DHS Publishes Long-Awaited AC21 Final Rule in Federal Register

The Department of Homeland Security (“DHS”) published a Final Rule (“Final Rule”) in the Federal Register today, November 18, 2016, to codify its interpretation of important sections of the American Competitiveness in the Twenty-First Century Act of 2000 (“AC21”) and other laws relating to the employment and retention of high-skilled foreign workers. The Final Rule will be effective as of January 17, 2017. This Rule, which is slightly different form the Proposed Rule published in December 2015, adds new regulatory provisions and amends existing regulations to clarify several interpretive questions raised by the statutes. The Rule is expected to improve consistency in DHS’ adjudication of employment-based petitions and applications, and provide more predictability to employers that rely on high-skilled foreign workers. In addition, the Rule establishes several new benefits designed to provide foreign workers greater stability and flexibility to change jobs and remain in the U.S., while also providing U.S. employers greater stability and flexibility in the employment and sponsorship of these workers. While the Final Rule is long overdue good news for employers and high-skilled foreign workers, it is unclear whether the Rule will survive beyond the early days of the Trump Administration. The Rule may fall victim to the President-Elect’s promise to roll back Obama’s rule-making, and threats to “cut up” 70% of federal regulations. House Majority Leader Kevin McCarthy, speaking on behalf of Republicans in Congress, also recently warned the Obama Administration that the Republican-controlled Congress would scrutinize and overturn Obama regulations with “unintended consequences,” pursuant to the Congressional Review Act (the “CRA”). If the Final Rule is overturned pursuant to the CRA, DHS would have to obtain Congressional approval to reenact the same or substantially the same rule in the future. An outline of the key provisions of the Final Rule are provided below. Section 104(c) of AC21: 3-Year Extensions of H-1B Status beyond the 6-Year Limit Under Section 104(c) of AC21, H-1B workers are eligible for 3-year extensions of their H-1B status beyond the 6-year limit if such workers are beneficiaries of an approved EB-1, EB-2 or EB-3 I-140 immigrant petition, and are also subject to an immigrant visa quota backlog. The Final Rule addresses several interpretive issues with this section of the statute:

  • Multiple 104(c) Extensions. Although Section 104(c) benefits are termed “one-time” extension benefits in the statute, under the Final Rule, consistent with current policy, petitioners would be able request multiple 3-year extensions on behalf of beneficiaries so long as such beneficiaries remain subject to an immigrant visa quota backlog. The Final Rule amends language in the Proposed Rule to clarify that a 104(c) extension may be approved if the beneficiary is subject to a quota backlog at the time the extension is filed. Under the Proposed Rule, the person would only have been eligible if he/she was subject to the backlog at the time of adjudication.

  • 104(c) Extensions While Beneficiary is Outside the U.S. The Final Rule also clarifies that the 104(c) 3-year extension benefit would be available whether or not the H-1B worker is physically present in the U.S. at the time of filing the "extension" petition. This addresses a key ambiguity in Section 104(c). Although the word “extension” in the statute could be interpreted narrowly to mean an “extension of stay,” which is only available when a person is physically present in the U.S., the Final Rule clarifies that the term will be interpreted more broadly in this context to give the statute its intended effect.

  • Impact of I-140 Revocation on 104(c) Benefits. Under the Final Rule, I-140 immigrant petitions approved for 180 days or more will remain valid indefinitely for purposes of extending the beneficiary’s H-1B status, so long as the petition is not revoked for fraud, material misrepresentation, invalidation or revocation of a labor certification, or a material error by the USCIS. This proposal addresses another well-known gap in DHS’ policy relating to Section 104(c). Under current interpretation, it is unclear whether a former employer can cut-short an H-1B worker’s eligibility for future H-1B extensions under Section 104(c) by simply withdrawing the I-140 immigrant petition filed on his/her behalf, even where the employee has long since left that employer. It is similarly unclear whether H-1B workers would remain eligible for extensions under 104(c) where the petitioning employer goes out of business. The Final Rule clarifies that neither withdrawal by the petitioning employer, nor termination of the petitioning employer’s business operations, more than 180 days following petition approval, will impact the beneficiary’s ability to seek continued H-1B extensions under Section 104(c). This will allow H-1B workers greater flexibility in changing jobs, and provide U.S. employers greater flexibility in hiring such workers without jeopardizing the worker’s eligibility for continued H-1B extensions beyond the 6-year limit.

