Michael D. Patrick
Michael D. Patrick ()

April 1, 2014, marks the opening of the H-1B cap, and companies across the United States are preparing for a highly competitive filing season. The H-1B non-immigrant visa category is available to businesses wishing to hire persons in a specialty occupation position—defined as one that requires the application of highly specialized knowledge and at least a bachelor’s degree or its equivalent in that particular specialty.1 The H-1B skilled worker visa is one of the most important options available to companies looking to hire foreign-born professionals on a temporary basis, and it is essentially the only option available for businesses looking to recruit new, highly skilled talent from top universities and the labor market abroad.

In the Fiscal Year 2015 cap season, companies are expected to file a large number of applications for the 85,000 H-1B visas available under the current statutory quota. In April 2013 the U.S. Citizenship and Immigration Services (USCIS) received more than 124,000 H-1B visa petitions in the first five days of the FY 2014 cap, forcing the government to default to a lottery system. One-third of all the petitions—or more than 31 percent of the total number of cap filings—were subsequently rejected through the lottery.

Even greater numbers of petitions are expected to be filed this year, which means that an even higher number of otherwise qualified highly skilled foreign nationals will be rejected in the lottery. This uncertainty makes it difficult for employers to meet their hiring needs, deterring foreign investment and negatively impacting U.S. workers.2 This article discusses the need for an increase in the number of H-1Bs for skilled workers, primary bills in the Senate and House with provisions to address the shortage of H-1B visas, the current political landscape and predictions for change in the coming year as well as practical pointers for the FY 2015 cap season.

Brief History of Category

The H-1B category was established in the Immigration and Nationality Act of 1952 and up until 1990 there was no limit on the number of non-immigrant visas that could be filed. However, in the Immigration Act of 1990, Congress established a yearly cap of 65,000 for H-1B visas.3 With the American Competitiveness and Workforce Improvement Act of 1998, Congress temporarily raised the cap to 115,000 in 1999 and 2000, and 107,500 in 2001, largely due to increasing pressure from employers facing labor shortages, particularly in the information technology sector.4 In 2000, Congress raised the cap further for fiscal years 2001 to 2003 to 195,000.5

In 2004, Congress did not pass further measures to increase the cap and allowed it to revert back to the original quota of 65,000 but exempted 20,000 aliens holding a master’s degree or higher from a U.S. university.6 Today the cap remains the same, with a total of 85,000 H-1B visas, 20,000 of which are only available to foreign nationals holding advanced degrees.

Each year on April 1, USCIS starts accepting applications for H-1B employment starting in the coming fiscal year which begins on Oct. 1. If USCIS receives more than enough petitions to meet the cap within the first five business days, the government will hold a lottery to randomly select the allotted number from the total pool of applications filed within those first five days. Contrary to popular belief, raising the cap for H-1Bs has not historically led to increased demand for H-1B visas. Rather, the correlation between the total number filed and the date the cap is met tracks the economic health and employment levels more generally. During the period of economic downturn coinciding with the FY 2010 cap, the quota was not met until Dec. 21, 2009, almost nine months after opening. Similarly, in FY 2011 and FY 2012 the cap was not met until January and November, respectively.

The decreased demand for H-1B visas during these years makes sense in light of the economic recession and high unemployment rates. But with the economy on the rise and unemployment on the decline, the demand for highly skilled workers, particularly graduates in the fields of science, technology, engineering, and mathematics (STEM degrees) is once again growing and as a consequence, the current quota is not in accord with the labor market. Moreover, economists studying economic growth factors argue that rather than threatening U.S. jobs, increasing the number of highly skilled foreign-born workers, particularly in the STEM fields, improves the average wage for U.S. workers in both STEM and non-STEM fields.7

Recent studies have also shown that increasing the number of foreign-born students who graduate from U.S. universities and stay to work in STEM fields creates new jobs for Americans because of their significant contributions to innovation, research, and development.8 The U.S. economy is recovering, and the unemployment rate is currently at a five-year low. Similar to the late 1990s and early 2000s, the current economic environment suggests that immigration reform is necessary to enable U.S. businesses to remain competitive and recruit the best and brightest, not only from around the world, but also from our top universities and colleges.

