DHS Announces Significant Changes to H-1B Cap Selection Process

On January 8, 2021, the U.S. Department of Homeland Security (DHS) published a final rule that significantly alters the longstanding randomized lottery process that U.S. Citizenship and Immigration Services (USCIS) has utilized to select H-1B cap-based petitions.

Background

There is a fiscal year annual numerical limit placed on the number of foreign workers authorized for an initial grant of H-1B visa status. The annual cap provides for 65,000 initial H-1B visas, with an additional 20,000 H-1B visas reserved for foreign workers who have advanced degrees earned from U.S. universities or colleges. Because the demand for H-1B visas typically exceeds these numerical limits, selection of cap-subject H-1B applicants has historically been made via a random lottery process. The new rule seeks to replace the random selection system with a process that prioritizes highly-paid H-1B workers.

Summary of the New Rule

Pursuant to the new final rule, “USCIS will rank and select registrations” based on “the highest corresponding Occupational Employment Statistics (OES) wage level that the proffered wage will equal or exceed for the relevant Standard Occupational Classification (SOC) code and area(s) of intended employment.” USCIS explained that the new rule prioritizes those who are paid the highest wages in each occupational category and geographic location, which may limit employers to successfully sponsor only the most highly-paid H-1B workers.

USCIS also stated that the “final rule will not affect the order of selection as between the regular cap and the advanced degree exemption.” However, the H-1B prioritization rule will favor registrations for prevailing wage levels II, III, and IV, at the expense of wage level I registration submissions. In particular, an employer offering a wage level I under the regular cap, and an employer offering a wage level I or II under the advanced degree exemption, may have a reduced chance of selection under the new rule.

How the New Rule Will Be Applied

For purposes of the new prioritization rule, an employer will need to provide “the highest OES wage level that the proffered wage equals or exceeds” as part of the electronic registration process. The rule clarifies that the selected wage level, as opposed to the proffered salary amount, will be the controlling factor. If an employee may work in multiple locations, the employer must indicate the lowest wage level that the proffered wage will equal or exceed for all areas of intended employment. USCIS stated that this requirement is intended to prevent employers from “gaming” the system by selecting a worksite specifically because of that location’s generally lower prevailing wages. Further, even if an employer seeks to use a private wage survey, USCIS will continue to rank and select registrations based on the highest applicable OES wage level.

Employers seeking to sponsor entry-level H-1B workers will thus face a difficult choice between offering salaries above entry-level wages for the position or risk that their registrations have reduced likelihood of selection under the new rule. Many employers may consider altering their H-1B strategies towards positions commanding higher wages and greater skills instead of entry-level positions for recent college graduates. Furthermore, large companies and those able to offer salaries at or near the top of the market may experience greater likelihoods of having their H-1B registrations accepted, while smaller employers and those unable to offer top market salaries may have significantly lower probabilities of having H-1B registrations selected in the new wage-based selection process.

DHS claims that this new wage-based H-1B selection process “is a practical way to achieve the administration’s goal of improving policies such that H-1B classification is more likely to be awarded to petitioners seeking to employ higher-skilled and higher-paid beneficiaries.” However, given the ongoing pandemic and economic downturn over the past several months, it remains to be seen whether market conditions can accommodate such a significant change at this time.

Although the new rule is set to take effect 60 days after it is published in the Federal Register, it is unclear whether the incoming Biden administration will freeze or delay its implementation. Ogletree Deakins’ Immigration Practice Group will continue to monitor developments with respect to these and other policy changes and will post updates on the firm’s Immigration blog as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.