The U.S. guest workers program's design needs an immediate and substantial reform in the wake of high unemployment in the nation, says a study.

Loopholes in the H1-B and L-1 visas is enabling the offshore outsourcing companies to employ cheaper foreign workers, denying job opportunities to tens of thousands of American workers, said a recent by the Economic Policy Institute (EPI).

By definition, these guest visas are meant to bring foreign workers to supplement the U.S. workforce in case of shortage of skills.

The U.S. tech industry lost 245,600 jobs in 2009, while adding more than 100,000 H-1B visas, said the study citing TechAmerica report.

“These guest worker programs have badly damaged one of the most dynamic sectors of the American economy, information technology (IT),” the institute said.

The study titled ‘the H1-B and L-1 visas; Out of Control’ finds that loopholes in the design of guest visas allowed the employers to recruit foreign workers for open positions bypassing American workers. Employers can even replace existing American workers.

In 2005-2009, IBM topped the list of guest visas usage, at the same time eliminated about 28,000 from its US workforce, the think-tank said.

Infosys Technologies' holding of such visas increased more than ten times from 993 in 2000 to 10, 7000 in 2010.

Companies like Pfizer, Siemens, Nielsen, Wachovia, and Bank of America have reportedly forced their U.S. workers to train foreign replacements on H-1B or L-1 visas, the study said.

In 2009, Microsoft jumped to second place from fifth in the previous year in employing H-1B visa holders though it had cut 5,000 workers.

EPI said that low wage requirements for H-1B and absence of wage specifications for L-1 visas, which are increasingly exploited by the companies for wage arbitrage is another loophole that replaces high waged, high skilled American workers with low cost guest workers.

In case of L-1 visas, the wage arbitrage is high as the employers pay home country wages. By importing workers from India—the largest source country for L-1 visas—employers can get 90 percent discount compared to hiring an American, said EPI.

Further, the wage requirements of these visas also stifle businesses that hire American workers. Systems in Motion (SIM), whose business model is based on hiring and investing the US workforce, the abuse of guest worker visas is harming their business and their ability to create high-wage jobs for Americans now and in the future, EPI notes.

The institute notes that one of the fundamental flaws in the visas design is employers’ holding of visas rather than workers.

As the employers hold the visas, the workers have little chance to change the jobs and the employers could cancel the visas by terminating them.

Finally, the institute finds lack of supervision and enforcement in the visa programs is one of major loopholes in the system.

A scrutiny by the US Citizen and Immigration Service (USCIS) showed one of in five obtained H-1B visa under false pretences. In one case, a H-1B worker, certified as highly skilled, was found working in a laundromat, doing laundry and maintained washing machines.

“Stepped-up enforcement and oversight of the H-1B program is a welcome change from past government negligence but is insufficient. Ultimately, only Congress can fix the problems inherent in the programs’ design,” EPI said.

The L-1 visa program has not been reviewed for more than four years despite reported to have significant vulnerabilities to abuse.

“By closing the H-1B and L-1 visa loopholes, we would create and retain tens of thousands of good quality American jobs and ensure that our labor market works fairly for American and foreign workers alike” the study said.