Sections 106(a) and (b) of AC21: 1-Year Extensions of H-1B Status Beyond the 6-year Limit Prior to enactment of AC21, H-1B workers were in all cases limited to a 6-year maximum period of stay in the U.S., and could only be eligible for a new additional 6-year period by being physically outside the U.S. for one continuous year. Under Sections 106(a) and (b) of AC21, H-1B workers are eligible for 1-year extensions of their H-1B status beyond the 6-year limit if a labor certification application or I-140 immigrant petition was filed at least 365 days before the maximum authorized period of stay is reached. The Final Rule addresses a number of important interpretive issues with Section 106(a) and (b):

  • 106(a) Extensions While Beneficiary is Outside the U.S. As with Section 104(c), discussed above, the Proposed Rule clarifies that 106(a) “1-year extensions” would be available whether or not the H-1B worker is physically present in the U.S. at the time of filing the petition.

  • New Restriction on 106(a) Extensions for Workers Who Do Not Take Final Step in Green Card Application Process. Under the Final Rule, in order to remain eligible for 1-year H-1B extensions under 106(a), the worker must initiate the final step in the green card process by applying for adjustment of status or an immigrant visa, within one year of becoming eligible to do so. If, during that year, the worker becomes ineligible to file the final step due to changes in the immigrant visa quota backlog, the worker will be allowed to continue extending H-1B status so long as he/she files the final step once an immigrant visa become available again. The agency may—in its discretion—excuse an individual’s failure to file within the 1-year period if the foreign worker establishes that the failure was due to circumstances beyond his/her control.

Under existing policy, there is no such limitation to 106(a) extensions, and H-1B workers could conceivably extend their H-1B status indefinitely based on an approved I-140 immigrant petition, even if not affected by a quota backlog. This Final Rule will thus limit the number of extensions that may be filed on an H-1B worker’s behalf in some cases.

  • Subsequent 106(a) Extensions after the 7th Year. The Final Rule also addresses the important question of whether a 1-year extension under section 106(a) may be requested on the basis of a PERM or immigrant petition that was filed after the beneficiary exceeded his or her initial 6-year limit of H-1B status. This situation is common in the H-1B change of employer context, where an employee obtains a 1-year extension based on a PERM application filed by his/her previous employer, and the PERM certification later expires, or the application is withdrawn by the sponsoring employer. Under existing DHS guidance, there is some ambiguity as to whether the H-1B worker in this scenario would be eligible for subsequent 1-year extensions under 106(a), based on a new PERM or I-140 that was filed after the worker had exceeded his or her initial 6 years of H-1B status, but 365 days before the new H-1B expiration date secured by the earlier 106(a) extension. The Rule confirms current practice by clarifying that each 106(a) exemption from the 6-year limit affords the H-1B worker a new date on which his/her maximum period of admission will be reached for purposes of determining 106(a) eligibility. This will allow H-1B workers in some situations to request 1-year extensions based on PERM applications or immigrant petitions that were filed after the 6-year limit had been reached.

Section 106(c) of AC21: Job Portability for Adjustment Applicants Section 106(a) of AC21 allows certain foreign workers who are being sponsored by their employers for permanent residency to transfer ("port") their application to a new job at a different company once they have reached the final stage of the sponsorship process (the “adjustment of status”), provided the new job is in the same or similar occupational classification, and the adjustment application has been pending for 180 days or more. The Final Rule clarifies procedural requirements relating to this section and addresses the definition of “same or similar” occupation.

  • Clarification on What May Be Considered “Employment” for Purposes of Adjustment Portability. Consistent with current DHS practice, the Final Rule makes clear that the new qualifying job for purposes of Section 106(c) may be with the same employer that sponsored the worker’s green card, a new employer, or based on self-employment.

  • Defining “Same” or “Similar.” As the statute does not define the terms “same” or “similar,” the Final Rule defines these terms consistently with their common dictionary definitions and DHS practice and experience. Specifically, the Final Rule defines “similar occupational classification” as an occupation that shares essential qualities or has a marked resemblance or likeness with the occupation for which the underlying employment-based immigrant visa petition was approved.

