USCIS Proposes Far Reaching Changes to H-1B Program, including the H-1B Cap Selection Process
On October 25, 2023, the US Citizenship and Immigration Services (USCIS) published a Notice of Proposed Rulemaking (“proposed rule”), impacting H-1B, F-1 and other nonimmigrant work-authorized categories. If adopted, the proposed rule would make far reaching changes to many components of the H-1B program. Most importantly, the rule would modify the H-1B cap selection process (the ‘cap lottery’) to prevent individuals and petitioners from increasing their odds of selection in the lottery by submitting multiple registrations for the same person. Among other changes, the proposed rule would lengthen the H-1B ‘cap gap’ extension period by 6 months, provide more flexibilities for entrepreneurs to obtain H-1B status through businesses they own, eliminate itinerary requirements for H-1B workers, and, under certain circumstances, allow petitioners to change the validity period of H-1B petitions that are approved on appeal, after the original requested validity period has passed. The proposed rule also seeks to clarify and codify many aspects of USCIS’ long-standing policies relating to H-1Bs, including off-site placements of H-1B workers, evidentiary standards for ‘specialty occupation’ determinations, and requirements relating to employer-employee relationships. The proposed rule will only take effect when, and if, it is adopted as a final rule – a process that could take several months. We have provided an overview of the most important proposed changes below.
Changes to the H-1B Cap Registration System (“The Cap Lottery”)
In response to the claims of fraud and abuse in the H-1B cap registration process, the proposed regulation aims to strengthen the H-1B cap registration system and process through the following five key modifications:
USCIS is proposing to modify the random H-1B cap selection process by basing the selection process on each unique beneficiary identified in the registration pool, rather than each registration by a petitioning employer. Thus, each unique beneficiary would be entered in the selection process once, regardless of how many registrations were submitted on their behalf. If a beneficiary is selected, each employer that submitted a registration on that beneficiary’s behalf would be notified of selection and would be eligible to file a petition on that beneficiary’s behalf. This new “beneficiary-centric” selection process would ensure that all beneficiaries have the same odds of being selected in the H-1B cap lottery, regardless of the number of registrations submitted on their behalf;
Since the efficiency of the new selection process would rely on the USCIS’ ability to identify each individual beneficiary, the USCIS is proposing a change to the registration form in order to gather additional information from beneficiaries. Beneficiaries would need to provide their valid passport information, including passport number, country of issuance, and expiration date. A beneficiary would no longer be able to submit a registration without a valid passport;
USCIS is proposing to bar the submission of multiple H-1B cap registrations by related entities for the same beneficiary. However, the new regulation would allow multiple registrations from related entities if the entities can establish a legitimate business need for submitting multiple registrations for the same beneficiary;
USCIS is proposing to codify its authority to deny or revoke a H-1B cap petition if the information provided in the registration, including the beneficiary information, petitioner information, and attestations, are determined to be false; and
USCIS is proposing to codify their current practice that permits petitioners to request a start date of October 1 or later on the H-1B cap petitions, as long as the requested start date occurs no later than six months after the filing date of the petition.
Lengthening of H-1B Cap-Gap Extension Period
The proposed rule would lengthen the H-1B ‘cap-gap’ extension period by six months, to help minimize gaps in student work authorization caused by USCIS processing delays. The current cap-gap extension was added to the H-1B regulations in 2008 to allow F-1 students with optional practical training (OPT) work authorization who were selected in the annual H-1B lottery to continue working between the end of their OPT work authorization period, and the start of the fiscal year, on October 1st, which is when their H-1B petition would normally take effect. The provision was designed to address the gap in work authorization that many F-1 students faced because OPT usually expires a few months before the start of the fiscal year. The existing rule does not however prevent a gap in OPT work authorization where the USCIS has not completed adjudication of the H-1B petition by the start of the fiscal year. Under these circumstances, the F-1 students relying on a ‘cap-gap’ extension loses their work authorization if the petition is still pending on October 1 stand must be taken off of payroll until the petition is approved. The delayed adjudications that have resulted in this situation have become more common over the last few years due to the need to conduct second cap lotteries only a few weeks before the start of the fiscal year, increased processing backlogs with the USCIS, and occasional suspensions of optional premium processing.
