H-1B Reform - Quantitative or Qualitative?

With recent campaign rhetoric and a new administration, H-1B reform is once again in the headlines.  Reform is surely needed.  But what type of reform?

The H-1B Cap and Lottery

There were 236,000 petitions filed for H-1B status in April 2016 for only 85,000 H-1B numbers, and USCIS ran a lottery to decide who would get an H-1B with an October 2016 start date.  The lottery distribution itself has been challenged in court as unlawful in the case of Tenrec, Inc. v. USCIS.  That case argues the statute specifies the distribution be "in the order in which a petition is filed" and not randomly.  But whether the agency distributes the visas in a lottery, or in a wait list fashion (first-in first-out), capping the category per year means that there will be a wait to get a number, because those who lose the lottery in successive years are in a de facto waiting line.  Many have entered for three years without a number - that's a wait.  As I have argued before, first-come first-served approach is more fair than a lottery system, with those filing earlier receiving visas earlier.  Running a lottery just allows some to cut ahead in line.  It also allows big companies to file massive numbers of petitions in order to increase their odds.  The case to abolish the lottery distribution process is under advisement before a federal judge and could be decided any day now.

The 85,000 H-1B cap is a quantitative restriction that hampers competitiveness and leads to abuse of U.S. workers.  To be fair, some who are eligible for an H-1B are exempt from the caps.  There are Canadian and Mexican professionals who can utilize NAFTA, and Australians who can use the E-3.  Multi-national companies can utilize the un-capped L-1 visa for managers, executives, and those with specialized knowledge.  Institutions of Higher Education, and non-profit or government research organizations are exempt from the H-1B cap, and can petition for an H-1B employee at any time without regard to the caps.  There are even private entities which can employ someone under exempt status if they are working principally for an exempt employer, or where there is a close affiliation (such as shared board of directors) between the for-profit and exempt entity.  The 65,000 cap set back in 1990 has only been increased, however, by 20,000 by allowing that many who have U.S. Master's degrees to be issued a number.  Unless one of the special exemptions applies, therefore, a U.S. company is prohibited from hiring the global talent they would like.

As a private citizen who reads the news, I have been dismayed to read of the alleged abuses of the H-1B system by companies like Disney and others.  No one should have to train their replacement who is on a non-immigrant visa.  As an immigration attorney, I have seen amazing contributions to businesses by professionals on H-1B visas.  My experience, over the past 20 years (ok, 4 months short of 20 years) of immigration practice, has been that companies hire H-1B workers for those positions which are tough to fill, and that companies end up paying more for an H-1B worker than a U.S. worker.  I represent a wide range of industries including manufacturing, civil and environmental engineering, renewable energy, health sciences, biomedical engineering, and information technology.  In order to maintain global competitiveness, U.S. businesses need to be able to tap the global talent pool.  So the numerical caps definitely get in the way of domestic enterprises being competitive in the global market.  So, is capping the category the best way to deal with abuses?  I firmly believe the caps are not the right tool.

Prior to 1990, there was no cap on H-1B petitions.  Instead, the pre-1990 Immigraiton Law required the H-1B beneficiary to show they were a person of "distinguished merit and ability" coming to "perform services of an exceptional nature."  That was a qualitative limitation, not a quantitative one.  In fact, right now, Congress is discussing qualitative limitations on the type of H-1B workers that are permitted to work in U.S. industry.  

For perspective, the U.S. currently has around 159 million workers in the workforce.  Even if the entire non-immigrant workforce, including H, L, E, O and other visas is in the few hundred thousand level, that is only a fraction of one percent of the U.S. workforce.  While the current system has permitted abuse of the H-1B program to occur in some instances, it is hard to believe that such a small fraction of the U.S. workforce could really impact U.S. workers employment opportunities in a meaningful way.  That is not to say there are some who have lost their jobs to H-1B workers.  I merely point out that the sheer numbers preclude any kind of huge impact on those who are looking for work.  In fact, those U.S. citizen men who are playing hours of video games each day (perhaps millions) instead of looking for work has a much higher impact on the economy than H-1B visas.

