Contrary to many misinformed (and probably disinformed, courtesy of industry lobbyists) letters that many members of Congress send their constituents, the H-1B visa doesn't require that American workers be given employment priority. That includes not only hiring but also layoffs. There is an exceptional category in the visa, discussed below, but it is tiny.
In fact, a number of major American firms have admitted to laying off Americans while retaining H-1Bs, for instance Sun Microsystems. (Santiglia v. Sun Microsystems, U.S. Dept. of Labor, Office of Administrative Law Judges, Case No.: No. 2003-LCA-2, pages 9 and 206; San Francisco Chronicle, June 25, 2002.) Moreover, many major firms were laying off Americans and forcing them to train their H-1B/L-1 replacements. (See for example Margaret Quan, "Critics Warn New Visa Bill Doesn't Go Far Enough," Electronic Engineering Times; May 22, 2003 and WKMG-TV news broadcast, Where Did the Jobs Go?, , February 17, 2003, updated February 19; Jim Gardner, "Bank Job: You're Fired, Now Go Train Your Replacement," San Francisco Business Times, November 22, 2002; Jennifer Bjorhus, "U.S. Workers Taking H-1B Issues to Court," San Jose Mercury News, September 26, 2002.)
In Guy Santiglia's complaint cited above, Sun Microsystems took a defiant stance in the press, saying that they could hire and fire whomever they wanted, regardless of whether a worker held an H-1B visa or not. There is indeed nothing to stop them.
Sun claimed that they retained H-1Bs only because they were better workers. For many reasons, I'm quite suspicious of that claim, but those who work in the trenches have also seen that managers often don't have the heart to lay off an H-1B, thus removing the right to work in the U.S. and possibly forcing him/her to return to the home country. (As if that were a catastrophe second to none.) But I'm surprised to see Microsoft actually admit that publicly, as they do in one of the enclosures below.
Senator Grassley, who wrote the letter to Microsoft included in the article, [U.S. Sen. Grassley: Works to ensure American workers are priority, Iowapolitics.com, January 23, 2009]introduced an excellent H-1B reform bill with Senator Durbin in previous sessions. Among other things, it would extend the protections in H-1B's minuscule "H-1B dependent employers" provision to all employers. This would prohibit hiring of H-1Bs while laying off Americans, but to my knowledge would not cover the issue of laying off H-1Bs. By the way, I have not heard whether Grassley and Durbin plan to reintroduce their bill.
Of course, the statements made by Microsoft and lawyer Weber in Senator wants Microsoft to preserve American jobs over those of foreign guest workers are standard industry lobbyist propaganda. I've refuted their points many times and will not take time to address them all here, but I do feel compelled to address one:"Perhaps Senator Grassley forgot that Google and innumerable other large and small American companies that were founded by foreign workers have created tens of thousands of jobs for U.S. citizens...Google was NOT founded by "foreign workers." Page was born in the USA, and Brin immigrated to the U.S. as a child. Brin was NOT a foreign student and he was NOT an H-1B. Moreover, we don't need Google. I use it every day and enjoy its cute pictures etc., but I could do just as well with the search engines offered by Yahoo! or Microsoft or others.