Trump Administration Announces New Interim Final Rule Imposing New Restrictions on the H-1B Program

Yesterday, October 6, the Trump Administration announced that it will publish an interim final rule (IFR) providing new restrictions on the H-1B program. The Department of Homeland Security (DHS) has provided a summary of the most important features of the IFR in a press release, and an advanced copy of the IFR was released yesterday evening. According to the release, the IFR will “combat the use of H-1B workers to serve as a low-cost replacement for otherwise qualified American workers” by imposing several new restrictions on H-1B employers. Specifically, the IFR aims to:

  • Narrow the definition of “specialty occupation,” which is a key requirement for H-1B classification. This change reflects the USCIS’ de facto policy which has been in effect since the beginning of the Trump Administration, and has already resulted in steep increase in the rate of requests for evidence (RFEs) and H-1B denials;

  • Provide a new definition of “third party worksite,” and impose a one-year maximum validity period for H-1B workers placed at such worksites;

  • Restore the USCIS’ so-called “Neufeld Memo” policy, which was enjoined by a court earlier this year on procedural grounds. This policy restricts H-1B sponsorship to employers that can show that they have a narrowly construed “employer-employee” relationship with the H-1B workers; and

  • Enhance the DHS’ ability to enforce compliance through worksite inspections, by giving the USCIS authority to deny or revoke H-1B petitions where an employer, or third-party customer of the employer, refuse to submit to an onsite inspection.

The IFR is scheduled to take effect 60 days after publication in the Federal Register, which is expected to happen this week. However, it is almost certain that this rule will be challenged in court, and we believe it is likely that the rule will be enjoined (i.e. blocked) before it takes effect.

Key Takeaways

  • If not blocked by a court, the rule would impose further restrictions and penalties on employers that are perceived as hiring workers that undercut the U.S. job market. The specific target of the rule is the consulting firms that assign workers at third party worksites. However, many of the provisions would also apply to traditional employers.

  • Yesterday’s press release by the DHS is unlike the press releases announcing rule changes under the previous administration. The language reflects a partisan view on the H-1B program, and makes claims about the impact of the program that are not supported by the majority of academic research on the program. The preamble to the IFR also reflects a largely one-sided assessment of the H-1B program, which fails to acknowledge the contribution that H-1B workers have made to economic growth in the technology sector over the last 30 years.

  • The revised definition of specialty occupation as it relates to "traditional" (i.e., non-consulting firm) employers reflects policy that has been in place for a few years. We believe it fairly unlikely that this definitional change will result in a significantly higher rate of RFEs or denials for such employers, if the rule goes into effect.

  • The provision allowing for enhanced authority for worksite inspection may impact many of the largest tech companies that rely on high skilled workers through consulting firms. The provision could lead to denial or revocation of these companies’ own H-1B petitions, if they decline to allow a site visit relating to an H-1B worker employed onsite by one of its consulting firms. This provision is very likely to be challenged in court.

  • The rule was published as an “interim final rule,” which means that it will take effect without the normal notice and comment period required for most rulemaking. The DHS appears to be using a “good cause” exception that allows rulemaking to go into immediate effect where there is an emergency. The strategy of publishing this as an IFR may reflect the dwindling hope of Trump’s reelection prospects, and the DHS’ attempt to push the rule through before a new president takes office. This provision is also very likely to be challenged.

  • If the Democrats win the presidency, Congress and the new President will be able to nullify the IFR without additional rulemaking under the Congressional Review Act (CRA) once the new President takes office. This would be more likely to happen if the Democrats win the Senate, in addition to the presidency, while retaining the House of Representatives. As noted above, we believe the rule will be blocked before it takes effect in December, in which case nullification by Congress under the CRA would be moot.

We will provide a more detailed summary and analysis of the rule as more information becomes available.

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