New Regulation Replaces H-1B Random Selection with Wage-Based Selection

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On January 8, 2021, the Department of Homeland Security (“DHS”) published a final rule that would dramatically change how H-1B cap petitions are selected in the annual “lottery.” Under this final rule, the current random selection process would be replaced with a system that gives priority to workers whose offered salary is in the highest wage levels for their occupation and geographic location. The new rule will go into effect 60 days after publication—March 9, 2021—and U.S. Citizenship and Immigration Services (“USCIS”) intends to use the new system for the upcoming FY2022 lottery to be conducted in late March or early April 2021. However, the new rule is likely to be challenged in court and changes in the White House and Congress may delay or cancel its implementation.

Background

Congress has established an annual quota of 65,000 H-1B visas (commonly known as the “regular cap”), plus an additional 20,000 H-1B visas for foreign nationals who have earned a U.S. advanced degree (commonly known as the “advanced degree exemption” or the “Master’s cap”). In years when the demand for H-1B visas exceeds these quotas—which has occurred in every year since FY2014—USCIS employs a random selection process for allocation (commonly known as the “H-1B lottery”). Until now, the lottery has been a random, computerized process that did not consider wage or any other substantive factors. Last year, USCIS implemented a new electronic registration system for entering the lottery, which previously required the submission of a complete petition with forms and supporting documentation.

The New Selection Process

If the new rule is implemented, USCIS would replace the random lottery with a selection process based on prevailing wage level. In the H-1B context, the “prevailing wage” is defined by the Department of Labor’s Occupational Employment Statistics (“OES”) rules as the average rate of wages paid to similarly employed workers in the area of intended employment. As such, prevailing wages are determined by the standard occupational classification that corresponds to the offered position, the area of intended employment, and the education and experience requirements of the sponsored position. Four wage levels are available under the OES rules. These wage levels correspond to the education and experience requirements for the position, as compared to the normal requirements for the standard occupational classification, from entry level (Level 1) to fully competent (Level 4). Under the new system, USCIS would prioritize H-1B visas for workers offered the highest wage levels for the occupation and geographic location. Visas would be allocated to workers offered Level 4 wages first, and then to the other three wage levels in descending order. A random lottery would be conducted if the number of registrations for a specific wage level exceeds the remaining H-1B visas in the quota.

Implementation Uncertain

Whether the new rule ultimately will be implemented is uncertain. The incoming Biden Administration has indicated that it will delay all pending rules that have not become effective before January 20, 2021. It may also seek to delay, change, or cancel the implementation of the rule. Additionally, the rule is likely to be subject to litigation challenges on both procedural (under the Administrative Procedures Act and the Vacancies Act) and substantive grounds.

Despite the many unknowns about the upcoming H-1B selection process, employers should begin the process of identifying current and prospective employees who may require H-1B sponsorship and who are subject to the H-1B cap, working with their immigration counsel to conduct due diligence and assess the eligibility and viability of each case.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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