H-1B Visa Abuse: What You Need to Know

In January 2026, Texas Attorney General Ken Paxton launched investigations into three North Texas companies accused of running “ghost offices” to fraudulently sponsor H-1B visas. The businesses allegedly listed homes as corporate addresses and advertised products that don’t exist, depriving U.S. citizens of job opportunities. The case highlights growing federal and state scrutiny of H-1B abuse.

H-1B abuse occurs when employers break program rules to exploit foreign workers or replace American workers. The H1-B visa allows U.S. companies to hire highly skilled foreign professionals in specialty occupations when qualified domestic candidates aren’t available. When employers commit fraud, wage violations, or worker displacement, both U.S. and H-1B workers suffer the consequences. Read on to learn how H-1B abuse happens and what it means for workers and employers.

Types of H-1B visa abuse and fraud

Understanding how violations occur helps workers and employers recognize warning signs. Abuse of the H-1B program takes several forms, from wage manipulation to lottery gaming. Social media has brought increased attention to these issues, with videos of suspected ghost offices circulating widely online.

Wage violations and benching

Employers must pay H-1B workers at least the prevailing wage certified on the Labor Condition Application (LCA). Some H-1B employers violate this requirement by paying below the LCA amount or engaging in "benching," which means not paying visa workers while they wait for project assignments. Federal law prohibits benching because H-1B nonimmigrant workers must receive their certified salary for full-time work regardless of available projects.

Fraudulent business operations

The Texas AG investigation exemplifies this abuse pattern. Some entities create shell companies with fake websites, register residential addresses as worksites, or submit LCAs listing incorrect work locations. USCIS conducts site visits to verify that employer business information is legitimate and that H-1B workers actually perform the duties described in their H-1B petitions at the listed worksites.

Lottery gaming and multiple registrations

Before the 2024 reforms, some employers filed multiple H-1B lottery registrations for the same beneficiary through related companies or shell entities. USCIS received 780,884 registrations for fiscal year 2024 but only 470,342 for FY2025 after implementing a beneficiary-centric selection system. This 40% drop reflects reduced duplicate filings. The reform means each H-1B nonimmigrant beneficiary receives only one lottery entry.

U.S. worker displacement

H-1B-dependent employers (those with workforces where more than 50% hold H-1B status) must attest that they recruited American workers and will not displace U.S. workers within 90 days before or after filing a petition. Violations occur when companies conduct layoffs while simultaneously hiring H1B employees for similar roles, particularly in IT jobs where outsourcing models concentrate these concerns. Entry level positions have faced particular scrutiny in displacement cases.

Job duty misrepresentation

Some H-1B petitions overstate job requirements to justify specialty occupations classification or describe duties that differ from actual work assignments. USCIS site visits verify whether H-1B workers perform the tasks listed in their approved petitions. These visits confirm whether H1B employees actually work at the worksites specified on the LCA.

Government crackdowns on H-1B program abuse

Federal and state agencies have ramped up enforcement of the H-1B program in 2025 and 2026, affecting employers across industries. In September 2025, the U.S. Department of Labor (DOL) launched Project Firewall, opening 175 investigations into suspected violations, while USCIS expanded probes targeting lottery gaming and ghost employers, coordinating with law enforcement when criminal fraud is suspected.

In January 2026, Texas Governor Abbott ordered state agencies to freeze new H-1B petitions and review current program use, emphasizing that taxpayer-funded employment should prioritize U.S. citizens and Texans. Attorney General Paxton followed with Civil Investigative Demands to three companies suspected of fraud. Meanwhile, the Department of Homeland Security (DHS) increased unannounced site visits, focusing on H-1B-dependent employers, companies with unverified business information, and third-party placements, in coordination with the DOL Wage and Hour Division and the DOJ for discrimination cases.

Structural reforms were also implemented to address lottery abuse: the 2024 beneficiary-centric lottery limits each applicant to a single entry, closing a major loophole that previously allowed multiple submissions by the same individual through different employers.

Reporting H-1B fraud or violations

Anyone can report suspected H-1B visa abuse, including American workers, H-1B workers, or concerned third parties. Anonymous reporting is available through most channels

• USCIS: Submit tips through the online tip form. Include the employer name, specific violations observed, and supporting documents such as pay stubs or LCA copies. USCIS uses this information to prioritize site visits and investigations.
• DOL Wage and Hour Division: Report LCA violations, including wage underpayment, improper working conditions, or displacement of U.S. workers. The Wage and Hour Division can order back pay and assess penalties up to $35,000 per violation against violators.
• DOJ Immigrant and Employee Rights Section: Report national origin discrimination in hiring. Contact the Department of Justice section at 1-800-255-7688 or email ier@usdoj.gov.
• State attorneys general: Some states investigate H-1B fraud under consumer protection laws. Texas AG Paxton's investigation demonstrates state-level law enforcement authority over visa workers and their sponsors.

H-1B workers who report violations receive certain protections under federal regulations. If you faced employer retaliation for reporting an LCA violation and subsequently lost H-1B nonimmigrant status, USCIS may consider this an "extraordinary circumstance" when you apply for an H-1B extension or change of status. This discretionary relief allows case-by-case exceptions to normal eligibility rules.

