The H-1B "Cap" and Bridging the "Gap"

With the H-1B cap being reached earlier and earlier in the last several years, companies that require the services of foreign national professionals in specialty occupations are now required to think about recruitment strategies under the ticking clock of the H-1B cap, including ways to "bridge the gap" until October 1 of the year in which they apply for a visa or even beyond. Although legislation has been introduced in the past several years to raise the overall H-1B cap, any efforts to assist in helping "legal" immigration have become intertwined and confused with proposed legislation covering guest worker programs, amnesty and other measures involving "illegal" immigration. Since legislative efforts to pass the Comprehensive Immigration Reform of 2007 failed last summer, there has been no movement to separate out the "legal" immigration proposals, including provisions that deal with the limited number of H-1B visas available each year. Employers hire H-1B professionals to provide specialized and unique skills, to fill temporary worker shortages, and to stay globally competitive. If the limited number of temporary work visas under the H-1B cap is not increased, the likely result is that foreign students (especially those with specialized skills in math, science, research and technology) will not travel to the U.S. for their higher education and then will not remain in the U.S. to work in these specialized and other fields after graduation. Such a development would probably undermine the global competitiveness of U.S. companies, which would in turn impact the U.S. economy.

Overview of the H-1B Cap

• Background on the H-1B Cap

Starting in 1990, Congress imposed an annual "cap" of 65,000 H-1B visas during each fiscal year (FY), which begins October 1 and ends September 30 of the following calendar year. The cap was first reached in FY 1997 and FY 1998. For FY 1999 and FY 2000, Congress enacted legislation to temporarily increase the cap to 115,000. In October 2000, the American Competitiveness in the 21st Century Act (AC21) was signed into law, increasing H-1B numbers to 195,000 for fiscal years 2001, 2002 and 2003. Thus, during these years, there was no issue with the cap. For FY 2004, however, numbers were reduced back to the regular cap of 65,000, and every year since that the H-1B cap has been reached on or before the start of the new fiscal year on October 1. For example, in FY 2007 (with an H-1B start date of October 1, 2006), the 65,000 cap was reached at the end of May 2006, and the master's degree exemption cap of 20,000 was reached at the end of July 2006.

• Fiscal Year 2008

On Friday, March 30, 2007, U.S. employers mailed thousands of H-1B petitions to USCIS to be received by April 1, 2007—the first day of filing for FY 2008. On April 3, 2007, USCIS announced that the regular 65,000 cap had been reached and that the petitions filed would be subjected to a computer-generated random lottery. After a final count of the mail, USCIS determined that 133,000 H-1B petitions had been filed and were subject to the random lottery. Prior to conducting the random lottery of cases received on April 2 and April 3, USCIS announced that Premium Processing would be conducted after petitions had been selected for processing through the random lottery. On April 12, USCIS conducted the random selection process. That day was also the start of the 15-day time period for Premium Processing. Immediately after the selection process, for cases filed with Premium Processing, USCIS started sending e-mail receipt and approval notifications. Receipt notices on cases picked in the lottery and filed without Premium Processing were received by the end of April. Cases under the regular cap that were not successfully chosen in the random lottery were returned, along with the appropriate filing fees, by mid-May.

Cases filed pursuant to the U.S. master's degree cap exemption and allotment of 20,000 additional H-1B visas were not exhausted on the first day. USCIS announced on May 4, 2007, that the "final receipt date" for the 2008 H-1B cap for foreign workers who had earned a master's degree or higher from a U.S. college or university was April 30. Those petitions received on April 30 were then subject to the computer-generated random lottery.

Accordingly, since April 2007, there have not been any new H-1B visas available and no legislation has been enacted by Congress to provide H-1B relief.

• What to Expect for Fiscal Year 2009 (H-1B Start Date of October 1, 2008)

Based on what happened last year, it is likely that all regular and master's cap cases will be exhausted on the first day of filing and will be subjected to the computer-generated random lottery. Therefore, all cases must be mailed on Monday, March 31, 2008, to be received by USCIS on Tuesday, April 1, 2008, in order to have a chance of being successful.

