should properly be in H-1B status most likely have not had employment or income taxes withheld from their wages, leading to IRS audits, investigations, and penalties.
International companies must weigh the risk of keeping workers on the foreign payroll while they are in the United States, and should examine the tax implications of doing so more carefully. In this age of increased inter-agency and inter-governmental cooperation, employers should be aware that an audit by one agency can lead to another audit by a different agency, and could keep you on the radar of each agency for repeat audits, and possible repeat or willful violator sanctions.