The U.S. Department of Homeland Security (DHS) recently released a notice of proposed rulemaking (NPRM) entitled, “Modernizing H-1B Requirements, Providing Flexibility in the F-1 Program, and Program Improvements Affecting Other Nonimmigrant Workers.” The proposed rule includes several significant proposed changes to the H-1B program, as well as to other nonimmigrant programs.

Creating a Beneficiary – Centric H-1B Registration System

Several of the proposed changes will be incredibly beneficial. Perhaps most significantly, the agency proposes to change the H-1B lottery registration selection system to a beneficiary-centric model as a way of reducing fraud and gamesmanship in the registration process. DHS implemented an online registration system for the H-1B lottery for the first time in 2020, which permits prospective H-1B employers to file an online registration on behalf of prospective H-1B employees each year during a specified period in the month of March. U.S. Citizenship and Immigration Services then selects 20,000 Master’s Cap cases, plus 65,000 Regular Cap cases, from among all of the registrations received. This allows petitioners to submit petitions for adjudication for the upcoming government fiscal year, which begins on October 1 of each year. Each registration submitted under the current system gives an individual a chance of being selected.

DHS regulations prohibit the filing of multiple registrations by a single employer on behalf of the same individual employee, but they do not prohibit the filing of multiple registrations by different prospective employers on behalf of the same individual. According to the proposed rule, since 2020, the number of individuals with multiple registrations has grown significantly, as has the overall number of registrations, thereby slanting the odds of selection in favor of those beneficiaries with multiple potential job offers. The proposed rule goes into a detailed statistical analysis of the duplicate registrations received in the last three years, and the data are suggestive of collusion between the companies who filed multiple registrations on behalf of numerous individuals.

In order to curb this behavior, DHS proposes to change the random selection process to select from a pool of unique beneficiaries, rather than from a pool of registrations. In other words, no matter how many registrations a person has filed on their behalf, their name will have the same odds of selection as another individual who has only one registration filed on his or her behalf. If a beneficiary is selected who has multiple registrations filed on his or her behalf, the beneficiary will have to choose which one to use.

The downside to this proposed change is that DHS proposes to require that an individual possess a valid passport at the time the registration is completed, and that additional passport information be included with the registration, including passport number, country of issuance and expiration date. This detail currently is not required, and the current registration website permits an applicant to state that they do not have a currently valid passport. The proposed rule discusses the problem that this requirement poses for stateless individuals who are unable to obtain a passport, and does not arrive at a solution for these individuals. Rather, DHS notes that less than 1% of H-1B lottery registrants are stateless. The proposed rule, as written, would effectively make it impossible for a stateless individual to register in the H-1B lottery.

The proposed rule also notes some individuals have passports issued by more than one country and proposes to require the individual to pick one of the passports for use in the registration process, and to prohibit filing additional registrations using a different passport.

Overall, this proposed change is extremely positive, as it will result in a more even playing field for those who are using the H-1B lottery system as intended, but the issue regarding the passport requirement for stateless individuals requires agency attention.

Amending the Definition of “Specialty Occupation”

The NPRM proposes to significantly modify the regulatory definition of a “specialty occupation” in the H-1B regulations. Currently, 8 C.F.R. §214.2(h)(4)(ii) defines a “specialty occupation” as follows:

Specialty occupation means an occupation which requires theoretical and practical application of a body of highly specialized knowledge in fields of human endeavor including, but not limited to, architecture, engineering, mathematics, physical sciences, social sciences, medicine and health, education, business specialties, accounting, law, theology, and the arts, and which requires the attainment of a bachelor’s degree or higher in a specific specialty, or its equivalent, as a minimum for entry into the occupation in the United States.

The proposed rule seeks to amend this definition to include all of the foregoing but to add the following limiting language:

… The required specialized studies must be directly related to the position. A position is not a specialty occupation if attainment of a general degree, such as business administration or liberal arts, without further specialization, is sufficient to qualify for the position. A position may allow a range of degrees or apply multiple bodies of highly specialized knowledge, provided that each of those qualifying degree fields or each body of highly specialized knowledge is directly related to the position.

The addition of this regulatory language would preclude from H-1B classification any job for which an employer would accept a business administration or a liberal arts degree, or some other form of “general degree” — a term which is not defined. This would be true even if the employer also would accept more specific degrees. For example, if an employer advertising for a Marketing Director role would accept a bachelor’s degree in Marketing, Communications, or Business Administration, the position would not meet the new regulatory definition of a specialty occupation. The preamble to the proposed rule also states that a position requiring “any engineering degree” for a software developer would not meet the new definition of a specialty occupation, as it is not specific enough.

The proposed rule codifies the longstanding notion that some bachelor’s degrees are general whereas others are specific, but provides little guidance in determining which degrees are too general, apart from the aforementioned examples.

Amending the Definition of “United States Employer”

The proposed rule also would make clear that H-1B beneficiaries may own the company providing sponsorship to them. This revision represents a potential sea change in how DHS treats H-1B petitions in the context of self-employment. Historically, USCIS would routinely deny H-1B requests filed by beneficiary-owned entities for failure to show a valid “employer-employee” relationship. As a result, the H-1B category was of limited value to entrepreneurs and start-up companies, where an ownership stake is often of paramount importance.

