The decision was announced on Thursday, October 8, by Vice President JD Vance and officials from the US Department of Labor, who said the action was intended to protect American jobs and address alleged abuses of employment-based immigration programmes.

The decision has affected companies including Cognizant, Infosys, Tata Consultancy Services, Wipro, HCL Technologies, and Capgemini, according to the Department of Labor.

The suspension is from the Permanent Labor Certification (PERM) programme, a certification that allows employers to hire a foreign employee to work permanently in the United States. Under this requirement, employers must demonstrate that qualified American workers are not available for the positions before sponsoring foreign talent for permanent residency.

Vance singled out Microsoft, alleging that the company laid off 6,000 American workers last year while benefiting from thousands of H-1B visas and green card applications. He argued that companies should not dismiss American employees while relying on foreign workers to fill positions.

Expressing the administration's stance during the announcement, Vance said, "Our message to Microsoft is not that we want to harm your company… it's that we want your company to thrive, but we want it to thrive by employing and empowering your fellow Americans."

Labor Secretary Keith Sonderling said the department would stop accepting new applications and processing pending permanent labor certification applications involving the targeted companies while investigations continue.

Sonderling stated, "We will not accept any new or process any pending permanent labor certification applications involving these companies."

Microsoft defended its hiring practices, saying the vast majority of its US employees are American citizens. The company also said that approximately 80 per cent of its H-1B visa applications in the previous fiscal year involved extending or changing the status of existing employees rather than hiring new workers. Addressing its position in an official statement, Microsoft noted,

"Microsoft only files H-1B petitions for those who meet the rigorous standards of this visa category."

The measure does not amount to a blanket suspension of the H-1B visa programme. Instead, it restricts the targeted companies’ access to the PERM process, a key route through which eligible foreign workers can obtain permanent residency in the United States.

The announcement forms part of the Trump administration’s broader efforts to scrutinise employment-based immigration programmes and address allegations of visa fraud and unfair competition with American workers.