As another H-1B cap season comes and goes, tens of thousands of hopeful employers and employees will again be informed that their H-1B visa petitions were not among the 85,000 selected in USCIS’s random lottery for processing in fiscal year 2020. Exploring H-1B cap exemptions may be a way to avoid the stress of H-1B roulette.

Demand for H-1B exceeds supply

Shortly after the H-1B filing window opened on April 1, USCIS announced that it received 201,011 H-1B petitions during the filing period – greatly exceeding the 65,000 H-1B visas available in the regular cap and the 20,000 additional visas available to those who possess advanced degrees (master’s or higher) from a U.S. institution. This means that more than half of the petitions submitted for processing will be returned in coming weeks, leaving many individuals scrambling to find alternative options. While this may in some cases require pursuing other nonimmigrant visa classifications, such as E-1/E-2, F-1, J-1, L-1, and O-1, there are additional options: certain entities, foreign national employees and/or petitions that may qualify for exemptions to the H-1B cap.

For at least the last 15 years, the demand for H-1B visas has exceeded the available supply – and in each of the last seven years, that supply has been exhausted within the first week of the opening of the H-1B cap. This imbalance forces many who seek an H-1B visa allowing them to work in the United States into relying on pure luck of the draw. This, in turn, creates significant uncertainty for employers and employees alike, forcing them to place business and personal decisions on hold until their lottery number is called.

Exemptions to H-1B cap

Section 214(g)(5)(A) and (B) of the Immigration and Nationality Act (“the Act”) provides that an alien who is employed or has received an offer of employment at an institution of higher education or a related or affiliated nonprofit entity, a nonprofit research organization, or a governmental research organization, is not subject to the H-1B cap. While this provision appears relatively straightforward, those who find that their H-1B petitions were not one of the lucky few selected in the lottery may find value in investigating these H-1B cap exemptions further.

Each of these paths to H-1B cap exemption is explored below:

A. Directly Exempt: Institutions of Higher Education, Nonprofit Research Organizations, and Governmental Research Organizations

By statute, certain types of employers receive a blanket exemption from the H-1B cap. Most institutions of higher education (colleges and universities) are exempt from the H-1B numerical limitations, and can therefore file H-1B petitions at any time throughout the year, regardless of whether the H-1B cap has already been met for that particular year. This exemption applies to any H-1B petition filed by a college or university – its availability is not limited to specific circumstances or specific types of positions. Both faculty and staff positions at qualifying institutions of higher education are exempt from the H-1B cap. The primary exception to this blanket H-1B exemption is that some specific types of institutions of higher education, primarily for-profit institutions and institutions that are unaccredited, are not entitled to a cap exemption. See 20 U.S.C. § 1001(a).

A nonprofit or governmental research organization is defined in the applicable regulations as “an organization that is primarily engaged in basic research and/or applied research." Both basic and applied research include “research and investigation in the sciences, social sciences, or humanities.” Nonprofit or governmental entities engaging in such research are exempt from the H-1B cap in much the same way as are institutions of higher education.

In addition to direct employment by one of the cap-exempt entities described above, options also exist for cap exemption by other types of employers who would ordinarily be subject to the H-1B cap, if certain conditions are met regarding the beneficiary’s employment.

B. “Employed at” a Cap-Exempt Entity: The "At" Doctrine

One such option allows for an H-1B cap exemption if an employee will be employed by an otherwise cap-subject employer to perform work at the location of a cap-exempt entity. Under this option, the worker must be “employed at” one of the qualifying institutions listed above – namely, an institution of higher education or a related or affiliated nonprofit entity, a nonprofit research organization, or a governmental research organization. Often, a petitioner that is not itself a qualifying institution will claim this exemption because the foreign worker it employs will perform all or some of his job duties “at” a qualifying institution, even though he is not employed by that qualifying institution. USCIS refers to these as “third-party petitioner” cases.