Recent Proposed Legislation

The growing demand for highly skilled workers, as evidenced by the immediate exhaustion of the FY 2014 H-1B cap, is a key issue driving legislative reform. The Border Security, Economic Opportunity and Immigration Modernization Act of 2013 (S.744), which was championed by the bipartisan “Gang of Eight”9 was passed in the Senate in June 2013. The Senate immigration bill would increase the baseline cap to 115,000 per fiscal year with further increases of 5,000-25,000 within a fiscal year possible, depending on certain market indicators including prior use of cap numbers and the unemployment rate.10 Similarly, the cap exemption for holders of U.S. advanced degrees would be increased to 25,000, but would be limited to graduates with STEM degrees.

While the Senate bill would significantly increase the annual allotment of H-1B visas which would benefit businesses, it also would add significant additional government oversight and Department of Labor control over new requirements surrounding the recruitment and employment process. It also would place severe new restrictions on companies that employ large numbers of H-1B workers or L-1B specialized knowledge employees, which is the other significant temporary employment visa category available to companies. Specifically, the Senate bill creates a new wage system, collapsing the current four-tiered wage system into three tiers and significantly increasing wage requirements at each level—in effect, not just for foreign professionals but for their U.S. worker counterparts as well.

Additionally, S. 744 establishes greater restrictions on petitioning companies, and particularly those with large numbers of employees in H-1 or L-1 status (“dependent employees”) including heightened recruitment, non-displacement and outplacement requirements. S.744 also calls for increased fees, including an additional $2,500 on all H-1B petitions.11 Moreover, the Senate bill provides for expanded Department of Labor enforcement authority, including increases to the maximum Labor Condition Application (LCA) processing times, tougher scrutiny of LCAs and increased authority to perform compliance audits. It also increases potential fines for non-compliance.

Significant measures to address the lack of H-1B visas have also been taken up in the House. In May 2013, House Representative Darrell Issa, along with 21 Republican cosponsors, introduced the Supplying Knowledge Based Immigrants and Lifting Levels or STEM Visas Act (SKILLS Visa Act H.R. 2131). Under the SKILLS Visa Act, the annual H-1B cap would increase to 155,000 with a U.S. advanced degree exemption of 40,000 limited to STEM graduates. Unlike the Senate bill, there is no market escalator formula in the House bill and 155,000 would be the maximum number of cap cases that could be filed regardless of prior usage or other economic factors. Similar to the Senate bill, the House bill would increase required wages at each level and also provides for expanded Labor Department enforcement for H-1Bs.12 Additionally, H-1B employers would need to have gross assets of at least $50,000 or show business activity to qualify to petition for H-1Bs.

Projections for Changes

As the second half of the 113th Congress begins, questions remain as to whether immigration reform will be possible in 2014, but recent comments from key Republicans in the House seem to foretell at least the possibility that immigration reform can progress this year. In March of 2013, the Republican National Congress (RNC) formally endorsed immigration reform as a strategy to win votes among key minorities. Bipartisan legislation was thereafter introduced in the form of S. 744. However, Speaker John Boehner and House leadership, as well as many other House Republicans, have been explicit in their opposition to moving a single, comprehensive immigration reform bill. Instead, the House has instead introduced a series of more targeted immigration reform bills, including the SKILLS Visa Act. To date no bills have been put to a vote on the floor of the House, and in December 2013, Speaker Boehner indicated that immigration would “have to wait until next year.”13

There seems however, to be renewed hope that Boehner and the House Republicans may be prepared to move immigration reform legislation in 2014. Late in 2013, Boehner hired senior policy staff experienced in immigration reform legislation.14 Both Boehner and House Majority Leader Eric Cantor also included immigration reform on a list of their top priorities in 2014, and Boehner indicated last week that an outline of GOP principles on immigration would be released in the coming weeks.15 Representative Paul Ryan has also made recent comments in support of immigration reform.16

But while Congress is dragging its feet, other countries are reforming their immigration policies in order to better compete internationally and attract highly skilled foreign-born workers, as well as foreign investment. For example, Australia and Canada both emphasize professional skills very heavily in their overall immigration system, reflecting a clear awareness that employment-based immigration policy is a critical piece of a nation’s talent and competitiveness strategy. In comparison, the U.K.’s visa restrictions for non-E.U. high-skilled workers have coincided with a decrease in foreign investment and national GDP.

Practical Implications

All of this debate on increasing the H-1B cap will unfortunately be too little, too late for employers, at least in the near term, as the FY 2015 cap season is just around the corner. As such, in order to increase the chances of obtaining H-1B visas in the lottery employers need to start preparing for the filing season now. It will be critical to file petitions for delivery to USCIS in the first few days of April and to set expectations accordingly. Advance LCA preparation will also be particularly important this cap season, especially if there is another government shutdown, as this would lead to delays in LCA certifications with the Labor Department.

