• H-1B Visa Changes Affecting U.S. Employers: For Better For Worse or For Naught?
  • December 23, 2003 | Author: Lori S. Patterson
  • Law Firm: Rogers Towers, P.A. - Jacksonville Office
  • In October 2000, former President Clinton signed into law pivotal H-1B legislation, the American Competitiveness in the Twenty First Century Act ("AC 21"), which has had a significant impact on employers who seek to hire and retain professional non-immigrant workers. AC 21 increased the number of H-1B visas available, increased the training fee paid by employers, and increased the portability of H-1B status. Add to those changes the option of a streamlined H-1B processing service instituted by the Immigration and Naturalization Service ("INS"), effective July 31, 2001, and the H-lB visa program appeared to offer endless benefits to employers. But, is more, faster and more mobile always better? Unfortunately, with those benefits also came a daunting challenge for employers, namely retaining H-1B non-immigrant workers with particular skill sets. In addition, with the onset of an economic recession, the 2000-2001 changes to the H-1B program have come under close scrutiny.

    H-1B visas are available for qualified foreign workers who are hired to fill specialty occupations in the United States. Generally, these visas are obtainable for job positions requiring highly specialized knowledge and the attainment of a bachelor's or higher degree in the specific specialty. H-1B visas are issued for an initial maximum three-year period and are renewable for an additional three years. Some common uses of H-1B visas are for engineers and architects, teachers and professors, accountants, financial analysts, lawyers, business executives, scientists and researchers, and computer professionals. Prior to the enactment of AC 21 and the INS's new processing service, the H-1B visa program suffered from some serious flaws: the number of H-1B visas was insufficient to satisfy the growing demand for H-1B workers, and the process for obtaining an H-1B visa was laden with delays and inefficiencies. Employers pushed for change.

    Prior to AC 21, the H-1B visa quota was 115,000 for fiscal year 2000. This quota was met in March 2000. This meant that the INS was unable to issue H-1B visas between March and October 2000. With the enactment of AC 21, the number of H-1B visas was increased from 115,000 to 195,000 for fiscal years 2001, 2002 and 2003. In addition, prospective H-1B non-immigrant workers sponsored by institutions of higher learning, affiliated research organizations, non-profit research organizations and governmental research organizations became exempt from the visa cap. These types of educational visas are estimated to account for between 6,000 and 10,000 H-1B visas per year, which are no longer counted toward the visa cap. Also exempt from the cap for fiscal year 2001 were the approximately 30,000 visas from fiscal year 2000 since AC 21 retroactively increased the quotas for fiscal years 1999 and 2000 to match the demand in those years. Finally, if any H-1B visa is revoked for having been obtained by fraud or willful misrepresentation, it is discounted from the quota.

    This increase in the H-1B quota did not come without a price. Prior to December 17, 2000, the fees for processing an H-1B visa included a $110 filing fee and an additional $500 training fee that was required to be paid by the employer. In connection with AC 21, the training fee was doubled to $1,000 as of December 17, 2000, all of which must still be paid by the employer. The employer cannot seek reimbursement from the H-1B worker for the $1,000 fee at any time during or after employment. This fee is intended to be disbursed between the Department of Labor and the National Science Foundation for job training, low-income scholarships, grants for mathematics, engineering, or science enrichment courses, systematic reform activities, and administration and enforcement of the H-1B program. Additionally, the INS filing fee for H-1B petitions was increased to $130, effective February 19, 2002.

    In addition to the filing and training fee, employers were given the option as of July 31, 2001 to pay a premium processing fee in the amount of $1,000 to INS in exchange for expedited, 15-day processing of an H-1B visa, rather the 30-90 days prescribed by INS. If INS fails to process the visa within 15 days, the employer's money will be refunded. This expedited processing, typically successful, is optional and an employer who does not pay the additional $1,000 premium processing fee should not be affected. However, since September 11, this option has become more attractive to employers who seek to avoid any processing delays caused by enhanced scrutiny over certain petitions.

    H-1B visas are employer-specific. Prior to AC 21, a non-immigrant worker who had an H-1B visa with one employer was required to undergo the entire H-1B petition process and obtain an approval notice from INS prior to beginning work for a new employer. Perhaps the most significant aspect of AC 21 was the increased portability provisions for H-1B workers. Under these provisions, a non-immigrant worker who has a valid H-1B visa with one employer is permitted to begin working for a new employer upon the filing of a non-frivolous H-1B petition with INS by the new employer, rather than having to wait for INS to issue an approval notice. This change effectively reduces the overall H-1B process by the 30-90 day processing period. The result: significantly increased mobility for H-1B workers who are able to swiftly and readily transfer from one employer to another.

    With all of these changes, employers obtained what they sought: an increased number of H-1B visas for prospective workers, the potential to expedite processing (for a price), and an increased ability to recruit H-1B workers from other employers. The impact of these changes began to be felt by employers who questioned: How do I retain my H-1B workers? The answer was not easy, primarily because neither Congress nor INS provided clear guidance as to what steps employers may take to retain H-1B workers. As a general rule, an employer is not permitted to impose a "penalty" against an H-1B worker for terminating his or her employment prior to the intended duration. In light of this rule, employers must be wary of using the typical retention tools such as reimbursement agreements and non-competition agreements for H-1B workers. One state court in California has already effectively eliminated this option. Employers should confer with legal counsel prior to instituting any such tools. Some employers have found, depending on the industry in which they operate, that they are compelled to sponsor their H-1B workers in the permanent residency process in order to compete with other employers in their industry who are doing so.

    As employers continued to struggle in the short-term for answers to these retention issues, September 11 shook the world, the economy, and the immigration community. Since that time, some industries have essentially withdrawn from the H-1B program, while others continue to rely on it for foreign workers with a particular skill set. For fiscal year 2001, (October 1, 2000 through September 30, 2001), the demand for professional foreign workers reached an all-time high: INS received applications for 342,035 H-1B visas -- a 14.4% increase over fiscal year 2000. Although the number of reported H-1B visa applications for the first quarter of the current fiscal year has declined compared to 2001, INS received a total of approximately 54,000 petitions, with 28,000 of the H-1B visas being approved during that time, 18,000 remained pending, and others were exempt from the quota.

    Ultimately, employers got what they wished for with the enhancement of AC 21 and the related changes to the H-1B visa program. The questions, however, still loom: was it necessary given the current state of the economy, and was it worth the new challenges and the price? Employers who remain reliant on the H-1B program, however, strive to bolster their recruitment and retention strategies in the United States and abroad in order to fill positions as more mobile H-1B workers continue to switch employers and transfer H-1B status.