The Trump administration suspended Microsoft from the federal program the company uses to help foreign workers stay in the U.S. permanently, accusing the tech giant of abusing the system.

The announcement by Vice President JD Vance, during a news conference Thursday morning at the White House, came hours before President Trump gave Microsoft CEO Satya Nadella the National Medal of Technology and Innovation in a ceremony honoring Elon Musk and other tech leaders.

Vance said Microsoft laid off 6,000 American workers last year while getting 6,300 H-1B visas and nearly 3,000 green cards, which he said amounted to replacing U.S. employees with lower-paid foreign workers.

“There has been no company in the United States, unfortunately, that has abused the system more than Microsoft,” Vance said at the news conference, while adding, “Our message to Microsoft is you’re a great American company, but you’ve got to hire great American workers.”

Microsoft’s response: In a statement, the company said 80% of the roughly 6,000 H-1B applications it filed last fiscal year were to extend or change the status of people who already work for the company. The rest were for new hires who were already living in the U.S. legally, a group equal to about 1% of its U.S. workforce.

“They are not new arrivals to our country,” the company said.

Microsoft said it pays H-1B employees “the same as any other employees doing comparable work,” that its wages are “among the highest of all H-1B filings,” and that the vast majority of its U.S. employees are Americans.

The statement didn’t mention the suspension, but the company said it looks forward to “providing the Administration with additional information.”

Details of the penalty: The suspension covers the Labor Department’s Permanent Labor Certification program, known as PERM. It’s usually the first step when a company sponsors a foreign employee to live and work in the U.S. permanently. To get approved, the employer has to advertise the job and show the government that no qualified American worker was available.

Labor Secretary Keith Sonderling said the department won’t accept new applications from Microsoft or process the ones it already has pending. The move doesn’t stop Microsoft from applying for H-1B visas, the temporary work visas that many PERM applicants hold.

The department also suspended Adobe and six IT outsourcing firms: Cognizant, Infosys, Tata, Wipro, HCL and Capgemini.

Trump didn’t mention the suspension at the ceremony. Introducing Nadella, he credited him with making Microsoft “an early leader in superintelligence” and said, “Satya, we are honored to give you the National Medal of Technology and Innovation. It is so well deserved.”

The official citation honored Nadella “for his transformative leadership of a critical American technology company” and for building the “hyperscale infrastructure that enabled the training and global deployment of American superintelligence.”

Tech industry reaction: The announcement drew pushback in Seattle’s tech community.

“There has been a continuous, nonstop deluge of immigration-related news leading up to the midterms,” said Xiao Wang, co-founder and CEO of Boundless, a Seattle startup that helps people navigate the U.S. immigration process.

Wang pushed back on Vance’s characterization of H-1B workers as “foreign indentured servants,” noting there are wage requirements to prevent underpayment of employees. He emphasized the economic benefits of educating and employing the students and workers who seek these visas — and what happens if they’re discouraged or prevented from coming to the U.S.

“What I have been trying to warn folks about is the long-term chilling effects that would be detrimental to the long-term prosperity and competitiveness of the United States,” he said.

Wang said the idea that the layoffs and recruitment of foreign-born workers are linked doesn’t make sense. “Layoffs and hiring are not one for ones of each other, especially at giant companies like Microsoft,” he said.

Someone laid off from a gaming division at Microsoft isn’t interchangeable, for example, with an H-1B employee who’s an expert in agentic AI for a Copilot role, he said.

Priyanka Kulkarni, founder and CEO of the immigration technology company Casium, previously worked at Microsoft for more than a decade building enterprise AI technology. She personally navigated H-1B status before becoming a permanent resident.

“I worked alongside people from around the world whose expertise helped build technology used by American businesses every day,” she said, adding, “America wants to lead in AI. That requires attracting and retaining exceptional people, and giving them confidence that they can build a future here.”

Kulkarni called the phrase “foreign indentured servants” troubling, and said it exposes a contradiction in the administration’s action.

“If the concern is that workers depend too heavily on their employers, blocking their path to permanent residency could deepen that dependence,” she said. “Permanent residency gives people more freedom to change jobs, negotiate pay, and start businesses.”