H-1Bs And How Changing The System Will Help Startups


In order for the American economy to thrive, we must rely on our ability to innovate. The U.S. government now estimates that job growth is almost three times faster in the innovation-rich fields of science, technology, engineering, and mathematics than the rest of the economy. Yet despite the explosion in demand, the steady supply of workers in these fields lags far behind. Even with the United States’ high unemployment levels, more than a quarter of technological employers report difficulty in filling open positions. Foreign high-skilled workers can help fill this gap, and provide U.S. companies with the kind of know-how necessary to compete in the global marketplace.

The best way to fill these gaps is by increasing the controversial H-1Bs. Given today’s deadline for H-1Bs in the U.S., we must acknowledge that they are simply too difficult to get. The 65,000 annual allotment of H-1B visas is depressingly inadequate, and it has been exhausted every year since 2004, often within days. In 2013, the gap was reached in less than four days! As a result, the American economy is losing out on technical geniuses who could launch new companies and product lines, creating thousands of jobs for Americans.

Increasing the number of H-1Bs is only the first step to improving the current system. After seeing other startups struggle to obtain H-1Bs, and my own role as a founder of a startup, change needs to be implemented and the entire process needs to be easier and simplified. As of now, the larger companies with more resources and money are able to obtain far more H-1Bs than ever while startups are left in the dust. How is the little company supposed to grow and flourish if the larger and more experienced companies continue to gobble up all the prospects?

H-1B Visa Challenges for Startup Employees

For startups, the challenges of obtaining an H-1B visa begin long before finally filing a H-1B. Before even filing an initial petition, every company must file a Labor Condition Application (LCA) with the U.S. Department of Labor. The LCA is a series of statements that attest to the fact that hiring the H-1B employee will not adversely affect any U.S. citizen workers. Because the company isn’t as well known as some of the larger companies, they must go through hoops to establish that they are properly established, such as by showing they have the cash flow necessary to provide the employee with the prevailing wage as established in the LCA.

While this is normally not a problem for large corporation, it can be a huge time and resource drainer for companies trying to hurry to file an H-1B, especially startups that rarely have money coming in at first. Indeed, the filing fees for applying for an H-1B visa can cost nearly $4000, and that’s not even including attorney’s fees.

Things become even more muddled when the employee is also a co-founder or even owner of the startup. This is because of United States Citizenship and Immigration Services provisions that an H-1B employee has a demonstrable employee/employer relationship with the sponsoring company.

This can be a difficult task for a co-founder who may himself have authority over employees as well as hiring and firing responsibilities. In cases like this, according to the USCIS, the startup can “provide evidence that there is a separate board of directors which has the ability to hire, fire, pay, supervise or otherwise control the beneficiary’s employment.” Ultimately, as long as there is another entity that acts as a check on the employee’s authority, even if he or she is a majority shareholder, an H-1B visa may still be attainable.

But the H-1B visa is not a gateway to a green card. It is a work visa rather than an immigrant visa. If a startup founder finds great success in the U.S. and wants to stay beyond the six-year limit, he or she will have to begin an entirely new process of immigration applications and paperwork.

Suggestions for Change

Large technology companies have long urged Congress to increase the quantity H-1B visas—claiming there aren’t enough American developers, programmers and engineers to fill their open jobs.

But raising the annual cap, still won’t enable startups to be able to compete with the tech giants in luring H-1B talent. Most startups and small firms lack human-resources departments to handle the complex paperwork, and the funds to cover legal expenses associated with hiring someone under the program.

Only about 30 percent of applications for H-1B visas make it past the preliminary stage of the process, the bulk of which are filed by startups and small employers. Many small companies have given up on recruiting H-1B workers because the risks of an application being rejected are too high.

In order to help start-ups and small businesses obtain H-1Bs, there must be a more simplified procedure to let them recruit the workers they need. Many small tech companies do not have the resources to ensure numerous forms and procedures are done correctly, and before the annual quota fills up.

Of roughly 70,000 employers who applied for H-1B visas on behalf of their workers in 2011, nearly half applied for just one, and most applied for less than 10—suggesting they were startups or small employers. By contrast, larger technology companies such as Intel have applied for more than 1,400 of the visas each.

Another way for startups and small firms to have a chance, is for H-1B visas to be set aside directly for them, so that they aren’t always competing head-to-head with much larger employers. Despite the “mountain of paperwork” that a firm had to provide along with added fees and legal costs that would not be required for a local hire, many start ups still have hope for H-1Bs. –Talent is the most important thing. Startups need the ability to look for the best people possible. But with the current system, this is not feasible.

Matt Faustman is the co-founder of UpCounsel, an online marketplace for attorneys, and serves as its chief executive officer. Follow @matthewfaustman

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2 responses to “H-1Bs And How Changing The System Will Help Startups”

  1. American Worker says:

    Correction: there aren’t enough developers, programmers and engineers, that will work for pennies on the dollar, 80 hours a week with threat of deportation.

  2. StopTheLies says:

    Matt, where do you get your “facts”? From the Chamber of Commerce?

    Perhaps you’re unaware that 60% of H-1B visa go to foreign-owned, offshore outsourcers? A highly profitable — and corrupt — business model causing large-scale harm to both this nation and citizens — even as they abuse low cost foreign workers.

    One more piece of trivial. Do you know which nation had the largest preponderance of modern day slavery? No doubt you should be little surprised to learn this is India. A nation that also has widespread occurrences of bribery and corruption.