Executive Summary

The Trump Administration has introduced long-anticipated changes to the H-1B visa program for highly-skilled foreign workers, aimed at tightening eligibility for STEM talent working at major US employers, including by imposing a rigid requirement that any job offered to an H-1B worker require a single specific degree in a subspecialty, and that each H-1B candidate have that specific degree to qualify.

The changes, some of which come under immediate effect and all of which will likely face legal challenges, would make it tougher for applicants to qualify for an H-1B visa and significantly more expensive for employers to sponsor them for H-1Bs or for green cards.

The changes also will create high barriers for vendor partners to provide talent to major customers, as both the expense of new wages and specific requirements for vendors to renew their H-1Bs annually (or more frequently if statements of work provide for shorter periods), raise their costs substantially.

Potential and Practical Impact on Your Business

  1. H-1B candidates working in finance, IT, data analytics, and AI are at risk of being denied status because jobs in these fields necessarily allow for multiple specialized degrees. The agency rule, which is politically motivated, seeks to nix high numbers of H-1B candidates from approval, and is using the “one degree per specialty” rule to achieve a noticeable reduction in H-1B approvals.
    1. Potential Impact:  High.  H-1B visa issuance could be restricted to only those jobs where a single degree is required generally (e.g., a finance position where all of our workers have finance degrees, or an IT position where virtually all of our workers have computer science degrees).  Absurdly, all other positions would be at risk (e.g., data analysts, which have degrees in engineering fields, computer science, statistics, and business, as is true throughout the IT and financial industry).
    2. Practical Impact:  Low.  The rule is subject to challenge on multiple levels, including that the authority of the Department of Homeland Security (DHS) Secretary is in question, the agency passed the rule without notice and comment, and the restrictive definition the agency has adopted runs counter to the extensive evidence provided in prior individual lawsuits by the business community.  Employers should nevertheless assess and evaluate if any upcoming H-1B filings are vulnerable, and prepare default approaches as needed.
  2. H-1B filings for top talent from universities or the open market, as well as extensions for current H-1B holders, will rise in price.  The wage requirements in the new rule heighten current wages by 43 to 71%.
    1. Potential Impact.  High.  Employers typically pay H-1B workers more than the government’s current required wage.  These wage hikes are so dramatic, however, that the compensation of workers, including current H-1B visa holders who require extensions, to continue working at their employers, would likely be impacted.
    2. Practical Impact.  Low.  This rule is vulnerable to the same challenges as the degree provision above, and is, in addition, at risk because the government has deviated from its own sources for wage assessment (and a 30-year history of using those).  As above, employers should assess if any upcoming filings are affected.  We anticipate that because of the lead times already incorporated into your filings, you can pause any submissions pending the injunction hearings.
  3. Vendors must also address the degree and wage issues noted above, and, further, ensure they are actively managing and directing the work of their onsite resources, and expect that their H-1B approvals will only last for up to a maximum of one year, as opposed to the three years currently allowed for all H-1B petitions.
    1. Potential Impact.  High.  Vendors who perform work at third-party worksites will face the same restrictions and are likely to struggle the most with the new wage levels, as well as with the limited period of approval allowed for their H-1Bs.  In addition, they are likely going to be affected the most by additional Requests for Evidence and denials of H-1Bs based on the various provisions in the rules, which could disrupt their ability to provide continuous service to companies that rely on their services.
    2. Practical Impact.  Moderate.  While vendors will benefit from the same injunctive relief that will affect their clients’ filings, scrutiny of vendor H-1B petitions is likely to be high regardless.  Even in the absence of the new rules, vendors must prove they have and exercise a right to control resources provided onsite to their client, and the burden is also on the vendor to demonstrate it has contract work available to fill the full period of H-1B service sought (i.e., up to three years).  In addition, staffing vendors are already subject to criminal investigations for fraud and abuse.  Companies that rely on vendors should accordingly establish or reinforce, if already established, protocols for vendor visa compliance, including ensuring that all vendor requests for visa support go through a central review (procurement or vendor management), and that vendor resources are supervised by their own team leaders (i.e., not company managers).  Further consideration of default options for nearshoring and offshoring should also be made, although we caution that no significant changes should be made, particularly as court challenges for injunctive relief will be decided relatively soon.

