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EIG Summary & Analysis | DHS Proposed H-1B Rule Changes

November 2, 2020

The Department of Homeland Security (DHS) published a Proposed Rule to select H-1B cap-subject registrations based on the highest corresponding Occupational Employment Statistics (OES) wage levels.

Summary:

On November 2, 2020, the Department of Homeland Security (DHS) published a Proposed Rule, titled Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitioners (85 FR 69236), to select H-1B cap-subject registrations based on highest corresponding Occupational Employment Statistics (OES) wage levels.

The Proposed Rule would eliminate the current random computer-generated selection of H-1B cap-subject registrations (or petitions any year in which the registration requirement is suspended) when USCIS receives more registrations (or petitions) than needed to meet the numerical limitation. In place of a random selection, USCIS would select H-1B registrations (or petitions) based on wage level beginning with wage level IV and proceeding in descending order to OES wage levels III, II, and I. USCIS will use the highest corresponding OES wage level regardless if a permissible private wage survey is used on the LCA. Where OES wage data does not exist, USCIS will use DOL prevailing wage guidance to determine the appropriate OES wage level (DHS is requesting comments on alternative solutions when OES wage data is unavailable). If there are more registrants in the same wage level than available visas, DHS would conduct a random selection of registrations in that wage level. This proposed change will require adding the corresponding OES wage level to the H-1B cap registrations.

In so many words, DHS has authorized petitioners to purchase H-1B cap-subject spots by allowing employers to offer higher wages to seek an advantage in the H-1B selection process even in cases where DOL prevailing wage guidance would result in a lower wage level selection.  DHS defends this position by stating that “an employer who offers a higher wage than required by the prevailing wage level does so because that higher wage is a clear reflection of the beneficiary’s value to the employer, which, even if not related to the position’s skill level per se, reflects the unique qualities the beneficiary possesses.”

DHS is also considering a weight-based selection process where higher wage levels result in a better chance of selection. For example, a level IV wage beneficiary would have four times the selection rate than that of level I, a level III wage beneficiary would have three times the selection rate than that of level I, and so on. DHS is requesting comments on alternative ranking solutions to ensure higher wages for H-1B cap-subject beneficiaries.

It is important to note that USCIS will reject, deny, or revoke any subsequent new or amended petition filed by the petitioner, or related entity, on behalf of the same beneficiary for a lower wage in an effort to increase H-1B selection chances and circumvent the proposed changes.

DHS relies on Walker Macy LLC v. United States Citizenship & Immigration Servs., 243 F. Supp. 3d 1156 (D. Or.2017) to make these broad changes without statutory authority. In Walker Macy, the court upheld the current random lottery as a reasonable interpretation of the INA requiring USCIS to process H-1B cap-subject petitions in the order in which they are “filed”. The court reasoned that a random computer-generated selection of petitions in excess of the annual numerical limitation does not violate the statute because it eliminates arbitrariness in the selection of simultaneously submitted petitions. This is a stark contrast from the Department’s admission in the preamble of the H-1B Registration Final Rule that “prioritization of registration selection on factors other than degree level, such as salary, would require statutory changes” and would be inconsistent with Congressional intent.

Purpose:

To increase the average and median wage levels of H-1B cap-subject beneficiaries “to help ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries” per President Trump’s Executive Order on Buy American and Hire American (E.O. 13788). This Proposed Rule is also in furtherance of President Trump’s Proclamation Suspending Entry of Aliens Who Present a Risk to the U.S. Labor Market Following the Coronavirus Outbreak (E.O. 10052) directing DHS to promulgate regulations to ensure “that the presence in the United States of H-1B nonimmigrants does not disadvantage United States workers.”

Estimated Impacts:

By examining wage data from FY19 & FY20 H-1B cap lotteries (FY21 data not yet available), DHS estimates that all registrants with wage that exceeds Level III will be selected, 20% of advanced degree level II registrants and 75% of regular cap registrations would be selected. No level I wage registrants are expected to be selected. These proposed changes would effectively eliminate the H-1B as a viable visa option for new graduates seeking employment in an entry-level position.

Below is a chart from the Proposed Rule summarizing estimated selections per wage level and cap category:

Projected Costs:

DHS estimates that the Proposed Rule will cost petitioners $21,540,448 in FY 2022 and $15,254,921 in FY 2023–2032. The estimated 10-year total net cost petitioners will be $158,834,737 undiscounted, $136,230,024 discounted at 3-percent, and $113,018,506 discounted at 7-percent. These costs are attributed to time needed to complete the registration form and familiarization costs due to time spent understanding how to file new Form I-129H1. These estimates do not take into consideration what DHS labels “unquantified costs” of increase in labor costs to improve H-1B selection chances, training costs to find substitute workers as well as decrease in profits and productivity borne from turnover and/or hiring less qualified workers.

DHS fails to quantify the costs to the Federal Government despite admitting that implementation would require IT updates and increase time to review and select H-1B cap-subject registrations because USCIS has the authority to increase filing fees to cover any increase in administration costs. This may indicate a future spike in USCIS filing fees if this rule is implemented.

Next Steps:

DHS is accepting comments to the Proposed Rule until December 2, 2020.

Like many of the Administration’s proposed immigration rule changes, EIG expects significant litigation preventing the implementation of this Proposed Rule. Subscribe to EIG’s alerts to stay up to date on immigration-related news.