Since there are an additional 20,000 H-1B visas available for students who have obtained a master's degree or higher, it can be advantageous for a master's degree student to be able to qualify for one of these additional visas. If a master's student has completed all of the requirements for the master's degree (including all papers and examinations) by the time of filing (April 1), the paperwork can be submitted to USCIS as a master's degree cap exemption case even if the actual diploma won't be awarded until the school's regularly scheduled graduation ceremony in May. In this situation, since the diploma is unavailable, USCIS will accept a letter from the dean's office (or equivalent) of the U.S. college or university stating that all course requirements for the master's degree have been completed. Additional documentation (if available) can also include a copy of the student's transcript showing that all course requirements for the degree have been completed. Again, it is expected that the master's cap will be reached on April 1 or soon thereafter. However, with the additional slots available, it may be beneficial to file under this exemption, if appropriate.

H-1B Petitions Subject to the Cap

Employers need to be aware that some types of H-1B visa petitions are subject to the cap and some are not. People, and not petitions, are to be counted under the H-1B cap. The basic rule is that if the foreign national listed on the petition does not already have H-1B status, the H-1B visa petition counts against the cap. There are three common scenarios for H-1B visa petitions to be subject to the cap. First, the foreign national is outside the United States waiting for the employer's H-1B petition to be approved so he can enter the United States in H-1B status. Second, the foreign national is inside the United States with a temporary status other than H-1B status (e.g., F-1, H-4, TN, B-1 and so on) and is changing to H-1B status. Third, the foreign national has H-1B status with a cap-exempt entity (e.g., a university) and is transferring to a cap-subject entity (e.g., a private employer).

H-1B Petitions Not Subject to the H-1B Cap

Although a significant portion of H-1B visa petitions are subject to the cap, a substantial number are not because the foreign national already has H-1B status.

• Amended Petitions. If a "material change" has occurred in the terms and conditions of the foreign national's employment, the employer is required to file an "amended" petition. These petitions are not subject to the H-1B cap.
• Extension Petitions. If the foreign national's current H-1B status is about to expire and needs an extension for additional time in H-1B status (typically three years), the employer must file an H-1B "extension" petition. Like amended petitions, extension petitions are not subject to the H-1B cap.
• Concurrent Employment. When the foreign national wants to work for Employer B while also working for Employer A, Employer B must file a "concurrent" H-1B petition on his behalf. Again, this type of H-1B petition is not subject to the cap.
• Sequential Petitions. A sequential petition is filed by a new employer on behalf of a foreign national who already has H-1B status with another employer. Through the filing of the sequential petition, the foreign national also typically takes advantage of H-1B portability, which allows the foreign national to transfer his employment to the new employer prior to approval of the petition by USCIS. This situation involving a foreign national changing H-1B employers through the filing of a sequential H-1B petition and with H-1B portability (more below) is extremely common and routine in many industries (e.g., high-tech). Like the petitions previously referenced, sequential petitions are not subject to the cap.

In addition to the above, through AC21 and other legislation passed by Congress, certain types of employers and foreign national employees are "exempt" from the H-1B cap.