  • Impact of I-140 Revocation on Adjustment Portability. Under existing policy, where a foreign worker’s adjustment of status application has been pending for at least 180 days, and the sponsoring employer subsequently withdraws the approved I-140 immigrant petition underlying the application, the beneficiary may still port that application so long as he/she has a new offer of employment in the same or similar occupational classification. In contrast, if the sponsoring employer were to withdraw the approved I-140 immigrant petition before the adjustment application had been pending for 180 days, the foreign worker would not be eligible for portability and would need to be named in a new immigrant petition. Current policy does not specifically address the situation in which an employer goes out of business after the I-140 immigrant petition has been approved and the adjustment of status application has been pending for at least 180 days.

The Final Rule proposes that approved employment-based I-140 immigrant petitions will no longer be automatically revoked based solely on withdrawal by the petitioner or termination of the petitioner’s business. Notably, however, DHS would limit this protection to include only those I-140 immigrant petitions that have been approved for at least 180 days at the time of revocation. This amendment thus expands restrictions on foreign workers such that, in addition to the adjustment application needing to have been on file for at least 180 days, the I-140 immigrant petition must also have been approved for at least 180 days at the time of withdrawal by the petitioner, or at the time of termination of the petitioner’s business, in order for the foreign worker to remain eligible for adjustment portability. Although this subtle change would not affect the majority of foreign workers seeking to port their applications, it would in some cases result in applicants having to wait longer before being able to safely rely on adjustment portability. It is unclear whether DHS has fully considered the implications of this new restriction which does not appear to align with the goal of fully implementing the job portability provisions of AC21. New Adjustment Portability Form. The Final Rule also introduces a new form, I-485 Supplement J, for the adjustment of status application, to be filed by the intending immigrant worker, describing the worker’s eligibility for adjustment portability. The form will assist DHS in determining whether a new offer of employment is in the same or similar classification as the offer listed on the original immigrant visa petition. This is a departure from current practice, as there is currently no official guidance in place for workers seeking to avail themselves of such portability benefits. Section 105(c) of AC21: Job Portability for H-1B Workers Under Section 105(c) of AC21, a foreign worker who was previously issued an H-1B visa or otherwise granted H-1B status, may commence employment with (“port to”) a new employer upon the filing of an H-1B petition by the new employer, provided that the foreign worker was admitted lawfully to the U.S., and has not worked without authorization. Despite clear statutory language which says that portability is available to workers “previously” granted H-1B status, the Final Rule confirms DHS’ current policy which states that this option is available only to foreign workers who are present in the U.S. in H-1B status at the time of filing the new petition. The Rule also confirms that an H-1B worker who has changed employers based on H-1B portability petition may again change employers based on the filing of a new H-1B portability petition, even before the previous petition is approved. Recapturing H-1B Time toward the 6-Year Limit The Final Rule follows DHS’ established policy of not counting time spent outside of the U.S. by an individual during his/her H-1B petition validity period toward the H-1B 6-year limit. Petitioners may seek to “recapture” that time toward the worker’s 6-year limit. The Final Rule confirms DHS’ longstanding policy that the H-1B petitioner bears the burden of demonstrating eligibility for “recapturing” time. It and also confirms DHS’ current policy allowing the recapture of any time spent outside of the U.S. for at least a continuous 24-hour period, regardless of reason. The Final Rule also adds an important clarification that was not found in the Proposed Rule. It was unclear in both existing agency guidance and the Proposed Rule whether H-1B time could be recaptured if six or more years had elapsed since the foreign national held such status. The Final Rule confirms that there is “no temporal limit” for recapturing H-1B time, and that H-1B time spent abroad more than six years ago can be recaptured. Cap Exempt H-1B Employment Under Section 103 of AC21, an H-1B employer may claim an exemption from the annual H-1B cap if the worker will be employed at an institution of higher education, nonprofit entity related to or affiliated with such an institution, nonprofit research organization, or governmental research organization.

  • Broadening of Cap-Exempt Employment. Under current policy, H-1B workers may only be treated as cap-exempt when employment is located directly at a qualifying organization and the worker will perform job duties that directly and predominantly further the normal, primary, or essential purpose, mission, objectives or function of the qualifying organization. The Final Rule broadens the exemption to include petitioners that are not themselves a qualifying organization if: (1) the majority of the worker’s duties will be performed at a qualifying organization; and (2) such duties directly and predominantly further the essential purpose, mission, objectives, or functions of the qualifying organization.