In the Proposed Rule, the USCIS has acknowledged that current regulations are not adequate in protecting students selected in the lottery from losing work authorization, and has proposed extending the end date of the cap-gap period from October 1st to April 1st of the fiscal year for which the H-1B cap petition was filed. It is hoped that this additional 6-month extension will provide sufficient time for the USCIS to complete adjudication of all H-1B cap petitions for that fiscal year. As with the existing rule, cap-gap work authorization would cease before the end of the cap-gap period if the H-1B petition is denied.
Revised Policy for ‘Beneficiary-Owner’ H-1Bs to Aid Entrepreneurs
An intriguing proposal in the proposed rule is aimed at encouraging entrepreneurs to use the H-1B program to start and grow their business. Historically, it has been difficult for entrepreneurs who are majority owners of their business (referred to as ‘beneficiary-owners’) to obtain H-1B status, due to the requirement that there be an employer-employee relationship between the sponsoring business (the petitioner) and the H-1B worker (the beneficiary). The USCIS has interpreted the employer-employee concept narrowly to exclude an H-1B worker from being considered an ‘employee’ if that beneficiary owns a majority of the petitioning business, except in the unusual situation where another person, or other persons associated with the business, such as a board of directors or investor, exercises some controls over the beneficiary-owner. Without explicitly discarding the ‘control’ requirement for owner-beneficiaries, the proposed rule appears to subtly do away with it by proposing other conditions, that if met, would allow beneficiary-owners to be sponsored for an H-1B by their business. Most importantly, the proposed rule lays out a ‘majority of the time’ framework whereby the petitioner must establish that the beneficiary-owner will spend a majority of their time performing specialty occupation duties. This condition would allow the beneficiary-owner to spend less than a majority of the time on non-specialty duties directly related to owning and directing the business, including incidental tasks, such as answering phones and making copies. The USCIS would also limit the validity period for the first two H-1Bs petitions for beneficiary-owners to 18 months each, as opposed to the usual 3 years, as a ‘guardrail’ to protect the H-1B program from fraud and other abuses.
Revision to “U.S. Employer” Definition / Elimination of Employer-Employee Requirement
Related to the H-1B entrepreneur / beneficiary-owned petitioners changes mentioned above, the USCIS proposal will revise the definition of “U.S. Employer”. Current regulations define a “U.S. employer” as a person, firm, corporation, contractor, or other association, or organization in the United States that: (1) Engages a person to work within the United States; (2) has an employer-employee relationship with respect to employees. Under the proposal, a “U.S. Employer” will be defined as a petitioner that has a legal presence and is amenable to service of process in the United States. The proposal will also eliminate the employer-employee relationship requirement, which currently requires the petitioning employer to establish that it meets at least one of the ‘‘hire, pay, fire, supervise, or otherwise control the work of’’ factors with respect to the H-1B beneficiary. In place of this requirement, the proposal will require the petitioning employer to demonstrate that it has a bona fide job offer for the beneficiary to work, which may include telework, remote work, or other off-site work, within the United States. This revised definition will address the inconsistency with the Department of Labor’s definition of “employer” on the labor condition application (LCA).
Revision to Specialty Occupation Definition
To merit approval for the H-1B visa, the position offered must be a “specialty occupation” and the beneficiary must possess a bachelor’s degree (or the equivalent). Definition of the “specialty occupation” standard occurs in both statute (Immigration and Nationality Act and Title 8 of the U.S. Code) and in regulation (Title 8 of the Code of Federal Regulations). In its proposed rule, the USCIS seeks to revise the regulatory definition to better align with the statutory definition. The proposed rule would also codify the existing USCIS practice of requiring a direct relationship between a required degree field and the duties of the position – what is often referred to as showing a degree nexus.
USCIS consistently recites that general degrees, such as a Liberal Arts or Business Administration degree, without further specialization, would not satisfy the specific degree requirement.
Clarification of Specialty Occupation Criteria
Under current regulations, USCIS criteria states that a bachelor’s or higher degree in a specific specialty must be “normally” required as the minimum requirement for entry into the occupation to perform the duties of the occupation. Through interim regulations promulgated by the Trump Administration and later vacated by federal courts, the specialty occupation standard pushed strict and narrow definitions that were used by USCIS adjudicators to interpret “normally” to mean “always”. The proposed rule seeks to clarify that “normally does not mean always” – so long as the degree requirement for the position is “normal, usual, typical, common or routine.”