• Colleges, Universities and Non-Profits Related to Institutions of Higher Education. Before the passage of AC21, colleges and universities were traditionally adversely impacted by the H-1B cap, as visas were unavailable in the summer months and early fall, when they needed H-1B professors and researchers. AC21 was a response to this problem, as it provided an exemption from the H-1B cap for all petitions that provide for employment at higher educational institutions and their related or affiliated nonprofit entities, and for individuals employed by nonprofit research organizations or government research organizations. Since there are specific definitions for these different entities, it is especially important to review these items, as certain companies may meet the exemption upon a closer examination of their "affiliations" and may therefore not be subject to the cap.
• J-1 Physicians/Waiver of the Two-Year Home Residence Requirement. Also exempt from the cap are H-1B physicians who have received a J-1 Conrad 30 waiver of the two-year home residency requirement based on work in a health professional shortage area.
• U.S. Graduate Degree Exemption. Congress created an exemption from the H-1B cap for foreign nationals who have received a master's degree, Ph.D. or other postgraduate degree from a U.S. college or university. There are 20,000 cap-exempt H-1Bs available for foreign nationals who meet this requirement. Although these foreign nationals are "exempt" from the regular 65,000 H-1B cap, as highlighted above, the "master's cap" has been reached earlier and earlier each year since its implementation. Last year, the 20,000 "extra" H-1B visas under this exemption were exhausted by April 30. It is important to note that under current USCIS rules, the offered position does not have to require a postgraduate degree in order for the H-1B petition to qualify for the cap exemption. Additionally, the current view of USCIS is that to qualify for this exemption, either the person's bachelor's degree or master's degree must be in a field related to the position.
• Exemptions for Chilean, Singaporean and Australian citizens. The U.S.-Chile Free Trade Agreement and the U.S.-Singapore Free Trade Agreement created a new category of H-1B1 visas. Under these special H-1B1 provisions, citizens of Chile and Singapore can apply directly for the H-1B1 visa at the U.S. consulate in those countries. Prior approval from USCIS is not necessary. Visas under this exemption are granted for one year. Extensions are also not limited to six years. The H-1B1 visas for Chile and Singapore are deducted from the H-1B cap, with a limit of 1,400 for Chile and 5,400 for Singapore. Similar to the special H-1B1 procedures for Chilean and Singaporean citizens, a special provision for Australian citizens was enacted in May 2005. Congress created the E-3 category for Australian nationals performing services in a specialty occupation. This E-3 visa category requires a labor condition application (LCA) and must meet the specialty occupation criteria of the H-1B category. This category has a cap of 10,500 (which is not deducted from the 65,000 H-1B cap), not including spouses and children. In addition to bypassing the H-1B cap, the E-3 visa category for Australians enables spouses of E-3 visa holders to obtain employment authorization.

Adverse Consequences of the H-1B Cap

• Delayed Employment

  Perhaps the most obvious consequence of the H-1B cap being reached early or before the start of the fiscal year is that the employer and the foreign national might need to wait six months or more if not chosen in the random lottery before filing an H-1B petition for new employment and upwards of 12 months before the actual H-1B employment can commence. In such circumstances, an employer may be unable or unwilling to hold open a job opportunity for such a long period of time. Lengthy delays resulting from the H-1B cap can kill the prospective employment relationship.

• Status Issues

  Of potentially greater concern to the foreign national already in the United States than commencement of employment is the maintenance of proper immigration status. Most foreign nationals in this country in another immigration status prefer to remain here and change to H-1B status rather than having to leave the U.S. until the H-1B status can be activated. However, sometimes a foreign national's current immigration status will expire prior to the October 1 H-1B start date. Although certainly not the only class of foreign nationals affected, F-1 students and J-1 exchange visitors with work authorization status based on approved practical training find this problem to be particularly acute.

How Can Companies Bridge the Gap?

There are several potential immigration strategies that can assist the employer and the foreign national employee to "bridge the gap" until October 1 or later if the foreign national is not "chosen" in the random lottery. It is important to emphasize that a foreign national must have valid work authorization to work for the U.S. employer and must maintain his immigration status to avoid severe consequences that could impact future applications for temporary or permanent residence benefits from USCIS.

• F-1 Optional or Curricular Practical Training

  F-1 visas are issued to foreign students who are in the United States pursuing a full-time curriculum. Subject to certain restrictions, an F-1 foreign student may be authorized to work on or off campus. Of the various types of off-campus employment authorization available to foreign students, the one that gives the greatest flexibility to U.S. businesses is the "practical training authorization." Post-completion Optional Practical Training (F-1 OPT) allows an F-1 foreign student to work full-time off campus for up to one year after completing his studies. Curricular Practical Training may be another option for an employer, as it provides off-campus work authorization and entitles the student to work for a U.S. company where the employment is an integral or important part of the student's studies. A combination of both Optional Practical Training and Curricular Practical Training may also bridge the gap to October 1. This strategy can be workable if a student returns to a higher educational level (e.g., master's degree) and can obtain Curricular Practical Training through the school with the U.S. employer. Foreign national employees and U.S. employers must work with the college or university for this strategy to be viable.

• Potential H-1B-Related Solutions

  —H-1B Concurrent Employment. The H-1B rules allow for H-1B workers to be employed by several employers concurrently. Typically, this situation occurs with an H-1B professor working part-time at two different universities or a computer systems analyst who is employed full-time by one company and is hired by another employer to do part-time consulting work. Under current USCIS policy, concurrent employment also works in the cap-exempt and cap-subject situation, so that an H-1B visa holder would continue to work for the cap-exempt entity on a part-time basis, while also working for the cap-subject employer. However, USCIS has indicated that this policy may be changing in the near future.

