On November 2, 2020, the Department of Homeland Security (“DHS”) published a Notice of Proposed Rulemaking (NPRM) to effectively end the random H-1B visa lottery selection process used when U.S. Citizenship and Immigration Services (“USCIS”) receives more petitions than allowed under the annual limit. Instead, if the proposed rule becomes final, USCIS would rank petitions by the highest salary level and work its way down, “by generally first selecting registrations based on the highest Occupational Employment Statistics (“OES”) prevailing wage level that the proffered wage equals or exceeds for the relevant Standard Occupational Classification (“SOC”) code and area(s) of intended employment.”(85 Fed. Reg. 69236, 11/02/2020).

By way of background, Congress has set the limit at 65,000 H-1B visa petitions that can be approved in each government fiscal year, plus an additional 20,000 for individuals with U.S. master’s degrees. Historically, USCIS has received far more petitions than there are H-1B visa numbers available each year, except when the United States is in a deep recession. For example, last year USCIS received over 275,000 H-1B registrations, or more than three times the number of H-1Bs available, rendering the odds of selection approximately 31%.

The H-1B visa category requires that the U.S. employer pay the foreign national employee a certain wage, which must be the higher of the prevailing wage for the area as determined by the Department of Labor’s OES, or the wage that the employer pays to other similarly qualified workers. The OES prevailing wages for each job category are determined based on a four wage level system, with entry-level starting at (Level 1) up to most senior level (Level 4), depending upon the employer’s education and experience requirements as well as the worker’s level of responsibility and supervision.

The current random selection process for H-1Bs is done blindly, and without regard to the nature of the petitioner, the job offer, or the rate of pay being offered to the beneficiary. Under the new system created by the NPRM, however, DHS predicts that no individuals paid Level 1 wages would be selected in the H-1B lottery. DHS also projects that about 25% of individuals who would receive Level 2 wages also would not be chosen for an H-1B petition. Everyone at Level 3 and Level 4 would likely be selected.

The proposed rule, if implemented, in conjunction with the Department of Labor’s Interim Final Rule (IFR) from October 2020 that raised all prevailing wage levels across all industries, would prove disastrous for many employers who simply cannot meet the higher wage levels under Level 3 and Level 4 wages. The one-two punch of the Department of Labor raising salary levels significantly enough that employers are having trouble paying a Level 2, 3 or 4 wage, in conjunction with this proposed rule forcing companies and employers to offer a Level 3 or 4 salary level in order to ensure obtaining work authorization creates a situation in which, in order to hire an H-1B worker to fill a vacancy, the employer must pay that worker a salary vastly out of step with its existing salary structure. In many cases the wages required for H-1B employees are now tens of thousands of dollars higher than they were previously, and similarly higher than the wages that U.S. employers are paying to other U.S. workers with equivalent skill sets.

The proposed rule is also problematic in that it would essentially eliminate the ability of U.S. employers to hire recent international student graduates for entry-level positions. Positions requiring a level 3 or level 4 wage are by definition advanced roles. Currently, most H-1B lottery petitions are filed on behalf of recent graduates who are on F-1 student visas and who have little to no work experience. However, many have degrees in STEM fields, and it is hard for employers to find entry-level U.S. candidates holding these degrees. According to the National Foundation for American Policy, in 2017, 81% of graduate students in most engineering fields in the United States and 79% of graduates in Computer Science are international students.

The proposed rule therefore would dramatically reduce the number of possible candidates for many high tech and engineering jobs and make the U.S. less competitive in global markets. Initially, this will lead to international students leaving the U.S. after obtaining their STEM degrees. In the long-term, it will likely result in international students seeking higher education in countries that make it easier for them to remain and work long-term.

Moreover, the proposed rule violates the law. Section 214(g)(3) of the Immigration and Nationality Act states that the numerically limited H-1B visas or status, “shall be issued … in the order in which petitions are filed for such visas or status.” We anticipate that legal challenges will be posed against the proposed rule because it violates this congressionally imposed requirement to select H-1B petitions based on the order in which they are received, as opposed to some other form of ranking such as the wage-based ranking system proposed in the NPRM.