Salaries and Prevailing Wages

Salaries of H-1B workers and prevailing wage rates are being discussed in Congress now as a qualitative limitation on the H-1B category.  In my experience, most of my clients are paying in the 90th percentile of wages, which represents "Level IV" wages which is the highest level of the four tier prevailing wage system.  If you'd like to see what prevailing wages are in a given area, broken down by occupation and location within the country, you can visit the FLCDataCenter website.  Those rates are researched and updated each year, and published there by the Department of Labor for use in the Labor Condition Application (LCA) that is required in H-1B petitions.  Level IV wages are extremely high, representing the highest mean wages in the occupational category.  An H-1B employer must pay prevailing wages even if they pay U.S. citizens less, as the requirement is to pay the higher of the prevailing wage or wage paid to similarly employed U.S. citizens.

One proposal in Congress is to raise the minimum salary level to $100,000.  That kind of across the board minimum does not work when taking into consideration the myriad of occupations, and the differences in cost of living (and thus salaries) of different parts of the country.  If Congress is intent on making salary a qualitative limitation on the H-1B category, it would be better to link it to a certain wage level within the DOL prevailing wage rates.  But doing so would make it virtually impossible for a company to hire a recent graduate, for example.  It would also make it harder for smaller companies, or start ups, to get the talent they need.

Recent Graduates

What to do about recent graduates from U.S. universities who are foreign students and require H-1B visa sponsorship to work in the United States?  Do we tell them to get out of the country after they've spent tens or hundreds of thousands for a U.S. education?  If we do so, we lose talent we need.  Increasing the minimum salary to a Level III or Level IV as a qualitative restriction would likely make it difficult for any recent graduate from a U.S. university to get a job under the H-1B.  Considering the fact that U.S. universities gain considerable income from foreign student tuition, and that many U.S. educated foreign students have gone on to start amazing companies employing droves of U.S. citizens, it would seem like we are shooting ourselves in the foot by turning away promising foreign graduates.  Yet opponents of H-1B visas may very well point to lost opportunities for recent U.S. citizen college graduates.  How can we balance the need to utilize talent from within U.S. universities, and ensure that qualified U.S. citizens don't get passed over?  A salary floor won't do that.

The STEM OPT program permits an F-1 student who has a degree in Science, Technology, Engineering or Math to obtain Optional Practical Training for a period of 36 months following graduation.  A solution to enable the United States to keep the best and brightest of our U.S. educated students would be to expand the STEM OPT program by allowing all degree fields to be eligible, but require the payment of at least Level II wages.  This represents a compromise which will ensure a transition period for U.S. graduates, increase the chance we will still have international students wanting to come and pay foreign student tuition at our colleges and universities, and protect opportunities for U.S. graduates by a prevailing wage requirement combined with a short period before the F-1 OPT recipient needs to comply with the stricter qualitative H-1B requirements.

Small Companies and Start Ups

Implementing a salary floor as a qualitative restriction is going to negatively impact small companies and start up enterprises.  Congress should consider providing an exemption from a salary floor or any quantitative (cap) restrictions for a certain small percentage of the company's workforce.  For example, if a company were to be given an allotment of up to 3 employees or 5% of their FTE employee total, whichever was greater, that would allow companies to supplement their workforce with global talent in a small proportion to their overall employee count.  It is hard to see how such a small percentage of H-1B workers, relative to the overall workforce, would negatively impact wages or working conditions.  

My Recommendation

If H-1B reform were left up to me, I would consider the following immediately:

  • Eliminate the H-1B numerical cap (a quantitative restriction) entirely;
  • Institute a salary floor at the Level IV wage level or above, per DOL prevailing wages, as a general rule for H-1B petitions;
  • Institute an F-1 student OPT program of 36 months with a salary floor at the Level II wage level or above, and remove the restriction on degree field;
  • Create an exemption from the Level IV wage level requirement for any petition which is filed by an employer which does not have more than 5% of full time employees in H-1B status (or more than 3 employees for a very small employer), but still require as per current law, the payment of prevailing wages based on the four levels currently available.