Provisions to Ensure Bona Fide Job Offer for a Specialty Occupation Position
To further protect against the perceived fraud plaguing the H-1B Cap registration system, the USCIS will codify the existing requirement that the petitioner have a bona fide job offer, and is proposing the following measures:
Contracts: USCIS will codify its authority to request specific documentation which will assist in determining whether a bona fide job offers exist. Specifically, the USCIS seeks authority to request contracts, statements of work (work orders) or milestone tables.
Non-speculative employment: Employers will be required to demonstrate that they have non-speculative positions available for the beneficiary beginning on the requested start date of the petition.
LCA correspondence with petitions: The USCIS will have express authority to determine whether an LCA properly supports and corresponds with an accompanying H-1B petition.
Amended H-1B Petitions
Under the proposed rule, the USCIS aims to codify its precedent decision Matter of Simeio Solutions, LLC, which held that a change in geographic area of employment for H-1B workers is considered a material change and requires the filing of an amended or new petition before the H-1B worker may perform work under the changed conditions. USCIS is adopting much of the existing regulations that govern Labor Condition Applications (LCA) promulgated by the U.S. Department of Labor. While LCA regulations generally apply to H-1B, E-3 and H-1B1 workers, the proposed rule includes a specific carveout for H-1B workers that allow for short-term placement of less than 30 days, or in some cases, up to 60 days and do not require a new LCA or amendment petition, if certain conditions are met.
Codification of USCIS’ Deference Policy
The USCIS proposes to codify its existing policy on giving deference to prior approvals on subsequent I-129 petitions and to clarify the circumstances on when this policy will apply, to ensure consistent adjudications. The USCIS’ deference policy is not new and has been a long standing policy for I-129 extension of stay petitions since 2004. However, this policy was rescinded in 2017 by the Trump Administration, which required the USCIS to adjudicate extension requests as new petitions. In 2021, under the Biden Administration, the USCIS reinstated its 2004 deference policy.
Consistent with current policy, USCIS adjudicators will be instructed to consider previous decisions/approvals when reviewing an I-129 petition that involves the same parties (same petitioner and beneficiary) and same facts, so long as there are no material changes or prior errors in adjudication that would adversely impact eligibility. Furthermore, the proposed regulations will expand the policy to apply more broadly beyond I-129 extension of stay requests.
Evidence of Maintenance of Status
The USCIS’ proposed regulation will codify and clarify the USCIS’ current policy on the required evidence demonstrating the beneficiary’s maintenance of status when seeking an extension of stay, change of status, and amendment requests. Under the proposal, the petitioner must submit supporting evidence with the subsequent petition that establishes the applicant or beneficiary has maintained the previously accorded nonimmigrant status before the extension request was filed. Such evidence includes, but is not limited to, copies of paystubs, W–2 forms, quarterly wage reports, tax returns, contracts, and work orders, as well as copies of the beneficiary’s Form I–94, passport, travel document, or Form I–797 demonstrating current lawful status.
The proposed regulation will apply to E–1, E–2, E–3, H–1B, H–1B1, H–2A, H–2B, H–3, L–1, O–1, O– 2, P–1, P–2, P–3, Q–1, R–1, and TN nonimmigrants. The codification and clarification on the required evidence of maintenance of status is aimed to reduce the issuance of requests for evidence (RFE) or notices of intent to deny (NOID).
Elimination of H-1B itinerary Requirement
The USCIS proposes to eliminate the itinerary requirement. This would harmonize the H-1B regulations with the USCIS Policy Memorandum published in June 2020 that rescinded a policy issued in February 2018 that detailed the itinerary requirement for individuals with multiple worksites. The proposed regulations go a step further by additionally removing the requirement of itineraries for petitions filed by agents.
Prior to the June 2020 rescission memo (when WFH and hybrid work arrangements were uncommon), itineraries listing dates and locations of employment were required for positions where individuals were assigned to work at different worksites. This was often seen in consultant-type positions as well as positions typically managed by agents. Itineraries were required to show that there was non-speculative demand for the individual’s employment in the United States. Concrete business arrangements and contracts needed to be made in advance, and evidence to back up the itinerary was also required. Documenting that the foreign national’s services were booked for the entire, maximum three-year period that could be potentially requested in an H-1B filing was a challenge for employers. It had the effect of necessitating more frequent filings, adding to employer costs and burden.
As part of the USCIS’ drive to modernize the H-1B program through new efficiency measures, the requirement for an itinerary will be removed from the regulations. This is in recognition of the fact that the itineraries contain information included in the LCA, which require the petitioner to specify work locations. Form I–129 used for H-1B filings also requires the petitioner to provide the address where the beneficiary will work if different from the petitioner’s main address.
