On January 31, 2019, the Department of Homeland Security announced two major changes to the H-1B program. Under the final rule, which takes effect April 1, 2019, employers seeking to file H-1B petitions will now be required to first electronically register with U.S. Citizenship and Immigration Services (USCIS) during a designated registration period.
The final rule also changes the order in which USCIS will select H-1B cap-subject registrations to increase the odds of selection for beneficiaries who have earned a master’s degree or higher from a U.S. institution of higher education. Although the new registration requirement will not apply for the Fiscal Year 2020 cap season, which begins April 1, the new selection order will.
The H-1B visa program allows U.S. employers to temporarily hire foreign workers to perform services in a specialty occupation. A specialty occupation is one that requires (1) the theoretical and practical application of a body of highly specialized knowledge and (2) the attainment of a bachelor’s degree or higher (or its equivalent) in a specific specialty as a minimum qualification for entry into the occupation.
Congress has limited the number of H-1B visas available each fiscal year. Currently, the number of workers who may be granted initial H-1B status during any fiscal year is capped at 65,000. Some workers, however, are “exempt” from the visa cap. Workers holding a qualifying U.S. master’s degree or higher, for instance, do not count toward the regular cap. Instead, Congress allocates an additional 20,000 H-1B visas for workers with qualifying U.S. master’s degrees or higher (known as the “advanced degree exemption”).
Before the new final rule went into effect, employers seeking an H-1B visa for the upcoming fiscal year, which begins October 1, could file an H-1B petition as early as April 1. If USCIS receives enough petitions to meet the regular cap, it may then randomly select the number of petitions needed to reach 65,000 visas. If USCIS receives enough petitions to meet both the regular cap (65,000) and the advanced degree exemption (20,000), then USCIS first randomly selects the 20,000 advanced degree petitions and then randomly selects the 65,000 regular cap petitions from a pool that includes both the regular cap and the unselected advanced degree petitions. This is what is commonly known as the H-1B lottery.
The Final Rule
The final rule changes the H-1B program in two respects:
First, the final rule implements a new registration requirement. Under the final rule, employers will no longer file an H-1B petition to be part of the H-1B lottery. Instead, they will electronically register for each prospective H-1B worker. Assuming USCIS receives enough registrations to meet the numerical cap, then it will randomly select from the H-1B registrations. It is only when an employer’s registration is selected that the employer will file an H-1B petition.
Importantly, the new registration requirement will not go into effect this year. USCIS has delayed implementing the registration requirement so that it can test the system and ensure it is fully operable. Once the new system is full operable, USCIS will publish a rule announcing the registration system’s initial implementation.
Second, the final rule changes the order of the visa lottery. Assuming, as has historically been the case, that USCIS receives enough petitions to reach both the regular and advanced degree caps), it will begin by selecting registrations for the regular cap from a pool that includes all regular registrations and all advanced degree registrations. Once it has selected enough registrations to reach the 65,000 cap, USCIS will then select the advanced degree registrations from the remaining unselected advanced degree petitions. USCIS estimates that changing the order of the H-1B lotter will increase the number of H-1B beneficiaries with a master’s degree or higher from U.S. institutions of higher learning by 16 percent (or 5,340 workers each year).
Effect of New Registration Requirement on Employers
According to USCIS, the purpose of the registration requirement was to streamline the process for administering the H-1B program. USCIS estimates that the new registration requirement will save employers and the government between $43 million and $62 million annually. But how will it affect individual employers?
Let’s start with the good news: For employers who are not selected in the H-1B lottery, the new final rule will save them money. USCIS estimates the cost of registration will be less than $300 per registration, which is less than the cost of preparing an H-1B petition. So if an employer’s registration is not selected, the employer will save the difference between the cost of filing a petition under the current system and the cost of registering under the new system. Of course, the goal of the H-1B lottery is to be selected, which brings us to the bad news.
For employers whose registrations are selected in the H-1B lottery, they will see a slight increase in costs. In addition to paying for preparing an H-1B petition once their registration is selected, those employers will also have the added cost of the electronic registration, although this added costs should not exceed $300.
But the monetary cost of the new registration is not the only additional cost to employers.
For one thing, the registration system creates uncertainty. Under the final rule, USCIS reserves the right to suspend the registration system in any given year, an option it has already exercised for FY 2020. As of now, it is unclear whether the registration system will be implemented for FY 2021 and, if so, when that decision will be announced. Because properly preparing an H-1B petition takes time, employers may end up having to prepare H-1B petitions before USCIS announces whether the registration system will be implemented for FY 2021. And what if USCIS implements the registration system for FY 2021, only to suspend it for FY 2022? If USCIS fails to announce that decision early enough, which is possible since USCIS has only committed to announcing the start of the registration period at least 30 days in advance, employers will be forced to scramble at the last minute to prepare H-1B petitions.
There is also concern that the reduced paperwork and fees associated with electronic registration (as opposed to filing an H-1B petition) may flood the system with registrations, particularly by large employers that can take advantage of economies of scale, thereby forcing small businesses out of the H-1B market. And because, unlike with an H-1B petition, none of the information necessary to electronically register requires the employer to even minimally evaluate whether the proposed beneficiary is eligible for an H-1B visa, there is likely to be an increase in frivolous or non-meritorious filings, particularly given the reduced barriers to entry.
Fortunately, employers need not worry about these concerns for now since the registration requirement has been suspended for the upcoming cap season. But change to the order in which the visa lottery is conducted may affect you. Please check back as we provide more guidance about how this new final rule will affect employers. For more information, please contact Maria del Carmen Ramos at firstname.lastname@example.org or 813.227.2252.