USCIS Publishes Proposed Changes to H-1B Cap Lottery Selection Process

On December 3, 2018, the Department of Homeland Security (“DHS”) published its highly anticipated proposed rule creating a pre-registration process for the H-1B cap lottery. If published as a final rule, the pre-registration process will greatly impact how employers file H-1B petitions as well as how individuals are selected in the lottery process. The proposed rule introduces an internet-based electronic cap registration process to select individuals for adjudication. Pursuant to President Trump’s “Buy America and Hire American” ("BAHA") Executive Order (E.O. 13788), the rule also proposes to reverse the order by which USCIS counts its Master’s or higher degree (“Master’s cap”) exemption of 20,000 visas from the annual quota of 85,000 H-1B visas (“regular cap”).[1] By doing so, DHS predicts that Master’s cap candidates would have a 16% greater likelihood of being selected in the annual cap lottery.

Pre-Filing Selection Process

An annual cap is set for the H-1B visa category with 65,000 for H-1B regular cap and 20,000 for H-1B Master’s cap. Currently, employers seeking to sponsor a foreign worker for a cap-subject H-1B visa must file a petition with the USCIS on April 1st, approximately six months in advance of the federal government’s fiscal year, which begins October 1st. If USCIS receives enough petitions to meet the regular cap and advanced degree exemption quota within five business days after April 1st, then a lottery is held to determine which petitions will be randomly selected for adjudication. Over the last five years, the USCIS has received an average of 193,000 petitions annually, to meet an annual quota of 85,000. The USCIS must accept all petitions filed, attach unique identifiers, conduct a random lottery, warehouse the petitions, and eventually reject and return to employers any unselected petitions around June of each year. In order to streamline the process, the DHS is seeking to add a registration requirement for employers who wish to sponsor a foreign worker, which would limit the number of actual petitions received by the USCIS. Under the proposed rule, employers will file pre-registration forms electronically with USCIS that would start in advance of the filing period that begins on April 1st of each year. The registration process would begin at least 14 calendar days prior to the first day of filing, and USCIS would publicize the start of the registration period at least 30 days in advance of its opening. Petitions selected for processing would then be sent a notice instructing where and how to file the petition and a specific time period during which the petition would be accepted. DHS has proposed that employers be entitled to a period of at least 60 days in which to prepare and properly file a cap petition. Only those employers whose registrations are selected would be able to file H-1B cap petitions. USCIS would reserve a pool of registrants, in the event that the quota is not met—either because a petition is rejected due to filing error, denied, withdrawn, or if the actual number of petitions is less than anticipated because registrants who were selected did not end up filing petitions.

Reversal of Lottery Selection Order

Under the current H-1B selection process, if the regular and Master’s cap are reached during the first five business days that cap petitions are accepted, the USCIS will first randomly select a sufficient number of petitions to reach the 20,000 Master’s cap. Any individuals not selected in the Master’s cap are added to the regular cap, and USCIS randomly selects a sufficient number of petitions from the remaining pool of H-1B petitions. The proposed rule would reverse the order of the selection process, so that USCIS will first select registrations for the regular cap, and then select registrations for the Master’s cap. The DHS believes that reversing the order will result in a higher percentage of Master’s cap candidates selected in the lottery, as compared to the number of regular cap petitions selected. Critics point out that the rule is in conflict with the statute governing the H-1B lottery which requires the Master’s cap to be run first.

What This Means for Our Clients

At this time, it is unclear whether the final rule for the pre-registration selection system will become effective prior to April 1, 2019, the first filing date for FY2020 H-1B cap season. The proposed rule is currently undergoing a notice-and-comment period that will close by January 2, 2019, after which the DHS must review all submitted comments and propose a final rule to the Office of Management and Budget before the rule becomes effective and is published in the Federal Register. The last immigration regulatory action of this magnitude took over five months from the date of the proposed rule’s publication to become a final rule. Moreover, due to the proposed rule’s conflict with federal law governing the counting order for Master’s cap petitions before the regular cap, we expect legal challenges to the proposed rule In the rule-making process. Goeschl Law Corporation will work with clients to ensure that employers and employees are prepared to file FY2020 cap petitions.

Frequently Asked Questions

In the event that the new registration requirement is in effect for the FY2020 filing season, will USCIS collect a fee for each registration? No. At this time, USCIS is not proposing a fee for registration. What information is required for the registration process? The proposed rule indicates that employers will be asked to provide “basic information” for the filing, such as: (1) employer’s name; federal employer identification number (FEIN); (2) authorized representative’s name, job title, and contact information; (3) beneficiary’s name, date of birth, country of birth, country of citizenship, gender, and passport number; (4) indication of whether the beneficiary falls under the Master’s cap or regular cap; (5) employer’s attorney information and electronic G-28; and (6) any additional basic information. We note that the information collected by USCIS at the registration stage is subject to change. What are the benefits? The current H-1B cap process is criticized for a lack of transparency, and numerous other inefficiencies. The proposed rule would streamline the H-1B cap selection process, offer greater predictability to all stakeholders, and likely save employers substantial costs in attorneys fees. Under the current process, employers submit fully-prepared cap-subject H-1B petitions during the “cap filing season” which starts on April 1st of each year. If, during the first week of the filing season, there are more petitions filed than available numbers for that fiscal year, all petitions are subject to a random selection process, or “lottery.” Petitions not accepted in the lottery are returned to the employer or employer’s counsel, and it often takes several months for employers to learn whether or not a cap-subject petition was accepted in the lottery. Moreover, because the selection process takes place after the petition is filed, employers incur all of the cost of preparing the petition, irrespective of whether or not the petition is selected for processing. [2] Under the proposed pre-registration process, the employer would only incur the cost of preparation for those petitions that have actually been selected in the lottery. In addition to saving employers money, the pre-registration process would inform employers much sooner as to whether a sponsored employee has been selected in the lottery. This would allow the employer and employee to better plan for the future.

What are the drawbacks? Although the proposed rule would make the cap selection process less costly and more transparent, we believe that it will also likely result in an increase in the overall number of H-1B registrations being submitted. Because the registration would essentially be free for employers, there would be little disincentivizing employers from applying. This would effectively decreases the odds of any one particular petition being selected for adjudication. Thus, the unintended consequence and irony of the proposed rule is that although the DHS intends to reward individuals with advanced U.S. degrees, the lower barrier to entry would more likely harm these individuals chances of being selected in the lottery. By its own admission, DHS recognizes that there may be a rise in the number of registrations submitted electronically, but it does not account for this possibility when predicting the benefits that the proposed rule would bring. Can an employer register for the employee more than once, to increase odds of selection? No. Consistent with the rules already in place, an employer cannot file more than one petition on behalf of the same beneficiary. Can an employer substitute a beneficiary if the employee who was first selected decides not to join? No. DHS believes that permitting substitution of beneficiary would essentially game the registration system. Are there any penalties that would dissuade employers from filing registrations for employees that they do not intend to file petitions for? Yes. Employers will be asked to sign off on an attestation that they intend to file an H-1B petition for the beneficiary, should they be selected in the lottery. USCIS can investigate and hold petitioners accountable for not complying with attestations, possible sanctions for fraud and abuse.

[1] On December 8, 2004, President Bush signed the Consolidated Appropriations Act of 2005 and established the additional 20,000 H-1B numbers to be set aside for persons holding master’s degrees and above that were conferred by U.S. universities.

[2] Except government filing fees,which are refunded if the petition is rejected in the lottery.

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