While the elimination of the itinerary requirement will bring welcome relief to petitioners, the proposed regulations does not specifically remove the requirement for corroborating evidence. The USCIS may continue to request contracts or similar documents to show that the services to be performed at additional locations involve specific and non-speculative qualifying assignments and the performance of specialty occupation duties. With respect to agents filing as petitioners, the USCIS may require submission of contracts between the employer and the beneficiary in questionable cases.
Flexibility to Change H-1B Approval Period
The proposed rule would address a common problem that occurs where an H-1B petition that was previously denied is deemed approvable upon appeal or motion, but the requested petition validity period has already ended. Under current policy, the USCIS would be required to deny the petition, because the validity period has passed. Under the proposed rule, the USCIS may issue a request for evidence, informing the petitioner that it found the petition to be approvable, and asking it if it would like to change the validity dates to cover a period in the future. The petitioner would be permitted to submit a new labor condition application (LCA) which is required for all H-1B petitions, to cover the new requested validity period, even if the LCA was filed after the initial petition was filed.
H-1B Cap Exemptions
The USCIS proposal seeks to revise the requirements for exemption to H-1B cap lottery when a beneficiary is not directly employed by a qualifying institution, organization, or entity, and to revise the definition of ‘‘nonprofit research organization’’ and ‘‘governmental research organization’’ in order to clarify and expand eligibility, and address modern employment relationships. Under current policy, an H-1B employee is exempt from the annual cap lottery if they are directly employed by: (1) an institution of higher education; (2) a nonprofit entity related to or affiliated with such an institution; (3) a nonprofit research organization; or (4) a governmental research organization. Current policy also interprets existing regulation to require the beneficiary to work the majority of time (i.e. more than half of work time) with a qualifying cap exempt entity.
Under the USCIS proposal, H-1B beneficiaries who split their work 50/50 between a cap-exempt institution, organization, or entity and a non-cap-exempt entity may qualify for an H-1B exemption. The proposal also clarifies definitions of a H-1B cap-exempt beneficiary’s duties related to furthering the qualifying entity’s mission and activities. Furthermore, the proposal will expand the definition of ‘‘nonprofit research organization’’ and ‘‘governmental research organization’’ to include entities that conduct research as a fundamental activity, but is not primarily engaged in research, or where research is not the primary mission of the entity.
Site Visits
To uphold the integrity of the H-1B program, the USCIS is authorized under existing immigration law to conduct inspections and verifications at an employer’s work site to verify that the employer is in compliance with immigration law and that the employee is working according to their H-1B status. The USCIS proposal will expand the scope of on-site visits to determine compliance with immigration laws and regulations, such as an on-site visit of the petitioning organization’s facilities, access to all sites where the H-1B labor will be performed, interviews with its officials, and review of any records related to H-1B compliance.The proposed regulation also clarifies that an inspection may take place at the employer’s (or third party’s) headquarters, satellite locations, or the location where the H-1B employee works or will work, including their home, or third-party worksites, as applicable. Furthermore, any lack of cooperation or failure to allow the USCIS inspectors to conduct the on-site inspection or to interview H-1B workers outside the presence of the employer or its representatives will result in denial or revocation of the H-1B.
What this Means for our Clients
If the Proposed Rule becomes a final rule, it will enhance the H-1B program by making the H-1B cap lottery process fairer, give more opportunities to entrepreneur nonimmigrants, and provide much needed clarity to long-standing USCIS policies. By codifying these policies, the USCIS will improve transparency and accessibility for stakeholders whose lives and businesses are often deeply affected by them.
The changes proposed in this rule may not happen before the FY2025 cap season, and some of the changes may not happen at all. The USCIS states in the preamble to the Rule that it may become final before the lottery process begins, and hints that it has already redeveloped the software to implement the new process. It is possible that the USCIS will issue a final rule implementing only the H-1 cap related provisions first, and issue other rules implementing other provisions later.
The next stage in the rule-making process allows interested members of the public to provide comments on the proposals. The comment period is usually open for 60 days (the USCIS does not specify how long it will be open in this case). Only after the comments have been reviewed and considered by the USCIS, can a final rule be published. Because the USCIS is obligated to review all the comments, the more that it receives, the longer it is likely to take for the rule to become final.