Recognizing violations and consequences

Workers and employers should understand both the warning signs of abuse and the penalties violators face.

Red flags for workers:

• Salary paid is less than the LCA-certified prevailing wage amount
• Job duties differ substantially from the petition description
• Working at an unapproved location without a filed amendment
• Being benched without pay between projects despite full-time employment terms
• Employer threatens visa revocation if you raise concerns
• The company address is a residential home or an empty building
• Sudden layoffs coinciding with H-1B hiring in similar roles

Penalties for violators:

Civil penalties range from $1,000 to $35,000 per violation, plus the required payment of back wages. USCIS can debar H-1B employers from the program for one to three years. Criminal fraud charges carry fines up to $250,000 and imprisonment up to 10 years.

Beyond legal penalties, violators face public disclosure of enforcement actions, increased audit scrutiny, and difficulties recruiting legitimate talent. State-level sanctions may compound federal government consequences.

Understanding these indicators matters for visa sponsorship decisions. Not all employers abuse the system. Most H-1B employers comply with program requirements and provide valuable employment opportunities for highly skilled foreign workers.

How abuse affects workers and program changes

Abuse of the H-1B program creates consequences that extend beyond individual cases, affecting labor markets and policy development.

American workers face displacement and wage suppression when employers misuse the program. In IT jobs, particularly, some outsourcing firms have replaced domestic employees with H-1B visa workers, contributing to layoffs and reduced employment for U.S. citizens in certain sectors. Critics argue that outsourcing companies have used H1B employees to undercut wages for entry-level and mid-career positions.

H-1B workers also suffer under abusive H-1B employers. Visa portability limitations create power imbalances that unscrupulous sponsors exploit. Visa workers may tolerate wage theft or poor conditions because changing employers requires filing a new Form I-129 petition and maintaining continuous status.

The fiscal year 2025 lottery received 442,000 unique beneficiaries competing for 85,000 slots. This competition intensifies when legitimate applicants must contend with fraudulent entries. Reforms like the beneficiary-centric selection and enhanced site visits aim to level the field for legitimate H-1B petitions.

Industry composition has shifted in response to enforcement. Major Indian outsourcing firms that once dominated H-1B filings have reduced their visa use by approximately 70% since fiscal year 2015. Technology companies like Amazon, Meta, Microsoft, and Google now file the most H-1B petitions.

The Trump administration and subsequent administrations have prioritized H-1B enforcement through executive action and regulatory changes. State governors and attorneys general have joined federal efforts, creating multi-level oversight of program compliance with input from DHS and DOL.

Navigating H-1B compliance with expert support

H-1B compliance requires coordination across USCIS, DOL, and potentially DOJ. Violations carry penalties up to $35,000 per incident, criminal liability, and program debarment. Employers must maintain Public Access Files, accurate LCAs with prevailing wage documentation, and timely amendments amid heightened enforcement through initiatives like Project Firewall and expanded site visits.

Lighthouse provides eligibility diagnostics, LCA preparation guidance, and comprehensive petition legal review. Our case management technology tracks deadlines and amendments while experienced teams coordinate dependent applications and ensure filings meet USCIS standards. This approach minimizes the risk of Requests for Evidence, denials, and audit complications.

Start your H-1B petition with confidence.

Frequently asked questions

What is the H-1B controversy?

Critics cite cases where H-1B employers displace American workers, suppress prevailing wages, or game the lottery system. The Texas investigations and DOL's 175-case Project Firewall initiatives respond to these concerns. Supporters note the 85,000 annual cap represents a small fraction of the U.S. workforce and that properly administered programs fill genuine skill shortages in specialty occupations.

How do I report H-1B abuse?

Report through the USCIS online tip form, which accepts anonymous submissions. Include the employer name, specific violations observed, and supporting documents like pay stubs or LCA copies. For wage violations, contact the DOL Wage and Hour Division. For discrimination, call the DOJ Immigrant and Employee Rights Section at 1-800-255-7688.

Does H-1B abuse hurt Americans?

Abuse of the H-1B program harms U.S. workers through wage suppression and displacement, particularly in IT jobs. H-1B-dependent employers must attest that they recruited Americans first and will not displace them within 90 days. Research on compliant programs shows mixed effects, with some studies finding wage increases for native workers in fields with H-1B hiring.

What is the $100,000 rule for H-1B?

A proposed $100,000 fee on certain H-1B entries has faced legal challenges. This fee would be separate from existing charges, including the $460 Form I-129 filing fee and $500 fraud prevention fee. Current H1B employees in computer occupations earn median salaries around $125,000, and approximately 63% hold master's degrees or higher.

What triggers an H-1B audit?

USCIS and DHS target H-1B-dependent employers, companies with unvalidated business information, and third-party placements. Red flags include multiple lottery registrations for the same person, wage discrepancies between LCA and actual pay, and lack of legitimate business presence at listed addresses. Project Firewall intensified unannounced site visits in fiscal year 2025.