Analysis

The two new rules impose the following new requirements.

  • New wage requirements imposed immediately.  Effective today, the Department of Labor (DOL)’s “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States” rule makes it much more expensive for US employers to sponsor foreign students and workers in the H-1B, H-1B1, and E-3 nonimmigrant visa categories, as well as for immigrant visas (green cards) in the second and third employment-based classifications (EB-2 and EB-3) categories for workers who must undergo the labor market testing process known as PERM.  Prevailing wages in some occupational categories will increase nearly 60%.
  • H-1B specialty occupation definition narrowed and new restriction on off-site resources imposed. Effective December 7, 2020, the DHS “Strengthening the H-1B Non-immigrant Visa Classification Program” rule will implement a novel definition of a “specialty occupation.” The new definition will restrict the H-1B category to individuals holding a bachelor’s baccalaureate or higher degree “in a directly related specific specialty, or its equivalent,” for a job that requires that specific degree formulation as its minimum prerequisite. This interim final rule also imposes a new definition of “employer-employee” relationship, limits the validity periods for H-1B workers placed at a third-party worksites, and imposes additional requirements on both staffing companies and their clients.

Both rules have been issued as Interim Final Rules, which makes them vulnerable to litigation based on the agencies’ bypassing of notice and comment, particularly as the delays in passing the rules have not been explained.  The overall injury and disruption to employers and divergence of the wage levels from actual market wages are also likely to form part of the challenges and requests for injunctive relief.

Details on the New Wage Requirement Rule

The prevailing wage is “the average wage paid to similarly employed workers in a specific occupation in the area of intended employment,” as encapsulated in the DOL website. For the past three decades, the DOL has determined the prevailing wage by using data from the government’s Occupational Employment Statistics (OES) wage survey and using a mathematical formula to create four levels of wages for each occupation. The new calculus, which DOL indicates is required “to adjust the existing wage levels to ensure the levels reflect the wages paid to U.S. workers with levels of experience, education, and responsibility comparable to those possessed by similarly employed foreign workers,” is 43% to 71% higher.

The specific changes to prevailing wage levels under the existing four-tier wage structure are summarized below.

The new DOL wage data is live here.

The new wage data must be used for all Labor Condition Applications (LCAs) submitted on or after October 8, 2020 which rely on the OES survey. It will also be applied to future and pending Prevailing Wage Requests in connection with LCAs and PERM sponsorship.

The rule appears to continue to allow employers to challenge the DOL prevailing wage data with private surveys. For an example of changes in wage data for select occupational categories in two geographies, please refer to the attached Appendix.

Details on the New H-1B Definition and Restrictions on Off-Site Resources

I. Definition of Specialty Occupation Narrowly Restricted

The new rule restricts the definition of specialty occupation only to those jobs for which a US bachelor’s or higher degree “in a directly related specific specialty, or its equivalent” is the minimum requirement for entry into the company (as an established practice), the industry, or the occupation. Alternatively, employers can show that the specific duties of the proffered position “are so specialized, complex, or unique” that they can only be performed by an individual with such a specific degree.

Employers will be required to show that H-1B positions require a bachelor’s degree or higher in a directly related specific specialty, rather than showing that a variety of related fields, such as Computer Science, Computer Engineering, or Information Systems would be sufficient.  All H-1B occupational categories appear to be held to the standard common in only a few fields, such as medicine, where the incumbent must hold a medical degree.  Data scientists or data analytics experts, whose degree fields typically encompass two distinct degree programs, computer science and statistics, will seemingly run afoul of the new definition. This requirement does not accord with many employers’ hiring practices and will likely lead to higher rates of Requests for Evidence and denial both for new hires and for extensions of status.

