I took the implication to be that GP already had a good employee who was hired legitimately under the terms of the H1B, but that, to convert to a green card, you have to see whether a US person could do the job. So you have to put out for interviews to see, but you don’t have to act on that information.

If the interview process yields a US person equally qualified, GP can’t (and doesn’t) certify the guest worker’s green card application. But that doesn’t mean they have to fire them and send them home early: they can let the guest worker work out their contract if they want to (which they probably do, it probably pays well compared to other options). And an experienced, already-trained, good employee is probably more valuable to the business than an immediate, unplanned new hire anyway.

So yes, certainly screwed up incentives—but I don’t see how it would be better to require guest workers to put their jobs in immediate jeopardy just to apply for permanent residency.