A Fee for H-1B Employers Helps, But If It Doesn't Apply Equally to L-1 Employers It Will Cause Even More Abuse

By Puneet Ahluwalia

The Trump administration has proposed a $103,265 fee payable by companies who want to hire a new H-1B employee. It applies to each H-1B petition they file. It makes sense. If an employer claims it must import a foreign professional rather than hire or train an American, the company should bear the cost of that decision.

The problem is that it provides an even greater incentive for companies to end-run the H-1B visa system by hiring their foreign workers on L-1 visas.

The H-1B visa is already more tightly regulated than the L-1, and many employers have discovered they can end-run those constraints by turning to the L-1.

The L-1 program allows multinational companies to transfer executives, managers and employees with “specialized knowledge” from foreign offices to affiliated American operations. It has legitimate uses. A manufacturer opening an American facility may need an executive who understands its global operations. A technology company may require an engineer with genuinely unique knowledge of a proprietary system.

And unlike the H-1B system, the L-1 program lacks almost any guardrails to prevent fraud and abuse.

Unlike the H-1B, the L-1 system has no annual numerical cap, no lottery and no comparable prevailing-wage requirement. Employers generally do not have to demonstrate that qualified Americans are unavailable. “Specialized knowledge” can be interpreted broadly, while employees performing technical, consulting or sales work may be presented as managers. L-1A status also offers a quick route to EB-1C permanent-residence.

Charging H-1B employers $103,265 while leaving L-1 petitions inexpensive would be like closing the front door and hanging a neon sign over the back door.

First, a substantial fee for the L-1 visa would discourage labor arbitrage. If a company is transferring a worker because that individual is genuinely essential, the company should be willing to invest in the transfer. A substantial fee reduces the advantage a cheaper foreign worker has over the cost of hiring an American.

Second, it would create a genuine business-necessity test. Petitioning companies should have to answer four questions: Why this worker? Why this position? Why must the work be performed in the United States? Why can no available American perform it? A meaningful fee would force employers to consider the answers more carefully.

Third, it would discourage mass filings and category shopping. Large outsourcing firms should not be able to avoid H-1B limits simply by calling ordinary employees “managers” or claiming routine company knowledge is somehow indispensable.

The allegations involving Tata Consultancy Services illustrate the danger. Former employees alleged that TCS manipulated organizational charts and misclassified technical, consulting and sales employees as managers. Bloomberg reported that the company obtained more than 6,500 L-1A approvals between 2019 and 2023 — more than the next seven largest recipients combined. TCS denies wrongdoing, but the allegations demonstrate why financial and investigative deterrents are needed.

Fourth, L-1 fees could finance meaningful enforcement. Worksite inspections, foreign-affiliate verification, wage audits, whistleblower investigations and criminal referrals are costly and time consuming. Federal authorities reportedly have identified some 1,800 instances of suspected L-visa fraud, including nearly 200 cases in which L-1A recipients were determined not to be managers. Collecting fees without using them to police the program, however, would merely make abuse more expensive, not stop it.

Fifth, comparable fees would prevent regulatory whack-a-mole. Government cannot tighten H-1B while leaving L-1 open as a substitute. Employers will naturally move toward whichever category is cheaper and easier to obtain.

There is, however, a legitimate weakness in imposing a flat $103,265 fee. A fee that large would barely register on the balance sheet of Amazon or Google, but it could prevent a growing American company from hiring the one international executive or specialist it genuinely needs.

The answer is a graduated fee based on a company’s consolidated worldwide gross income. Smaller companies, say those with gross incomes of less than $20 million would pay no fee. The fee would increase, however, with a company’s gross income until those companies grossing more than $200 million would pay the full fee.

The government should calculate revenue across the petitioner’s parent company, subsidiaries and commonly controlled affiliates. Otherwise, large corporations could simply file through smaller entities to claim a reduced rate. Special provisions should also address high-volume petitioners: a company filing dozens or hundreds of L-1 petitions should not receive small-business treatment simply because it divides those filings among affiliates.

This graduated structure would preserve access for small but growing companies while requiring large corporations — those most likely to brush off a $100,000 fee — to bear the full cost. It would protect entrepreneurship without subsidizing multinational labor-importation strategies.

America should welcome exceptional people whose skills, knowledge and leadership genuinely strengthen our economy. But employment visas should supplement American labor, not game the system to hire cheap labor.

The Trump Administration’s proposed fee for H-1B petitions is a good idea and will help prevent employers from replacing American workers with cheap labor. But it won’t work if those employers can simply switch gears and go the L-1 route.

The administration should tie down that loophole before they make the rule official — and before unprincipled employers run through it.