Recent Changes in the H-1B Visa Category

The start of the federal fiscal year on October 1 triggered certain changes to the H-1B visa category, the most important – and controversial – of the nonimmigrant (temporary) work classifications. While these changes are not fundamental to the H-1B, the prospect of any shift in the delicate calculus of work-related immigration inevitably invites a good deal of attention from business and labor communities. This article addresses those changes and the key issues they have generated.

The H-1B category is the workhorse of the nonimmigrant (temporary visa) work classifications. Unlike the treaty classifications (E-1 and E-2), the H-1B is available to nationals of any country. And candidates for the H-1B, unlike L-1 applicants, need not be transferring from a related organization. Companies use the H-1B, described at INA §§ 101(a)(15)(h)(i)(B), 214(i), 8 U.S.C. §§ 1101(a)(15)(h)(i)(B), 1184(i), primarily to bring workers qualified in a “specialty occupation.” According to the statute, a specialty occupation involves highly specialized knowledge and requires at the entry level at least a bachelor's degree in the specialty, or its equivalent. INA § 214(i), 8 U.S.C. § 1184(i). H-1B workers can be admitted initially for three years, and can extend their status for another three. See generally 2 Charles Gordon, Stanley Mailman & Stephen Yale-Loehr, Immigration Law and Procedure § 20.08 (rev. ed. 2003).

Employers must file a labor condition application (LCA) with the U.S. Department of Labor (DOL) before they can petition the immigration agency for an H-1B worker. In that application, employers must attest that they will pay the H-1B the higher of either (1) the prevailing wage in the same geographic area or (2) the “actual wage,” meaning the salary paid to their own workers who are similarly qualified. Employers must furnish a copy of the LCA to the appropriate union, if there is one, or post it at the worksite. They must also keep the LCA for public inspection, together with a statement of the methodology they used to arrive at the prevailing and actual wages.

Beginning in 1990 Congress limited the number of new H-1B visas available each year, setting the annual cap at 65,000. This “cap” was reached (and at times, exceeded) between 1997 and 2000, prompting Congress to increase the annual allotment temporarily to 115,000 for fiscal years (FYs) 1999 and 2000, and to 107,500 for FY 2001. When those increases proved inadequate to meet demand, Congress raised the H-1B cap to 195,000 for FYs 2001-2003. The number reverted to 65,000 on October 1. H-1B employees who work in higher education or related research organizations remain exempt from the cap.

Congress also enacted three other temporary changes to the H-1B program that expired October 1:

• A $1,000 H-1B user fee that funded education and training programs for U.S. workers. See INA § 214(c)(9), 8 U.S.C. § 1184(c)(9). During the past five years, revenues from this fee totaled more than $692 million. Money from the fee provided training to more than 55,600 U.S. workers and funded scholarships for more than 12,500 U.S. students in science and engineering to try to reduce the need to hire foreign-born workers.
• H-1B dependency provisions. See INA § 212(n)(1)(E)(ii), 8 U.S.C. § 1182(n)(1)(E)(ii). These were special provisions for employers who had a high percentage of H-1B employees on their payroll (usually 15 percent or higher). They had to meet additional requirements like actively recruiting U.S. workers. They were also forbidden from laying off U.S. workers to hire an H-1B professional.
• Direct investigative authority of DOL. See the American Competitiveness and Workforce Improvement Act (enacted as tit. IV of the Omnibus Consolidated and Emergency Supplemental Appropriations Act for Fiscal Year 1999, Pub. L. No. 105-277, § 413(e)(2), 112 Stat. 2681, 2681-651), as amended by the American Competitiveness in the Twenty-first Century Act of 2000, Pub. L. No. 106-313, § 107(b), 114 Stat. 1251, 1255. The Department of Labor was empowered to investigate alleged violations of the LCA requirements on its own, without having to wait for an actual complaint.

The use of H-1Bs has waxed and waned with economic conditions. During the economic peak in FY 2001, the former Immigration and Naturalization Service approved 164,000 H-1B petitions subject to the cap. However, the very next year that number dropped by over half, to 79,000. And for the fiscal year just ended, the number of approved petitions subject to the limit was about 76,0000. Despite the deep decline over the last two years, that last number is still well above the 65,000 cap that applies this current year.

Moreover, it appears that this fiscal year less than 65,000 new H-1B numbers are really available. The Department of Homeland Security estimates that about 22,000 H-1B cases that are subject to the annual cap were filed before September 30 but will be adjudicated this fiscal year. In addition, two new free trade agreements with Chile and Singapore set aside another 6,800 H-1B numbers per year for usage by foreign professionals from those two countries. Adding those two figures together, only about 36,200 numbers appear to be available for new H-1B petitions filed this fiscal year.

Many people believe that the information technology (IT) sector is responsible for most H-1B usage. While that used to be so, it no longer is. Last year, over 60 percent of the approved petitions were for workers in other occupations. The number of H-1B petitions approved for workers in computer-related occupations fell from 191,400 in FY 2001 to 75,100 in FY 2002. Dep't of Homeland Security, Office of Immigration Statistics, Characteristics of Specialty Occupation Workers: Fiscal Year 2002 (Sept. 2003), at 12. H-1B usage in most occupations declined between FY 2001 and FY 2002 because of the recession. Id . But there were notable exceptions, including education, medicine and health, and life sciences. These occupational groups increased by 19, 14, and 7 percent, respectively. Id . This shows how critical the H-1B remains for the perennially underserved medical, education, and science sectors.