The proposed rule acknowledges the “limited pathways for entrepreneurs to come to the United States,” and explicitly states the revisions are designed to “promote access to H-1Bs for entrepreneurs, start-up entities, and other beneficiary-owned businesses,” while simultaneously setting “reasonable conditions” in cases where the beneficiary owns more than 50% of the petitioning entity. Such conditions include requiring the petitioner to show the beneficiary is performing specialty occupation duties, rather than duties related to owning and directing the business a “majority of the time,” and limiting the validity period of the initial petition and the first extension request to only 18 months. Despite these proposed limitations, the proposed rule should result in enhancing the effectiveness of the H-1B category by expressly opening it up to entrepreneurs and small businesses.

Clarifying that “Normally” Does Not Mean “Always”

The proposed rule also would define the term “normally” in the H-1B regulations to state that it means, “conforming to a type, standard, or regular pattern,” and that it does not mean “always.” This change would clarify that just because there may be some employers who do not require a degree in a specific specialty for entry into an occupation, the occupation may nevertheless be a specialty occupation if a degree in a specific specialty is normally required. Notably, determining the level of education “normally” required for a role has long been a major sticking point in H-1B adjudications, specifically when arguing that a proposed role “normally” requires bachelor’s degree in satisfaction of the regulations at 8 C.F.R. § 214.2(h)(4)(iii)(A)(1). In making these determinations, USCIS has almost exclusively relied upon the occupational requirements listed within DOL’s Occupational Outlook Handbook (OOH). Much to many employers’ chagrin, the OOH entry for some occupations might contain unhelpful statements such as “most employers require a bachelor’s degree but some do not.” USCIS would point to the latter part of the sentence in its denials as proof that a degree is not “normally” required for the proposed job. The proposed rule should put an end to this practice by clarifying that a position may still “normally” require a degree, even if some employers do not require it.

Extension of the Cap-Gap Provision

Another positive change in the proposed rule is the extension of the so-called “cap-gap” provision. The existing cap-gap provision allows for an automatic extension of F-1 student status and employment authorization for individuals who have been accepted into the H-1B lottery and on whose behalf a petition for H-1B status, with a request for change of status, has been filed for an October 1 start date. This provision helps those whose OPT expires between April 1 and September 30 each year to avoid a break in their status and employment authorization while waiting for their H-1B employment start date.

The proposed revision to this rule would extend the cap-gap period all the way through April 1 of the following year. This change will help individuals who are not selected in the first round of the H-1B lottery but are selected in subsequent rounds, or whose H-1B employer requests an employment start date subsequent to October 1 of the next fiscal year.

The proposed rule would also include clarifying language in the regulations to note that cap H-1B employment may begin any time on or after October 1 of the upcoming fiscal year. In prior years, USCIS erroneously denied cap H-1B petitions if they list a start date later than October 1, as the current regulatory language regarding when cap-subject H-1B employment must begin is unclear.

Treating Amended Petitions as Equivalent to Extension of Stay Petitions

Another significant change proposed by the NPRM would be to treat all amended petitions as equivalent to requests for extensions of stay and to clarify that all extensions or amendments require proof that the beneficiary has been maintaining the previously authorized status. This change would impact not only those in H-1B status, but also those in E-1, E-2, E-3, H-1B1, H-2A, H-2B, H-3, L-1, O-1, O-2, P-1, P-2, P-3, Q-1, R-1 and TN status. The proposed rule states that such evidence could include paystubs, W-2s, I-94s, prior approval notices, quarterly wage reports, tax returns, contracts, and work orders. If all the suggested evidence listed is required, it would become an extremely onerous requirement. The proposed rule states that this requirement is consistent with USCIS’ current requirements in practice. Currently, USCIS typically only requires 2-3 recent paystubs together with copies of prior approval notices and I-94 records as proof of maintenance of status. It is not clear whether the most recent 2-3 paystubs will be required or if USCIS will start requiring paystubs for the duration of employment, and it is also not clear how much of the suggested documentation USCIS will begin to require.

It should also be noted that nothing in the current regulations requires proof of maintenance of status, but the I-129 Form instructions, which have the force of regulations, do require proof of maintenance of status for changes of status or extensions of stay, but not for amendments. The proposed rule is therefore creating a new requirement for amended petitions, even though DHS claims that the NPRM is simply formalizing existing requirements. This is a significant change, as the denial of an amendment would give USCIS an opportunity to declare an individual out of status and thereby trigger accrual of unlawful presence.

This proposed change raises several questions not answered in the NPRM. First, it begs the question of whether those foreign nationals on whose behalf an amended petition is filed are now required to be physically present in the United States when an amended petition is filed, similarly to those on whose behalf an extension of stay is filed. It also raises the question of whether an individual who travels internationally while an amended petition is pending will be deemed to have abandoned the requested amendment. Further, the NMRM refers to the adjudication of amended petitions as requiring an exercise of discretion. Typically, discretionary determinations cannot be appealed. This begs the question of whether the proposed rule would render the decision to deny an amendment non-appealable. Moreover, if amended petitions are treated the same as extension of stay or change of status requests, it means that USCIS could issue a “split decision” on the petition — essentially approving the petition but denying the amendment, presumably because the petition qualifies the individual for H-1B status, but because a decision has been made that the individual is not eligible for an amendment due to a prior status violation. The proposed rule makes no mention of any of these issues, which are raised by the proposed changes.