USCIS will allow third-party petitioners to claim a cap exemption on behalf of an alien beneficiary if that alien will perform job duties at a qualifying institution and the employee’s job duties will “directly and predominately further the normal, primary, or essential purpose, mission, objectives or function of the qualifying institution, namely, higher education or nonprofit or governmental research.” In these cases, the petitioner must establish a logical nexus between the work performed by the alien beneficiary and the normal, primary, or essential work performed by the qualifying institution. In other words, there are numerous situations in which an alien beneficiary would qualify for an H-1B cap exemption, even though he is not employed directly “by” a qualifying institution, because he would perform some or all of his duties “at” a qualifying institution, and those duties would or could otherwise be performed by employees of the qualifying institution, in furtherance of the qualifying institution’s primary mission. For example:

• Company A, a for-profit consultant firm that would not otherwise be a qualifying institution, files an H-1B petition on behalf of an employee working directly for the firm. The H-1B petition describes the alien beneficiary’s job duties, which will be performed on-site at a qualifying governmental research organization pursuant to a joint-agreement between the two entities. Company A submits evidence in support of its H-1B petition demonstrating that the alien beneficiary will be working on a research project performing duties similar to those performed by actual employees of the governmental research organization in furtherance of the qualifying entity’s mission. If the alien beneficiary was sponsored directly by the government research organization, he or she would clearly qualify for the H-1B cap exemption.

In this case, the alien beneficiary would be exempt from the H-1B cap because the alien beneficiary will perform research duties that would or could otherwise be performed by employees of the qualifying institution, in furtherance of the qualifying institution’s primary mission.

• A medical fellow in pediatrics has been employed at a qualifying non-profit university medical center for two years in H-1B status. At the end of the fellowship, the doctor will become a member of Company B, a private pediatrics practice group which has its primary offices within the university medical center and predominantly trains medical students and treats patients in the medical center. The doctor will be doing exactly the same work that he did during his fellowship, including remaining on the university medical center’s faculty, but for reasons related to hospital billing practices and medical malpractice insurance requirements, his technical, and therefore petitioning, employer will be the private pediatrics practice group.

In this case, the doctor would be exempt from the H-1B cap because the conditions of employment demonstrate that the doctor will be performing the same work that he performed while employed directly by the qualifying university medical center. Thus, the H-1B employment directly furthers the primary mission of the hospital because the doctor will remain on the university medical center’s faculty, and will continue to educate and train its medical students and treat patients at the medical center.

Employers should note, however, that under this option, physical presence alone is not enough. If an alien beneficiary will be employed “by” a nonqualifying institution, to perform work “at” a qualifying institution (i.e., his duties will be performed at the physical location of a qualifying institution), the petitioner and/or beneficiary must still show that work performed by the beneficiary will be in direct furtherance of the normal purpose, mission, or objective of the qualifying institution. For example:

• Company C, a for-profit market research firm that would not otherwise be a qualifying institution, files an H-1B petition on behalf of a direct employee. The H-1B petition states that the alien beneficiary will be conducting a specific kind of market research on-site at a qualifying university. In addition, the petition states that the university has a specialized research tool that can only be accessed from its facilities and that the alien beneficiary’s research will be conducted for the benefit of the petitioner’s clients and business, and not for the university.

In this case, the alien would not qualify for a cap exemption as he or she is only physically located “at” the qualifying institution; and no nexus has been demonstrated between the work performed by the beneficiary and the normal purpose of the qualifying entity. The alien beneficiary will not perform work for the benefit of the qualifying institution, but rather for the for-profit firm.

C. Related or Affiliated Nonprofit Entities

An exemption may also be available for a nonprofit that is related to or affiliated with a qualifying cap-exempt entity. In early 2017, USCIS broadened the definition of what would qualify as a nonprofit entity related to or affiliated with a qualifying cap-exempt entity, permitting an otherwise cap-subject entity to claim a cap exemption where:

1. The nonprofit entity is connected to or associated with an institution of higher education through shared ownership or control by the same board or federation;
2. The nonprofit entity is operated by an institution of higher education;
3. The nonprofit entity is attached to an institution of higher education as a member, branch, cooperative, or subsidiary; or
4. The nonprofit entity has entered into a formal written affiliation agreement with an institution of higher education that establishes an active working relationship between the nonprofit entity and the institution of higher education, and a fundamental activity of the nonprofit entity is to directly contribute to the research or education mission of the institution of higher education.

Notably, and contrary to popular belief, this does not mean that the nonprofit entity as a whole must be owned, operated or controlled by the institution of higher education. This requirement may be fulfilled through a jointly managed program or endeavor between the two entities. There also does not have to be an actual legal relationship between the two entities, if sufficient evidence of affiliation and/or consistent collaboration can be produced (for example: a joint statement of policies, sharing space/personnel, joint committees managing the collaboration, the nonprofit holding itself out as an affiliate of the institute of higher education).