The requirement of a general degree without further specialization, such as business administration or liberal arts, will be insufficient to qualify the position as a specialty occupation.  Emerging fields like AI or machine learning, which lack any specific degree program, are similarly vulnerable to findings of ineligibility because there is no specific subspecialty in the general engineering programs that candidates are likely to have pursued prior to seeking H-1B employment.

In addition, current USCIS regulations provide that a position meets the H-1B standard of a specialty occupation if a bachelor’s degree or its equivalent is “normally” the minimum requirement for the role, or if the duties are so complex that the knowledge required is “usually” associated with the attainment of a bachelor’s degree or higher.  The new rule will remove the words “normally” and “usually,” greatly heightening the standard that must be met by employers. As DHS notes, “This change means that the petitioner will have to establish that the bachelor’s degree in a specific specialty or its equivalent is a minimum requirement for entry into the occupation in the United States by showing that this is always the requirement for the occupation as a whole, the occupational requirement within the relevant industry, the petitioner’s particularized requirement, or because the position is so specialized, complex, or unique that it is necessarily required to perform the duties of the specific position.” (Emphasis added.)

II. Third-Party Vendor Positions Face New Barriers

The rule narrows the definition of “employer-employee” relationship by removing from the regulations that this relationship is “indicated by the fact that it may hire, pay, fire, supervise, or otherwise control the work of any such employee.”  Instead, the rule provides a list of factors in determining whether this relationship exists, wherein no one factor is determinative.  Those factors include:

  • Whether the petitioner supervises the employee, and where the supervision takes place,
  • Whether the petitioner has the right to control the work of the employee on a day-to-day basis and to assign projects, and
  • Whether the petitioner evaluates the work-product of the employee.

The rule also limits approval periods for H-1B resources placed at client worksites to one year (compared to the current, three year maximum), and require that employers submit evidence showing that the employee will perform services in a specialty occupation at the third party worksite.

Assessing the Impact on Your Business

These new rules will significantly impact employers seeking to sponsor H-1B workers in the following ways: 

  • All H-1B, H-1B1, and E-3 Labor Condition Application (LCA) submissions must use the higher prevailing wage levels as amended by the new interim final rule if the LCA relies on the OES survey. This adjusted data will also apply to Prevailing Wage Requests in the H-1B and PERM context.
  • H-1B employers will be required to show that H-1B positions always require a bachelor’s degree or higher in a directly related specific specialty and meet the new employer-employee relationship standard.
  • Third-party worksite providers will need to consider adding onsite supervision and management of resources, and document closely how they monitor, evaluate, and direct H-1B workers’ activity.
  • More frequent H-1B petitions for off-site placements will be required, due to the one year validity period imposed by the new rule.

These changes also are likely to lead to higher rates of Requests for Evidence (RFE) and denial. In addition to the dramatic impact of new prevailing wage levels, the rise in RFEs and need for more frequent H-1B petitions for off-site placements due to the one year validity maximum will increase costs associated with these H-1B workers and make long-term employment more uncertain.

On the Horizon

Together, these rules impose the most significant changes and restrictions to the H-1B and employer green card sponsorship programs in decades.  They create significant business continuity challenges because of the likely increase in visa denials; expose companies to additional immigration-related compliance risks and government scrutiny; and result in increased costs to businesses that sponsor foreign talent.

The overall injury and disruption to employers and divergence of the wage levels from actual market wages are likely to form part of the challenges and requests for injunctive relief.  The Northern District of California’s recent grant of an injunction enjoining the White House’s suspension of H-1B, L-1, and J-1 visas was premised on this type of injury, as reported in our COVID-19 blog post.

Appendix: Example of Changes to Prevailing Wages for H-1B Jobs

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