The proposed rule also would amend H-1B regulations to clarify that an amended petition is required whenever there is a change in the beneficiary’s worksite location to a different metropolitan statistical area, thus necessitating a new Labor Condition Application (“LCA”). This requirement has been in place since 2015 when USCIS issued a memorandum requiring amendments in this scenario; the proposed rule would simply implement the requirement into the regulations.

Eliminating the H-1B Itinerary Requirement

The proposed rule would eliminate the itinerary requirement for H-1B workers, as it is duplicative of information already included with the H-1B petition, including the worksite location(s) listed on the I-129 Form and in the Labor Condition Application. This is a positive change.

Importing DOL Regulatory Requirements Into DHS H-1B Regulations

One of the stranger changes proposed in the NPRM is the proposal to include certain portions of the Department of Labor’s regulations governing H-1B workers into the USCIS regulations, including a definition of “short term placements” which do not require the filing of an amended or new petition. The proposed rule states this change is proposed in order to add clarity to whether an amended petition is required; however, in practice, it would likely cause more confusion. The Department of Labor’s regulations are part of an entire regulatory scheme complete with its own term definitions. Cherry-picking portions of those regulations and adding them to DHS regulations is bound to change their meaning and create conflicts between the two sets of regulations, which have very different purposes.

Changing H-1B Cap Exemption Requirements

The NPRM would also revise the regulatory requirements for certain individuals to qualify for cap-exemption. The current H-1B regulations apply if they will be employed at an institution of higher education or a related or affiliated nonprofit entity, a nonprofit research organization or a government research organization. The regulations further provide that individuals who are not directly employed by a qualifying organization may nevertheless be cap-exempt if the majority of the worker’s time will be spent performing job duties at a qualifying organization; and if the worker’s job duties will “directly and predominately” further the essential “purpose, mission, objectives or functions” of the qualifying institution. The proposed amendments to these provisions would remove the language stating the individual must spend a majority of their time working at the qualifying organization, and replace it with the requirement they spend “at least half” of their time working at the qualifying organization. This language would clarify that it is sufficient to spend exactly 50% of one’s working hours at the qualifying organization.

The proposed rule also clarifies the time spent working “at” a qualifying organization does not mean that the beneficiary must be physically onsite; job duties may be performed remotely from a home office.

In addition, the NPRM would remove the requirement that the beneficiary’s duties must “directly and predominately further the functions” of the qualifying institution, and replace this language with the much less onerous requirement that the beneficiary’s duties “directly further an activity that supports or advances one of the fundamental purposes, missions, objectives, or functions” of the organization.

Furthermore, DHS proposes to change the definition of a “nonprofit or tax exempt organization” by eliminating the requirement that an organization must have been recognized by the IRS as tax-exempt under section 501(c)(3), (c)(4) or (c)(6), as IRS letters granting tax exemption typically do not indicate the basis for the exemption. This proposed change would not eliminate the requirement for petitioners to document they fall under one of these bases for their tax exemption; but they need not document it by providing a letter from the IRS that says they are exempt under one of these provisions.

Third Party Placement Rules

The NPRM also proposes to include a new requirement in the H-1B regulations that when an H-1B beneficiary is “staffed” to a third party employer — i.e., when the beneficiary “becomes part of that third party’s organizational hierarchy by filling a position in that hierarchy (and not merely providing services to the third party)” — then USCIS must consider the third party employer’s education and experience requirements in determining whether the beneficiary will perform in a specialty occupation.

Site Visits

Finally, the NPRM would make clear that DHS may conduct site visits, including but not limited to an on-site visit of the petitioning organization’s facilities, interviews with its officials, review of its record related to compliance with immigration laws and regulations, and interviews with any other individuals or review of any other records that USCIS may lawfully obtain that are pertinent. The proposed changes would also require that petitioners and, if applicable, third-party employers, at facilities where the beneficiary will work, cooperate with these inspections. Failure to do so could result in denial or revocation of the petition.

The Harris Beach immigration team is following this issue and related matters. Our Immigration Law Practice Group includes immigration attorneys that work across New York State in our Albany, Buffalo, Ithaca, Long Island, New York City, Rochester and Syracuse offices. Our immigration lawyers focus on strategies – including immigrant visas for permanent U.S. resident status and temporary visas for foreign nationals – to ensure that companies are able to hire, transfer, and retain the brightest and best non-U.S. talent. If you have questions about this subject or relate matters, please reach out to our immigration attorneys, Danielle M. Rizzo at (716) 200-5149 and; Adam W. Moses at (212) 313-5449 and; or the Harris Beach attorney with whom you most frequently work.

This alert is not a substitute for advice of counsel on specific legal issues.

Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as Washington D.C., New Haven, Connecticut and Newark, New Jersey.