USCIS Cancels Strengthen H1B Program Rules as per Court Order[Dec 2020]

As some of you know DHS submitted Strengthen H1B Visa Program Rule as interim final stage rule for OMB to review. On October 8th, 2020 DHS published the rule in Federal Register. There were quite a few new changes that are part of the new interim final rule that is published by DHS.

Update : A court in California gave an order cancelling the implementation of the changes to H1B program listed in this article as DHS did not follow proper Notice and Comment period and their excuse to skip the process is not valid.

In this article we will cover all these aspects and give official rule text for your understanding and clarity, including when it will be effective, who it will apply to.

Court Order Cancels USCIS Implementation of New H1B Rules

December 4th, 2020 : Today USCIS issued a press release indicating that they cannot implement the regulation that was published as Interim Final Rule (IFR) to Strengthen H1B Program. They are complying with the court order from California. You can read full summary of Court Order Cancelling H1B Wage Levels, Program Changes

The interim final rule with all the changes to H1B program were set to go into effect from Dec 7th, 2020. But, now with the court order, they have given guidance that the rules will not be in effect. Below are the List of Changes that are Cancelled from going into effect.

• Revised definition for H1B Specialty Occupation
• Specialty occupation requirements, Evidence like Contracts
• Changes to Employer-Employee Relationship requirements
• Eliminating Itinerary requirements for H1B positions
• Limiting maximum H1B time to 1 year for third party placements
• Written explanation for H1B short term decisions
• Additional rules for verification, Site visits.  H1B Revocations, if no cooperation.

Below the screenshot of the Official press release from USCIS.

It is always important to understand the background of why a rule is put forward by someone to have full context. Let’s look those details.

Background – Why changes to H1B Rules?

The new H1B regulation document is about 147 pages. It has a detail analysis of why they are planning to change, cost analysis and some data points for the changes. Below are the some of the key reasons DHS has mentioned why there is a need for changes to H1B Visa program :  

• President EO – Buy American Hire American asking for new rules, guidance
• H1B Program has displaced US workers
• H1B program has led to reduced wages in various Industries in US
• President Proclamation suspending entry of H1B workers
• To improve integrity of H1B program

Some stats that were quoted by DHS in the background are below :

• From FY 2018 to 2018, 71% of  H1B petitions in H1B Industry involved third party workers.
• DOL has received many complaints about staffing companies.
• IT Workers on H1B grew by 75% in recent years (compared from FY 2003 to FY 2019). But, the wage levels have been flat in IT fields.
• IT wage was 189% of national average in 2003 vs 182% in FY 2019.
  • The reality is different, if you look at H1B data from top 200 H1B companies as reported by H1BGrader website. You can check H1B Median Salaries – Top 200 Employers 2011 to 2020
• As of Sep 30, 2019, there are about 583,420 workers and the huge number of H1B workers will impact US workers jobs.

DHS talks about various other stats and gaps in the H1B program and says COVID-19 has caused the gaps to be felt more for US workers. The goal of these changes is to protect US workers and integrity of the H1B program.

Now that we know the background, let’s look at the high-level summary of the changes that are proposed in this regulation.

Overview of the all changes to H1B Program in new Regulation

Below are the overall changes that are part of the new H1B regulation that is published by DHS on a very high level.  Think of these as index, we will discuss them in detail later in the article.  

• Revised definition for H1B Specialty Occupation
• Specialty occupation requirements, Evidence like Contracts
• Changes to Employer-Employee Relationship requirements
• Eliminating Itinerary requirements for H1B positions
• Limiting maximum H1B time to 1 year for third party placements
• Written explanation for H1B short term decisions
• Additional rules for verification, Site visits.  H1B Revocations, if no cooperation.

Let’s dive into each of the above listed topics now.

Change in H1B Specialty Occupation Definition

DHS is changing the definition of the H1B Specialty occupation to align with the actual requirement set by Congress in statue.

• The key change is that they are really placing emphasis on having a bachelors or higher degree in the specialty occupation.
• They say, you cannot just have a general bachelor’s degree and work in a specialty occupation that is not related to your bachelor’s degree.  
• Employer has to demonstrate that the duties of the position are related to the specific specialty or education degree.

Example & Rationale for Specialty Occupation:  DHS logic in the regulation is that, if you are doctor, you would get a degree in medicine and if you are a lawyer you would get a degree in Law.  So, it should be easy to prove the same.  For instance, they say that general engineering degree would not meet the requirements for a Software Developer as it does not satisfy the specific specialty requirement. So, logically, if you are going to be a Software Developer, they are expecting you to have a degree in Computer Science or have done supporting course work on the same.

Below are the exact requirements as per the regulatory text.  

Bachelor’s Degree requirements in Specialty Occupation for H1B Position

Changes to Employer-Employee Relationship Requirements

Earlier this year, DHS changed H1B employer-employee relationship clauses as they lost the court case with IT Serve. Now, they are pretty much bringing back all the old rules in other format asking for contracts, work orders, etc. to prove the employer employee relationship.

DHS says they are going to use the standard of “conventional master-servant relationship”, which is explained as per Supreme court that “the hiring party has right to control for the job at hand (whatever it is like product building or any task)”. They say that there is no one set of standard rules that define the employer-employee relationship, but rather it would be look holistically. 