The above system would require high wages for companies which employ a large percentage of employees in the H-1B system.  It would also recognize that U.S. companies need to employ a certain level of global talent to remain competitive in the international marketplace.  If a company wants to employ more than a small percentage of their workforce, they'll have to pay more for it.

H-1B Lawsuit Demands Place in Line

A place in line, not a rejection based on a computerized lottery, is what employers and employees are seeking in a soon-to-be-filed class action lawsuit challenging the H-1B lottery process.  Unlike the lottery, however, there is no need to cross your fingers on this filing, as the law is as plain as a pikestaff.  A lottery process for H-1B quota distribution is not authorized by law.  Instead, the law states H-1B numbers are to be provided based on filing date order.  The reasons that the H-1B lottery is illegal are outlined in our earlier BLOG and PODCAST.  The DRAFT LAWSUIT (in the form of the motion for summary judgment) is now available for review for the first time, before it is filed with the federal courts.  The lawsuit seeks the opportunity to resubmit rejected H-1B petitions and receive a priority date and place in line for future available H-1B numbers, so that rejected petitioners and beneficiaries do not have to endure another random lottery.  H-1B lottery victims may register their contact information on the H-1B LOTTERY LAWSUIT page and receive updates on the lawsuit, or register to be considered as a plaintiff.  You may also read the FAQ for more information.  

UPDATE - June 2, 2016 - the class action lawsuit has been filed in federal court.

Obama Visa Modernization - Visa Bulletin Just Got Better

As part of President Obama's Executive Action announced November 2014, the gate that opens and closes the door to liberty just received two doors - one for those who can apply for green cards and a separate door for those who can be approved.  Until now, the visa bulletin, which summarizes the dates of available priority dates for those with approved immigrant petitions, has only had one list of dates, both for those who can apply and those who can be approved.  This has created difficulties that are far too complex to describe here, but suffice it to say that it was a poorly conceived process which held back those who could file for adjustment of status.  Now there are two different dates to consult - one list is for "Application Final Action Dates" which is for those who can be approved for the green card, and one is for "Dates for Filing Applications" which is for those who can file for adjustment of status, and then remain pending until the Final Action Date is reached.  This new system appears to allow immigrants to file for adjustment sooner than they would otherwise have been able to do, which has a variety of positive implications.  First, dependents who might otherwise "age out" by turning 21 may be able to preserve status by filing for adjustment of status within one year of the visa availability date.  Second, those who are in other visa categories which do not allow extension of status beyond the limits of the visa (such as L-1B) may be able to avoid having to get an H-1B because dates for filing may come current for them sooner, allowing them to apply to adjust status.  Upon the filing of an adjustment of status application, each applicant is allowed to apply for work and travel permits, which may reduce the need for extension of nonimmigrant status sooner.

As an example, effective October 1, 2015, Indian born applicants in the Employment Based Second (EB-2) category (EB-2 India) will have a Final Action date of May 1, 2005, which means that if their Priority Date (the date the PERM Labor Certification was filed, which is then assigned to the I-140 Immigrant petition) is on or before May 1, 2005, they can be approved for permanent resident status.  In the old system, that would also be the date the USCIS would accept for adjustment of status filings.  But with the new visa bulletin, the Dates for Filing shows EB-2 India at July 1, 2011, which is six (6) years later than the Final Action date.  This means that those EB-2 India applicants whose priority dates fall on or before July 1, 2011 can file adjustment of status applications as of October 1, 2015, even if they can't yet be approved for the status.  Their cases can remain pending adjustment of status until the Final Action date moves forward to their priority date.  This is great news for many families.