  —H-1B Portability from Cap-Exempt to Cap-Subject Employment. H-1B portability allows the transfer of H-1B employment from one H-1B employer to a new H-1B employer upon the filing of a sequential H-1B petition. However, pursuant to the specific language of the portability rule, H-1B portability has not been an effective way to transfer H-1B employment from a cap-exempt to a cap-subject employer from April 1 until the October 1 start date of the approval with the H-1B cap-subject employer. Recently, Efren Hernandez, former Chief, USCIS Business and Trade Services Branch, issued a letter opinion indicating that portability might be appropriate from April 1 to October 1 and that approval of the H-1B petition prior to October 1 should not stop the work authorization through portability during this time period. However, this letter is only an opinion and is not specific guidance or policy issued by USCIS. Therefore, foreign nationals and H-1B cap-subject employers need to weigh the risks involved, including that of unauthorized employment, before using portability prior to October 1.

  —H-1B "Employed at" Cap-Exempt Theory. Another way to possibly bridge the gap is through an "employed at" H-1B theory. Third-party "for-profit" petitioners may seek an exemption from the cap for H-1B beneficiaries who will perform job duties "at" a qualifying institution that directly and predominately further the essential mission of the qualifying institution, namely, higher education or governmental research. The burden is on the third-party H-1B petitioner to establish that there is a logical nexus between the work performed by the beneficiary and the normal, primary or essential work of the qualifying institution. If the work performed is not for the benefit of the qualifying institution and only for the benefit of the H-1B cap-subject employer, such a petition would not be successful.

• Alternative Visa Categories

  Employers might also want to evaluate and utilize alternatives to the H-1B category, if possible. These alternatives may also enable the employer to "bridge the gap" until October 1. Employers should consider the following visa category alternatives to avoid H-1B problems:

  —L-1. For companies with related overseas entities (subsidiary, parent, branch, affiliate), the L-1 intracompany transferee category may be a viable option.

  —TN. For Canadians and Mexicans, the TN category should be considered as an alternative to the H-1B category. The TN category allows Canadian and Mexican citizens in 65 prescribed TN professional categories to enter the U.S. in one-year increments.

  —H-3. This visa category allows foreign nationals to temporarily enter the U.S. to receive training and instruction. The proposed training must meet USCIS guidelines and is often used for specially designed training programs (for which the foreign national can be paid) that may last a few weeks or up to two years. A drawback to using this option to "bridge the gap" is that the employer must demonstrate that the training will benefit the foreign national in pursuing a career outside the U.S.

  —O-1. For the highly accomplished, the O-1 visa category works well. The O-1 visa is for artists, athletes, entertainers, businesspeople and others with extraordinary ability.

  —J-1. The J-1 trainee visa is also an option in situations where there is an entry-level position and significant training must be accomplished in the initial six months to a year. However, before exploring whether a J-1 trainee visa would be appropriate in a particular case, the two-year home country residency requirement must be investigated. If the two-year residency rule applies, a J-1 trainee visa would not be appropriate as an alternative. Moreover, many J-1 foreign students who enter the U.S. to pursue college or university studies may be authorized to work in a variety of situations. This authorization provides another option for U.S. companies to benefit from the skills and services of a pool of highly qualified foreign professionals.

• Transfer to Related Company Overseas

  If there is a lengthy gap in work authorization, the employer and foreign national employee may need to consider a transfer overseas during the interim time period in which the foreign national does not have work authorization in the U.S. Such a transfer can be beneficial to both the company and the foreign national, as the foreign national can continue to work or obtain additional training. The knowledge obtained can then be transferred back to the U.S. company when the foreign national employee is able to return in H-1B status. Additionally, a transfer abroad may be a viable option if the F-1 student will be required to leave the U.S. because the gap to October 1 exceeds the 60-day grace period under F-1 rules. In analyzing whether such a transfer is viable, the company should consider the length of the gap and take into consideration the fact that the foreign national may need a work visa for the overseas transfer if the related company is located in a country other than the home country of the foreign national (e.g., Canada, if the employee is from India). Therefore, given the issues involved, a transfer abroad should not be left to the last minute. In addition to "outbound" work visa issues, companies must also consider overseas payroll, relocation reimbursement, tax and employee benefit issues with such a transfer. Therefore, it is important to keep in mind that such transfers are expensive for the company and may also be an inconvenience to a foreign national employee who may have other family members (including U.S.-born children) located in the United States.