In short, DHS says that the employer filing H1B should able to control work, evaluate work done by the H1B holder, hire, pay that person, given equipment for work,  claim them as employee for tax purposes, they deliver the product or service related to H1B sponsor’s line of work, etc.  It is technically going back to Neufeld Memo on Employer-employee Relationship from 2010, but just with some wording changes.  

Below is the actual regulation text that USCIS will consider evaluating Employer-employee relationship. 

Evidence to Prove H1B Specialty Occupation Work, Third-Party Workers

DHS is making it clear that there should be a bona fide (genuine) specialty occupation work for the H1B worker. They will review the job duties for the H1B position to make sure, it belongs to specialty occupation. As this part is very difficult in third-party worksite situations, DHS will require additional evidences as listed below to prove the same. Depending on the contract types, one or more of the below documents would be required :  

• Master Service Agreement (MSA), related work orders (WO)
• Statement of Work (SOW), Supplier Agreements
• Any other similar legally binding agreements.
• Client letters signed by end client responsible person, where the H1B worker would work.
• Technical documentation related to Specialty work  – Milestone tables, market research reports, brochures, funding documents, etc.

Below is the actual regulation text for proof of specialty work.

H1B Validity of 1 year for Third Party Placements

DHS as part of regulation will set at one-year maximum validity for H1B petitions that are filed as third-party worksite petitions. If you work in the same role or contract for more than a year, they say that you can file a new LCA or re-use the old approved 3 years H1B LCA for extensions. They say that this will incur more filing costs for certain petitioners, but it will reduce the fraud and non-compliance.

 DHS rationale is that most of the third-party contracts at usually around 6 months to one year, based on their experience. Giving a 3-year approval for third party worksite petitions will create more chance for fraud as USCIS cannot monitor properly.  With 1-year limit, they can reduce the fraud as the application would be reviewed again and checked for compliance, including site visits and other verifications.

Below is the actual regulatory text that says the validity would be 1 year.

Explanation for H1B Approvals – Shorter Duration

DHS says that they will give explanation for the shorter duration of approvals of H1B, if any. This is in situations where the H1B employer is asking for 3 years and USCIS gives shorter duration like in third party placements or other cases. The goal is for H1B employers to know the reason for shorter approvals.

See below the actual regulation text.

Itinerary Requirement Removed for H1B petitions

As mentioned earlier, there was a court case, where DHS lost on the employer-employee relationship and the itinerary requirement. To make that decision implemented properly, they are amending the regulation saying that itinerary requirement will not apply to the H1B petitions.  Basically, in the past, they were asking for day to day activities or work activities schedule like work duration by location and dates. Now, that requirement is not applicable anymore for H1B category petitions.

Below is the actual regulatory text for the Itinerary requirement not applicable to H1Bs

New Site Visits Rules, Refusal to cooperate – Revoke H1B

DHS has outlined a new set of rules to conduct site visits, inspections, verifications and evaluations. DHS can conduct inspections over phone, electronically or physical on-site inspections (site visit).  They can do these verifications, site visits before or after the approval of H1B petition.

The new rules include on-site visit to H1B sponsors’ facilities, interviews with officials, review of the company records to be compliant with Immigration laws.  Also, interviews with any other individuals or facts related to the case to verify the H1B petition, employer for compliance.

DHS can visit H1B employer’s headquarters, satellite location, where the H1B employee works, including third party worksites. If USCIS is unable to verify the facts or if petitioner or third-party does not cooperate with site visit, USCIS can deny or revoke H1B petition.   

Below is the actual H1B regulation text on site visits, verification process.

USCIS Reason for Not going through Rule Making process.

USCIS says that the reason for not going through the full 9 Steps Rule Making regulatory process with full public notice periods, comments is due to the gravity of the situation with COVID-19, the large number of H1B workers currently in US (583,420 as of Sep 30, 2019), rising unemployment rate in general and also unemployment rate in the Information sector where most of H1B holders are employed. 

They say that the current issued H1B regulation may be changed based on feedback and comments in the next 60 days. Even though this regulation is economically significant, DHS says that OIRA waived the review of this regulation.

New H1B Rules Effective Date, Applicable to All

All the above H1B program changes in the regulation will be effective 60 days after publication of the rule in federal register. So, as the rule is published on Federal register on Oct 8^th, the above changes will be effective from December 6^th, 2020.

The H1B changes in this regulation will be applicable to all H1B petitions that are filed on or after the effective date of the new regulation, which is December 6^th, 2020.  It applies to below listed types of H1B petitions.

• New H1B Petitions
• H1B Extensions
• H1B Transfers
• H1B Amendments.

New H1B Rules Not Applicable to : The new rules does not apply to currently pending H1B petitions, previously approved H1B petitions, either by reopening or opened after NOIR.

Will there be lawsuit ?

These changes announced today would have a lot of impact on big and small companies. The reality is that, we have many software engineers in the industry without having a degree in computer science (like history, mathematics, arts, etc.). Also, the one-year approvals is going to really squeeze a lot on the outsourcing companies and huge overhead for them. Looking at the overall impact of changes, there are many aspects that may be challenged in court.  Also, getting a waiver from OIRA without getting analysis is also another point that someone can go to court.  It will be interesting to see, how this will play out… Stay tuned for updates.

What do you think of the new H1B Regulations? Will they be effective or courts will block them ? Share your thoughts in comments.

You can check the official H1B regulation on FederalRegister.gov