What is unclear as of this writing is whether the 3 year extensions of H-1B status beyond the 6 year maximum may be negatively impacted.  Such extensions, allowed under the AC21 law, depend on a visa date not being immediately available.  It is not clear whether the agency will use the Final Application Date or the Application Date to determine whether a visa number is available for use.  

Overall, this is a very positive change to the system, and represents a true executive modernization of the visa system, without having to resort to the gridlocked Congress.  

H-1B Rejected?

Tens of thousands of employees sponsored by employers for H-1B work visas are awaiting news of whether they won or lost the lottery for the limited number of slots this year.  So far, only receipt notices and approvals have been issued for the winners, but no notices have yet been received by the approximately 87,500 who lost.  Employers and employees are left to wonder, unable to plan what to do next.

On April 10, 2014, USCIS announced that it had received a whopping 172,500 H-1B petitions for only 85,000 slots nationwide for the year.  The H-1B is the main work visa for our country in the professional worker category.  The exhaustion of the quota numbers in one week means that employers and employees will have to wait until April 2015 to file for one of the slots available for start dates in October 2015.  The losers will either need to leave the country, or find another option to stay and work.

Citizens of some countries are eligible for special kinds of visas (Australians have the E-3, Canadians and Mexicans have the TN, Chileans and Singaporeans have the H-1B1), and some employers are exempt from the cap entirely, such as institutions of higher education and non-profit entities affiliated with them, as well as non-profit research organizations.  Those who have previously been counted toward the H-1B cap, such as employees who hold H-1B status already and those who were granted in the past, are generally not subject to the cap.  But for those who have never been counted toward the cap and who have lost the lottery this year, the options may be limited.

F-1 students in Optional Practical Training (OPT) may work pursuant to that authority for 12 months following graduation, and if their degree is listed on the STEM List, they may be able to obtain another 17 months beyond that if the employer is an E-Verify Employer.  

The lack of notice to the losers of the lottery is concerning, as notice to employers was provided weeks earlier last year when the cap was reached also in one week.  The number of rejections is double that of last year, however, so the agency may be overwhelmed.  Hopefully, news will come soon, and employers and employees will be able to start planning.  Perhaps Congress will act to increase the numbers, as proposed in the Senate bill, S.744 which passed in bi-partisan fashion, but the House of Representatives must act.  

More and more American employers may find that the visa climate in the U.S. makes business too difficult, and move operations overseas where artificial visa quotas do not interfere with the free movement of top global talent.  As the Wall Street Journal has reported, Microsoft opened a Canadian operation to deal with the problem, and Apple has not brought engineering talent to work in the U.S. due to the visa restrictions.  After the H-1B rejections start flowing into the HR departments of companies around the U.S., perhaps more thought will be given to such actions by other companies, that is, unless Congress acts soon.

Work Permits! Spouses?

Work permits for H-4 spouses could soon become a reality in certain cases, but this is not a new proposal, and it does not affect that many people.  It will also take a while for this to go into effect.  On May 6, USCIS announced that it was intending to propose a rule which would allow dependent spouses of H-1B workers (H-4 category) to work, but only if their H-1B spouse is the beneficiary of an approved immigrant visa petition (the I-140 petition) or has obtained an extension of H-1B status beyond the six years as allowed under the American Competitiveness in the Twenty First Century Act (2000) (AC21) legislation.  This is an fairly limited group of people, because in order to obtain an I-140 approval, most employees must first proceed through the Department of Labor process called PERM and obtain a labor certification before even starting the I-140 petition.  This is a lengthy process.  Another option is the AC21 extension, but that only applies in two situations 1) where an I-140 is approved and priority dates are backlogged (enabling a 3 year extension of H-1B status beyond the sixth year); or 2) where the PERM labor certification was filed at least one year prior to the extension request.  So, in both these situations, there has been a lengthy process toward permanent resident status.  It does not impact very many people who are in visa categories that are generally current, since if an employee has an approved I-140 petition and current priority date, an adjustment of status application can often be filed, and as part of that process a spouse can obtain work authorization based on the pending application.  