Consistent with current policy, the Final Rule will adopt the definition of the term “institution of higher education” provided by the Higher Education Act. This definition does not include for-profit institutions of higher education. Also consistent with current policy, the term “related or affiliated nonprofit entity” is defined in the Final Rule to include nonprofit entities that are connected or associated with an institution of higher education through shared ownership or control by the same board or federation; operated by an institution of higher education; or attached to an institution of higher education as a member, branch, cooperative or subsidiary. DHS seeks to modify current policy by providing additional means by which nonprofit entities may establish a sufficient bona fide relation or affiliation with an institution of higher education.

  • Counting Previously Exempt H-1B Workers against the Annual Cap. The Final Rule confirms that H-1B workers who were not previously counted against the numerical cap, and who cease employment at cap-exempt institutions, will be subject to the cap if no other exemptions apply. In the absence of regulations, there has been some degree of uncertainty as to interpreting the statute on the issue of H-1B cap exemptions.

Additional Changes to Further Improve Stability and Job Flexibility for Certain Workers The Final Rule amends the regulations so that approved I-140 immigrant petitions withdrawn by the petitioning employer at least 180 days following petition approval solely due to employee termination or termination of the petitioner’s business would not be automatically revoked, and would remain valid for various purposes under the immigration laws.

  • Continued Validity of I-140 Approvals Following Withdrawal by Petitioner or Termination of Petitioner’s Business. To better reflect and enhance job portability authorized under AC21, DHS proposes that approved employment-based I-140 immigrant petitions will no longer be automatically revoked based solely on withdrawal by the petitioner or termination of the petitioner’s business. However, as noted above, the agency’s restriction of such revocation would be limited to I-140 immigrant petitions that have been approved for at least 180 days. Under the Proposed Rule, so long as the petition has been approved for at least 180 days, and has not been revoked for fraud, material misrepresentation, invalidation or revocation of a labor certification, or USCIS error, it will remain valid for various immigration benefits including the retention of priority dates, adjustment of status portability, and H-1B extensions beyond the 6-year limit.

Overall, this amendment increases the ability of H-1B workers to change employers without fear of retributive action taken by the petitioning employer, and/or fear that the petitioner’s business failures would impact the worker’s ability to extend H-1B status or pursue permanent residence in the U.S. Yet, as noted above, the new requirement that I-140 immigrant petitions be approved for 180 days or more before becoming immune from automatic revocation would also result in certain workers having to wait several months longer before being able to change employers through adjustment portability. The agency’s stated reason for the 180-day wait period is to provide additional assurance that the petition was bona fide when filed. As stated in the preamble to the Rule, “In addition to the period that it typically takes for a petitioning employer to obtain a labor certification from [the Department of Labor] and approval of an immigrant visa petition from DHS, the 180-day requirement would provide additional assurance that the petition was bona fide when filed.” However, it is unclear whether DHS has fully considered the implications of this new proposed restriction which do not appear to align with the goal of fully implementing the job portability provisions of AC21.

  • Retention of Priority Date Following I-140 Withdrawal. Under the Final Rule, where an I-140 immigrant petition has been approved, the beneficiary will retain his/her priority date for future filings unless USCIS denies or revokes the petition due to fraud, material misrepresentation, invalidation or revocation of a labor certification, or USCIS error. Notably, unlike the retention of I-140 benefits for adjustment portability, the ability of a beneficiary to retain his/her priority date would begin immediately upon petition approval, even if the petition is later revoked based on withdrawal or business termination. While not explicitly stated in any policy memorandum, current practice is consistent with this proposal. This clarification, in combination with the change above, would provide greater certainty and stability for beneficiaries in their pursuit of permanent residence.

Expansion and Establishment of Nonimmigrant Grace Periods

  • Expansion of 10-Day Grace Period to Other Nonimmigrant Classifications. Under existing regulations, H-1B and O-1 workers are afforded a 10-day grace period preceding and following the validity period of approved employment. The Final Rule extends this 10-day grace period to other classifications, including E-1, E-2, E-3, L-1, and TN, and the dependents of those nonimmigrant workers. Employment would not be authorized during these 10-day grace periods.