• Leave of Absence

  If obtaining additional practical training through the foreign national's F-1 status or a transfer overseas to "bridge the gap" is not viable, a company may need to place the employee on a leave of absence until the H-1B work authorization is activated on October 1. In this case, the company should follow all necessary policies regarding leaves of absence. The company should follow its normal procedures for documenting a leave of absence, and the foreign national should not provide any hands-on work or services during this period. The foreign national must not be at the workplace, and telephone and e-mail contact should be limited, if not cut off altogether. If the 60-day grace period for the F-1 student will expire during the leave of absence, the F-1 student must leave the United States and travel abroad, preferably back to his home country. The foreign national can then apply for the H-1B visa stamp while abroad and reenter the U.S. up to ten days prior to October 1 in order to activate the H-1B status and restart employment, now in H-1B status.

Will Congress Step in to Provide H-1B Cap Relief?

As outlined above, legislation that would have provided H-1B cap relief has stalled since the failure of Comprehensive Immigration Reform. At this point, there is no promising legislation pending in Congress or even "talk" that immigration legislation will pass this year. However, the U.S. Chamber of Commerce recently announced that immigration reform, including H-1B cap relief, will be at the top of its legislative agenda and lobbying efforts over the next year. If H-1B cap relief legislation is introduced, the bill would likely include provisions to: (1) raise the H-1B cap from 65,000 to 115,000; (2) provide for a "market-based" H-1B cap with a base limit of 115,000 effective the fiscal year after enactment (If the cap is exhausted in a given fiscal year, then the subsequent fiscal year's base limit increases by 20 percent of the base. If the cap is not exhausted in that fiscal year, the cap remain equal to the numerical limitation of the given fiscal year.); (3) create an uncapped exemption for professionals who have earned a U.S. master's or higher degree AND those who have been awarded a medical specialty certification based on postdoctoral U.S. training and experience; (4) modify the existing 20,000 cap exemption to apply to those with a master's or higher degree from an institution of higher education in a foreign country (currently, this exemption only applies to U.S. advanced degrees); and (5) restore Chile/Singapore Free Trade Agreement (H-1B1) numbers to the overall cap. However, such legislation to increase or expand the available number of H-1B visas may also include an additional H-1B filing fee. Although such a provision was recently stricken from the actual H-1B bill that was passed, the most recent legislation introduced regarding the H-1B visa category provides for an additional fee of $3500, which is to be used to create a special education fund to promote studies in the fields of math, science and engineering.

Finally, several senators recently sent a letter to Michael Chertoff, Secretary of the U.S. Department of Homeland Security (DHS), emphasizing that potential administrative reforms to visa programs for the highly skilled should be pursued and urging that DHS extend F-1 OPT from 12 to 29 months. These senators indicated that DHS has the authority to extend this period, which would allow U.S. employers to retain highly skilled foreign graduates for whom H-1B visas are not immediately available. To date, there has been no further movement regarding this administrative reform.

Conclusion

Unless legislation is passed to increase or expand the number of H-1B visas available, companies will be left in an untenable position with their recruitment efforts. Although companies can recruit and attempt to hire highly talented foreign national professionals, the random lottery for H-1B visas and the inability to obtain H-1B visas if not selected in the lottery are making recruitment and hiring decisions extremely difficult for all types of businesses. Companies are required to strategize regarding overseas assignments (including paying additional costs for short-term transfers), analyze whether additional practical training is potentially available, and change recruitment efforts to include countries where alternatives other than the H-1B visa are available (e.g., Canada, Mexico, Australia). With other countries around the world attempting to ease certain immigration requirements to make it easier for foreign national professionals to work in IT, science and engineering, the U.S. may lose out on such highly educated professionals (and students at the university level) if the ability to obtain H-1B visas remains a question mark.