This proposal is not new.  It was proposed back in January 2012 by this administration, including a notice of proposed rulemaking, but no action was taken on it at that time.  With this renewed proposal, there will also be some time before it goes into effect.  First, the announcement states that the proposal will be published with a public comment period.  Most of the time, this is a 30 to 60 day comment process, and then followed by a collection of all the comments by the government and an analysis of the responses.  This can take months or even years.  Assuming that this is a priority for the administration, it will still take a few months to put into a final regulation.  Once final regulations are issued, it will still take 60-90 days for most H-4 spouses who file for work authorization under this provision to actually receive work authorization in the form of an Employment Authorization Document (EAD card).  While it is difficult to say, it is a good guess that most H-4 spouses might see a work permit (after applying for it of course) by the end of the year if all goes well.  Be advised that there is no rule yet, and no application procedure established, so that cases filed now would likely be rejected.  

Despite the fact that this may take a while to implement, and may affect relatively few people, it is still a positive measure undertaken by the Obama administration, and will help a number of families.  While the administration could have gone much farther and proposed work authorization for all dependent spouses, this is a fairly good first step.

Unannounced L-1 Site Visits

USCIS recently announced that its Fraud Detection and National Security (FDNS) Division will expand its site inspection program to include L-1 employers.  For the past few years the FDNS has conducted worksite inspections for H-1B employers and is now expanding its inspection program to include L-1 employers.  This expansion is a response to a recent report from the Department of Homeland Security’s Office of Inspector General (OIG), “Implementation of L-1 Visa Regulations.”  OIG’s report was conducted to address concerns of fraud and abuse within the L-1 program.  One of the report’s recommendations is that USCIS conduct mandatory site visits before renewing L-1 petitions for new offices. 

USCIS advised that the FDNS would begin conducting L-1 site visits in the first quarter of the 2014 fiscal year (which began October 1, 2013) and in January 2014 reports of L-1 site visits began to surface.  It is unclear whether L-1 site visits are restricted to new offices or will include all L-1 employers.  It has been noted that the site visits will not include blanket L-1 employers.

Here is what we expect to from the site visits:

·         Visits will usually be unannounced;

·         Visits will occur after an L-1 petition has been approved;

·         The FDNS inspectors will want to inspect the physical work site premises;

·         The FDNS inspector will want to meet with L-1 petition signatories or another employer representative as well as the L-1 employee/beneficiary and possibly the employee’s co-workers and managers;

·         The FDNS inspector will want to verify the offered salary and job duties to confirm the L-1 employee is working in a capacity that is executive, managerial - L-1A, or requires specialized knowledge - L-1B;

·         The FDNS inspector may ask for a copy of the L-1 Petition (if you have not received this from your attorney, please ask for a copy); and

·         For L-1 petitions approved for new offices, the FDNS inspectors will want to verify employing entity’s corporate existence which may include reviewing payroll records, tax filings, or other evidence of the employer’s operations.

To prepare for the possibility of a site visit, L-1 employers should notify staff at L-1 worksites of the possibility and put procedures in place so HR managers and administrative staff are prepared to respond to an unannounced site inspection.

If a site inspection occurs, the employer’s representative should ask for the inspecting officer’s name, title and contact information (or just ask for the officer’s business card) and should immediately notify the employer’s attorney so that the attorney may be present during the inspection either in person or by phone.  For managers and staff present during the inspection, they should be advised not to provide responses to questions for which they do not know the answers.  Do not guess at a response, instead offer to investigate the question and provide follow-up information.  

USCIS’ announcement of the L-1 site visit is a reminder that employers should inform their attorneys of any changes to L-1 employment, such as job duties, work location, or placement at a client site, to ensure that any changes are reviewed in case an amendment is required for the L-1 petition.