The Department of Homeland Security (DHS) published today in the Federal Register a notice of proposed rulemaking that would change how employers file cap-subject H-1B petitions and how USCIS conducts the H-1B lottery process. The proposed rule would require employers to first electronically register with U.S. Citizenship and Immigration Services (USCIS) during a designated registration period. The proposed rule would also reverse the order in which USCIS selects H-1B petitions under the H-1B cap and the advanced degree exemption.

Background on the H-1B Visa

The H-1B program allows employers in the United States to temporarily employ foreign nationals in occupations that require the theoretical and practical application of a body of highly specialized knowledge and a bachelor’s degree or higher in the specific specialty, or its equivalent. H-1B specialty occupations may include occupations in a variety of fields such as science, engineering, law, finance, accounting, teaching, medicine, or information technology.

Annual Allocaion of H-1B Visas and the H-1B Lottery

Federal law sets an annual limit of approximately 65,000 on the number of new H-1Bs available. This number is commonly referred to as the "H-1B Cap." In addition, 20,000 H-1B petitions filed for persons who have earned a master's degree or higher at a U.S. institution of higher education are not counted towards the general H-1B Cap ("Master's Cap" or the "advanced degree exemption"). When the 85,000 available H-1Bs have been exhausted for the federal fiscal year (October 1 to September 30), the caps are considered reached and no new cap-subject petitions can be approved until the filing window for the next fiscal year's H-1Bs opens.

Historically, the federal government has allowed H-1B cap-subject petitions to be filed beginning April 1, six months prior to the start of the federal fiscal year.  Due to the heavy demand for H-1Bs in the past several years, USCIS has restricted the filing window to the first five business days in April, after which a lottery is conducted to determine which H-1B petitions will be selected for adjudication.  To participate in the lottery, U.S. employers have been required to file a complete H-1B petition—including Labor Condition Application certified by the Department of Labor, completed forms, filing fees, and supporting documentation—during the filing period. The petitions selected in the lottery proceeded to adjudication, while those unselected were returned to the employer.

H-1B Filing Pursuant to the Proposed Rule

Under the proposed rule, employers would no longer need to file a complete H-1B petition to enter the lottery. Instead, employers would register individual employees for whom they intend to file H-1B petitions. The proposed registration period would occur prior to April 1—the first day H-1B petitions for the next fiscal year can be filed—and would last for 14 days. Employers would register online by providing basic information, such as the employer’s  name, address, authorized representative, and federal employer identification number, the  employee’s biographical information and degree, and the employer’s attorney.  Employers would receive an automatic electronic notification confirming that the registration request was received by USCIS. Employers would be limited to one registration per employee per year. USCIS has not proposed a registration fee.

Once the registration period is closed, USCIS would select registrants in a random lottery and then notify all employers with selected registrations that the employer is eligible to file an H-1B petition on behalf of the named foreign worker. The notice would indicate a filing location and the designated filing period (of at least 60 days) during which the H-1B petition must be field. Unselected registrations would remain on reserve in the system in case additional selections are needed to meet the annual H-1B visa allocations.

The proposed rule would also reverse the order in which USCIS selects H-1B petitions under the H-1B Cap and Master’s Cap. Under the current lottery selection process, USCIS first conducts the random selection process for the Master’s Cap and then for the H-1B Cap. Under the proposed rule, USCIS would conduct the selection process for the H-1B Cap first and Master’s Cap second. USCIS estimates that doing so would increase the selection of individuals with U.S. advanced degrees by 16 percent, thereby promoting the Administration’s “Buy American, Hire American” policy to ensure that the H-1B visas are given to the highest paid and most qualified workers.

USCIS predicts that this new system would reduce burdens in the current system because employers would no longer need to prepare, and USCIS would no longer need to handle, petitions for employees who are not selected in the lottery. USCIS acknowledges potential downsides to the new system, such as an increase in lottery registrants and less targeted hiring by employers, due to the reduced costs of participation, although it has not proposed ways to avoid them.

Public comments about this proposed rule must be received on or before January 2, 2019. It is unclear whether the proposed rule would clear the rule-making process in time for the FY2020 lottery season, which is set to start on April 1, 2019.  As such, it is important that employers work closely with their immigration counsel and closely monitor any development with this proposed rule and position themselves for filing under both the current and proposed systems.

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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