Changes to the immigration system can seem painfully slow in light of growing business needs, but there are reasons to be optimistic that relief, in the form of at least an individual bill increasing H-1B visas, will be passed in the near future. When it is it will be good for business and good for the U.S. economy.

Michael D. Patrick is a partner at Fragomen, Del Rey, Bernsen & Loewy. Meghan O’Malley, an associate at the firm, and Nancy Morowitz, counsel at the firm, assisted in the preparation of this column.

Endnotes:

1. 8 C.F.R. S 214.2(h)(4)(ii).

2. Not only does the lottery create uncertainty for employers trying to determine their annual staffing needs, but an immense amount of unnecessary time and money is spent preparing petitions that are subsequently rejected in the lottery. Although USCIS refunds their fees for cases not chosen in the lottery there are still significant legal fees, as well as time and money spent by human resources departments to identify and prepare cases for filing. Increasing the cap would also reduce this burden on companies.

3. In addition to creating the H-1B cap, the Immigration Act of 1990 also changed the definition of an H-1B worker slightly. The INA originally required that non-immigrant workers applying for the H-1B visa be of “distinguished merit and ability.” The Immigration Act of 1990 changed the definition to the present day requirements that the individual work in a specialty occupation, defined as one that requires highly specialized knowledge and the attainment of at least a bachelor’s or higher degree, or its equivalent. See, Immigration Act of 1990, Pub. L. No. 101-649 (Act of Nov. 29, 1990).

4. AFM 31.1 Background [Section (b) amended 10/6/2010; AD10-48; PM-602-0009].

5. American Competitiveness in the Twenty-First Century Act of 2000, Pub. L. 106-313, 114 Stat. 1251 (Oct. 17, 2000).

6. Title IV of P.L. 108-447 (H.R. 4818), The Consolidated Appropriations Act for FY 2005.

7. For example, in a recent study titled STEM workers, H1B Visas and Productivity in U.S. Cities, economists found that rather than taking jobs from U.S. workers, increasing the percentage of foreign workers with STEM degrees “increased the wage of native college educated workers (both STEM and non-STEM)…”. See, Stuart Anderson “No Hiring New H-1B Visa Holders for another 18 Months” Forbes (April 7, 2013).

8. “Help Wanted, the Role of Foreign Workers in the Innovation Economy,” a report from the Information Technology Industry Council, the Partnership for a New American Economy, and the U.S. Chamber of Commerce (Nov. 30, 2012) available at: http://www.uschamber.com/reports/role-foreign-workers-innovation-economy.

9. The “Gang of Eight” consists of four Democratic Senators and four Republican Senators: Democrats Charles Schumer of New York, Robert Menendez of New Jersey, Dick Durbin of Illinois, and Michael Bennet of Colorado, and Republicans Marco Rubio of Florida, John McCain of Arizona, Lindsey Graham of South Carolina, and Jeff Flake of Arizona.

10. Specifically, the cap could be increased depending on whether demand in the previous year exceeds the cap or unemployment rate for managerial, professional and related occupations is less than 4.5 percent. There would also be limited cap reductions possible in following fiscal years if the demand for H-1Bs decreases. The overall cap ceiling would be set at a minimum of 110,000 and a maximum of 180,000 annually.

11. The fee would be $1,250 if less than 25 employees. If the total number of H-1B and L-1B workers exceeds 50 percent of employer’s U.S. work force there is an additional $10,000 for L-1B petitions (FY 2014-2017); and an additional $5,000 for each L-1B filed by employer with 30-50 percent H-1B/L-1B nonimmigrants from FY2014.

12. The House bill also includes a new required wage option—if at least 80 percent of an employer’s workers in an occupation are U.S. workers, the wage paid can be based on the actual wage the employer pays to similarly employed U.S. workers with the same qualifications in the same area of employment. Additionally, under the House bill the Labor Department would be permitted to conduct random audits and issue subpoenas to employers.

13. Rebecca Kaplan, “Can Immigration reform pass in 2014?” CBS News (Dec. 26, 2013).

14. Michael D. Shear and Ashley Parker, “Boehner Is Said to Back Change on Immigration,” The New York Times (Jan. 1, 2014).

15. Kristina Peterson, “Boehner, Cantor Want Immigration Overhaul in 2014,” The Wall Street Journal (Jan. 8, 2014).

16. John Dearie and Courtney Geduldig, “More Immigration Means More Jobs for Americans,” The Wall Street Journal (Dec. 29, 2013).