DHS Publishes Final H-1B Selection Rule

The Department of Homeland Security (DHS) will publish a Final Rule on January 8, 2021, to select H-1B cap-subject registrations based on the highest corresponding Occupational Employment Statistics (OES) wage levels.

Summary

On January 8, 2021, the Department of Homeland Security (DHS) is scheduled to publish a Final Rule, titled Modification of Registration Requirement for Petitioners Seeking To File Cap-Subject H-1B Petitioners, to select H-1B cap-subject registrations based on the highest corresponding Occupational Employment Statistics (OES) wage levels.

EIG previously issued a summary and analysis of the Proposed Rule on November 2, 2020. DHS has “declined to modify the regulatory text” of the Proposed Rule after reviewing the 1,491 comments it received during the notice and comment period. This Final Rule is expected to take effect on March 9, 2021, and without legal challenge will be in effect for the FY2022 H-1B cap lottery. 

USCIS will provide public training on the modified registration system in advance of its implementation. The Final Rule confirms that H-1B cap registrations filed prior to the effective date “will be based on the regulatory requirements in place at the time the registration.” It is unclear if petitioners will have the opportunity to submit H-1B cap registrations before the effective date of this rule since USCIS has not yet announced if the online pre-registration process from last year will be used for FY2022 H-1B cap-subject petitions. We will continue to monitor the situation and issue further guidance as information becomes available.

The Final Rule will 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 will 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. If the H-1B beneficiary will work in multiple locations, USCIS will rank and select the registration (or petition) based on the lowest corresponding OES wage level of the different locations. If there are more registrants in the same wage level than available visas, USCIS will conduct a random selection of registrations within that wage level. This change will require adding the corresponding OES wage level to the H-1B cap registrations.

Where OES wage data does not exist, USCIS will use DOL prevailing wage guidance to determine the appropriate OES wage level. If USCIS disagrees with the wage level selected by the petitioner, USCIS will issue either a Request for Evidence (RFE) or Notice of Intent to Deny (NOID) to allow the petitioner to establish that it selected the appropriate SOC code and wage level.

It is important to point out that the Final Rule will not change the order of H-1B cap lottery selections between regular cap and advanced degree exemption. Meaning, USCIS will first select from the regular cap registrants (or petitions) using the wage level ranking, and then for the advanced degree exemption.

In so many words, DHS has authorized petitioners to effectively purchase H-1B cap-subject spots by allowing employers to offer higher wages simply to seek an advantage in the selection process regardless of whether 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.”

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 states that USCIS will determine whether a petitioner attempted to circumvent the rule based on a totality of the record. DHS declined to provide a list of factors USCIS will consider in such adjudications. The burden of proof will be left to the petitioner to show that the new or amended petition is not an attempt to unfairly increase odds of selection.

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. In the Final Rule, DHS stands behind the “reasonableness” of the rule stating that it is in furtherance of “the dominant legislative purpose of the statute because the intent of the H-1B program is to help U.S. employers fill labor shortages in positions requiring highly skilled or highly educated workers.”

Purpose

To “maximize H-1B cap allocations, so that they more likely will go to the best and brightest workers” by “incentiviz[ing] H-1B employers to offer higher wages, or to petition for positions requiring higher skills and higher-skilled aliens that are commensurate with higher wage levels” and “disincentiviz[ing] abuse of the H-1B program to fill relatively lower-paid, lower-skilled positions.”

Notably, DHS removed mention that this Final Rule is in furtherance of President Trump’s Executive Order on Buy American and Hire American (E.O. 13788) and Proclamation Suspending Entry of Aliens Who Present a Risk to the U.S. Labor Market Following the Coronavirus Outbreak (E.O. 10052) as previously stated in the proposed version of this rule.

Estimated Impacts

By examining wage data from prior H-1B cap lotteries, DHS estimates that all registrants with wages that exceed 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 entry-level positions.

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

Projected Costs

DHS estimates that the annualized costs to the public will be $15,968,792 annualized at 3-percent, $16,089,770 annualized at 7-percent for the 10-year implementation period of the rule. The Rule estimates that costs for petitioners will be $21,538,925 in FY 2022 and $15,253,398 in FY 2023–2032. The estimated 10-year total net cost petitioners will be $158,819,507 undiscounted, $136,217,032 discounted at 3-percent, and $113,007,809 discounted at 7-percent. These costs are attributed to time needed to complete the registration form and familiarization cost. 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.

Despite the Rule admitting that implementation would require IT updates and increase time to review and select H-1B cap-subject registrations, DHS alleges that “[t]hese costs are captured in the fees collected for the benefit request from petitioners.” It is unclear if petitioners can expect a future spike in USCIS filing fees as a result of this rule.

Next Steps

DHS will publish the Final Rule on the Federal Register on January 8, 2021.

Like many of the Administration’s proposed immigration rule changes, EIG expects significant litigation potentially preventing the implementation of this Rule.