United States: DHS New Rule On H-1B Lottery Process: Who's The Winner?

Following President Trump's "Buy American and Hire American" executive order issued back on April 18, 2017, a long-awaited new rule has been proposed by the Department of Homeland Security (DHS) that would change the existing H-1B selection process, although perhaps not before the April 2019 filing season.

Online registration

The proposed rule would require petitioners seeking to file cap-subject H-1B petitions to first electronically register with US Citizenship and Immigration Services (USCIS) during a designated registration period, which would begin at least two weeks before April 1. The registration would require information about the employer, as well as the individual H-1B beneficiary.

USCIS would then select at random from the online registration database until the limited supply available under the quota (65,000 regular cap and 20,000 US advanced degree holders) is exhausted.

The big change is that US employers would only file complete H-1B petitions for the named beneficiaries who have been selected. Government processing fees would only be paid for selected petitions.

Similar to current processing, DHS would prohibit more than one registration from the same petitioner for the same beneficiary during any given year. Further, the new rule would require petitioners to attest to their intent to file an H-1B petition for the named beneficiary in the position for which the registration is filed.

DHS believes that this will prevent US employers from submitting a large numbers of registrations but not following up with complete filings of H-1B petitions for the selected beneficiaries—something that was not possible under the existing system. The proposed rule states that USCIS would closely monitor whether selected registrations are resulting in the filing of complete H-1B petitions. If USCIS finds that petitioners are registering numerous beneficiaries but are not filing petitions "at a rate indicative of a pattern and practice of abuse of the registration system," it would investigate and could hold the employers accountable.

Selection process

The proposed rule would reverse the order by which the H-1B cap petitions are selected. Currently, USCIS first selects 20,000 with US graduate degrees, and then allow the unselected to be considered a second time, with the rest of the world, for the 65,000 quota. The proposed rule reverses this order. The proposed rule claims that it would increase the likelihood that a US graduate degree holder would be selected by up to 16 percent, but no explanation for that calculation is provided in the rule.

Petitioners whose petitions are selected will be notified to file complete H-1B petitions for the named beneficiaries within a designated filing period, expected to be at least 60 days.

Dentons analysis

The new rule reduces USCIS' workload, since it does not have to handle the return of unselected petitions. However, this is not likely to speed up the slow processing of H-1B petitions, since the agency generally relies on contractors to handle mailroom services, rather than the officers who adjudicate petitions.

While the new rule may reduce some paperwork for US employers, it will not likely reduce the costs, since the cost of evaluating potential H-1Bs and registering is still incurred prior to the employer signing the petition. In fact, the extra step of registration creates extra work for employers and lawyers.

The anti-fraud provision of the rule attempts to address some of the realistic problems in the H-1B problem, but at the same time creates uncertainty for US employers and would most likely result in employers that have made bona fide job offers backing out for fear of the heightened scrutiny and potential liabilities.

DHS estimates that it will spend nearly $280,000 to develop the new system and $200,000 per year to maintain it. The proposed rule does not charge employers for the registration. How long the agency will forgo charging employers for registration is hard to predict, but USCIS has very few services that it provides to employers without a fee.

It is clear that this change will detrimentally impact the ability of US employers to continue to employ foreign workers. Current law allows the continued employment of F-1 OPT/STEM OPT and J-1 workers while the H-1B is pending, until their petitions are selected and approved OR even until the government announces they are not selected or not approved. The new rule means that fewer employers will have fewer H-1B petitions pending. The situation will be even worse if the new rule speeds up adjudications, as faster adjudications means faster denials. In sum, the new rule will result in fewer US employers being able to meet their staffing needs with pending H-1B petitions.

The announcement warns that the new rule may not be implemented in time for the April 2019 H-1B filing season, since there may not be enough time to fully test the system. If the new system has not gone into effect at least two weeks prior to the filing deadline, employers should be prepared to submit full H-1B petitions for all candidates on the first business day of April 2019.

Employers and stakeholders have until January 2, 2019 to submit comments on the proposed rule.

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