It is hard to determine the impact of H-1B workers on comparable U.S. workers. The only comprehensive effort to date, conducted in 2000 by the National Research Council of the National Academy of Sciences, concluded that the magnitude of any effect the H-1B program has on wages is difficult to estimate with confidence. National Research Council, Building a Workforce for the Information Economy (2000). The report's executive summary is available at http://www.nap.edu/execsumm/0309069939.html (last visited Oct. 15, 2003). The report noted that the effect, if any, may not be to depress wages and employment opportunities for U.S. workers but rather to keep wages from rising as rapidly as they would if the program did not exist. Another study in 2001 similarly concluded that if the H-1B program has any effect on comparable U.S. workers, the effect must be subtle because it does not appear immediately in the data. B. Lindsay Lowell, Skilled Temporary and Permanent Immigrants in the United States , 20 Population Research and Policy Rev. 33 (2001).

An article published last month by a research economist for the Federal Reserve in Atlanta tried to quantify the impact of H-1B professionals on IT workers. Madeline Zavodny, The H-1B Program and Its Effects on Information Technology Workers , in Federal Reserve Bank of Atlanta, Economic Review (third quarter 2003), available at http://www.frbatlanta.org/index.cfm(click on “Publications” and then “Periodicals”) (last visited Oct. 15, 2003). After going through a complicated regression analysis, the author concluded that the number of H-1B workers does not appear to depress wages or wage growth. The study also found that H-1Bs do not appear to have an adverse impact on contemporaneous unemployment rates, although they may affect unemployment rates a year later.

Congress has been uncertain about whether to make any changes to the H-1B category. On the one hand, members of Congress realize that the current limit of 65,000 on new H-1B petitions is too low. They are also interested in reinstating the $1,000 user fee. On the other hand, the business community is reluctant to press for an increase in H-1B numbers, perhaps afraid that opening the H-1B for any change might also attract restrictionist proposals. And labor unions have complained that H-1B workers are taking jobs away from U.S. workers.

All these concerns were outlined in a recent Senate Judiciary Committee hearing on H-1Bs. See http://judiciary.senate.gov/hearing.cfm?id=913 (last visited Oct. 15, 2003). John Steadman, dean of engineering at the University of South Alabama and president-elect of the Institute of Electrical and Electronics Engineers USA, testified that the H-1B program is “riddled with loopholes.” “Sometimes wage rates are based on surveys that are two or three years old,” he complained. Moreover, he charged that the DOL's enforcement of the prevailing wage requirement is weak. He argued that H-1B visas should remain capped at 65,000, and that all H-1B employers should have to show that U.S. workers are unavailable for the jobs and would not be displaced by H-1B nonimmigrants.

Elizabeth Dickson, a human resource specialist for Ingersoll-Rand Company, refuted allegations that employers are using H-1B visas to hire foreigners who will work for less money than Americans would. “It is a lot, lot, lot more expensive to hire a foreign worker,” she told committee members. In addition to the $1,000 user fee per application that employers had to pay the government until October 1, she pointed out that companies face paperwork costs, legal fees and relocation expenses.

Patrick J. Duffy, a human resources attorney for Intel Corp., testified that “the real issue here is the lack of highly educated U.S. candidates for the jobs for which we experience shortages.” Stephen Yale-Loehr, who testified both as a Cornell Law School professor and as chair of the business immigration committee of the American Immigration Lawyers Association (and who is co-author of this column), agreed that the fundamental problem is a shortage of highly educated U.S. students in math and science. He urged Congress to increase H-1B numbers in the short term and to work with educators and businesses in the long term to attract more U.S. students to the jobs of the twenty-first century. He also argued that bringing H-1B workers can be one way to slow down the movement of U.S. jobs overseas.

An interesting subtext of this debate is the concern over what happens to H-1B workers when they reach the time limit of six years that their classification imposes. Many of them are recruited for permanent employment in the United States, a basis for the “green card” if they qualify as “extraordinary,” as an outstanding academic or researcher, or with a DOL certification that U.S. workers are unavailable. Indeed, in the bull market of the 1990s, the competition for workers with advanced degrees in math or the sciences argued for facilitating their path to permanent resident status. Perhaps in the long run that would be wise.

Given these conflicting claims, it is unlikely that Congress will do anything soon to change the H-1B program. In the meantime, it appears that H-1B numbers will run out in early 2004, setting off a new round of tensions, administrative problems, and cries for a congressional solution, just as happened in the late 1990s. See, e.g ., Stanley Mailman & Stephen Yale-Loehr, How to Deal With the New H-1B Visa Cap , New York L. J., May 28, 1999, reprinted in 4 Bender's Immigr. Bull. 679 (July 1, 1999). Congress may then have to restore the delicate balance between allowing access to highly-educated foreign professionals and protecting U.S. workers.

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