  • Establishment of 60-Day Grace Period in the Event of Job Termination. Under existing regulations, there is no grace period for nonimmigrant workers whose employment ends during the authorized validity period—whether based on voluntary resignation or termination by employer. Such workers are generally considered to be in violation of status and required to depart the U.S. immediately. The Proposed Rule sought to permit a grace period of up to 60 days upon termination of employment during the authorized validity period for workers in E-1, E-2, E-3, H-1B, H-1B1, L-1, and TN status, and their dependents. The Final Rule clarifies that the grace period must be used on consecutive days, and is available for each approved validity period. It also adds O-1 to the list of nonimmigrant classifications eligible for this grace period. This grace period is intended to provide workers the opportunity to seek new authorized employment, apply for another nonimmigrant status, or to make arrangements to depart the U.S., and is consistent with the flexibility already afforded to nonimmigrants in F-1 and J-1 status. A similar grace period was initially proposed in a policy memorandum in 2000, but did not take effect.

Employment Authorization for Beneficiaries of Approved I-140 Immigrant Petitions Facing Compelling Circumstances To improve stability and flexibility for certain high-skilled nonimmigrant workers, the Final Rule allows qualifying individuals to apply directly for employment authorization under compelling circumstances.

  • Employment Authorization under Compelling Circumstances. Under the Final Rule, nonimmigrants may apply for a 1-year Employment Authorization Document (“EAD”) under the following circumstances: (1) the individual is in the U.S. in E-3, H-1B, H-1B1, L-1 or O-1 status; (2) the individual is the beneficiary of an approved I-140 immigrant petition under the EB-1, EB-2, or EB-3 classifications; (3) the individual is subject to a per-country quota backlog and therefore does not have an adjustment of status application pending; and (4) the individual can demonstrate compelling circumstances that justify an independent grant of an EAD.

DHS has not defined “compelling” circumstances, and may retain discretion in granting such requests, but the agency has identified four circumstances in which it would consider granting such a request, including: (1) a geographical move due to serious illness or disability; (2) employer retaliation; (3) other substantial harm if required to return home; or (4) significant disruption to employers. Processing of EAD Renewal Applications Under current regulations, individuals applying for EAD renewals in certain eligibility categories (including EAD applications based on pending adjustment of status applications) are not authorized to continue employment pursuant to the pending application. Rather, their applications must be approved in order to derive work authorized status. This can result in interruptions to work authorization where adjudication of such applications is delayed for any reason.

  • Automatic EAD Extensions Based on Timely Filed Applications. Under the Final Rule, USCIS will automatically extend the validity period of expiring EADs for up to 180 days from the date of expiration if a renewal application is filed before the current EAD expires under the same eligibility category. The change would allow employers to utilize the expired EAD and I‑765 receipt notice as I-9 evidence of employment authorization. The current requirement that USCIS process EAD applications within 90 days of receipt would be lifted in consideration of fraud and national security concerns and technological and process advances relating to document production.

H-1B Licensing Requirements Under existing regulations, where the intended beneficiary of an H-1B petition requires a state or local license to fully perform the duties of the occupation, the petition may not be approved unless the beneficiary possesses the license. This sometimes results in a “catch-22,” as the licensing authority may not issue licenses to individuals lacking a social security number and/or evidence of employment authorization. Under current policy, DHS may approve such a petition for a 1-year period, provided that the only obstacle to obtaining licensure is the lack of a social security number of employment authorization. However, the implementation of this policy has not been uniform in USCIS adjudications.

  • Clarification of H-1B Licensing Requirements. Under the Final Rule, consistent with current policy, DHS may approve an H-1B petition for a 1-year validity period if a state or local license is required to engage in the occupation and the licensing authority will not grant such license without evidence that the beneficiary has been issued a social security number or granted employment authorization. The Rule confirms that petitioner would be required to demonstrate at the time of filing the petition that the beneficiary has already filed an application for the relevant license in accordance with state or local licensing procedures, or show that the beneficiary cannot file such an application due to the lack of a social security number of employment authorization. Extensions beyond the 1-year period would not permitted without proof of licensure.

The Final Rule clarifies that an individual without an occupational license may obtain H-1B status if he/she will be employed in a state that allows an unlicensed individual to fully practice the occupation under the supervision of licensed senior/supervisory personnel.


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