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.