The Battle of the H-1B and H-2B Caps

In recent weeks the U.S. Citizenship and Immigration Services (CIS), which assumed some of the functions of the now defunct Immigration and Naturalization Service, announced that statutory caps on two temporary work visa categories, the H-1B and the H-2B, had been reached. That means that employers are unable to hire new foreign workers in those categories until October 1, when the new federal fiscal year starts. Efforts now by U.S. employers to persuade Congress to lift those numerical caps may be too little, too late. This article describes those efforts and how employers are coping in the meantime.

H-1B Visas

As background, the H-1B category allows qualified foreign nationals to work temporarily in a specialty occupation, one that involves highly specialized knowledge and requires at least a bachelor’s degree in the specialty or its equivalent. Immigration and Nationality Act (INA) § 214(i), 8 U.S.C. § 1184(i). H-1B workers can come to the United States 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. 2004). Before petitioning the immigration agency, an employer must file with the U.S. Department of Labor (DOL) a labor condition application. That is an attestation that puts the job under a regime designed to protect the wages and working conditions of similarly employed U.S. workers.

As a bow to American labor, Congress also limited the number of new H-1B visas available each year. Congress initially set the annual cap at 65,000. But between 1997 and 2000, demand tested and sometimes exceeded this cap, 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 numbers proved inadequate, Congress again raised the H-1B cap to 195,000 for FYs 2001-2003. The number reverted to 65,000 on October 1, 2003. See generally Stanley Mailman & Stephen Yale-Loehr, Recent Changes in the H-1B Visa Category, New York Law Journal, Oct. 27, 2003, at 3.

On February 17, less than halfway through this fiscal year, the CIS announced, to no one’s surprise, that the H-1B cap had again been triggered. As of that date, the CIS rejected H-1B petitions that requested an immediate start date. But as of April 1, it began accepting H-1B petitions requesting a start date of October 1, 2004, the date the new fiscal year begins. Assuming the same rate of filing, the FY 2005 cap could be exhausted by October 1. That would mean that no H-1B numbers would be available for an entire year.

H-2B Visas

The H-2B visa category allows noncitizens to work temporarily in a non-agricultural job for which the DOL has certified there are no U.S. workers available. Unlike H-1B petitions, H-2B petitions are valid for a maximum of one year. Also unlike the H-1B category, the need for an H-2B worker must be temporary. For this reason, the main recipients of H-2B visas are largely seasonal workers like camp counselors, hotel help at summer resorts, landscape gardeners, and shellfish shuckers. See generally 2 Charles Gordon, Stanley Mailman & Stephen Yale-Loehr, Immigration Law and Procedure § 20.10 (rev. ed. 2004).

The H-2B category has an annual cap of 66,000, reached this year on March 10. Caught short especially are resorts and other industries that have a peak summer season.

Everyone knew that the H-1B cap would be reached some time this fiscal year. The announcement that the H-2B cap had been reached, however, was surprising. “Nobody expected this to happen. This hit everybody like a ton of bricks,” Hank Lavery, executive vice president of Century Pool Management in Alexandria, Virginia, told the Washington Times. Stephen Dinan, Summer Jobs at Stake in Visa Bill, Washington Times, Apr. 5, 2004.

Legislation to Alleviate the H-2B and H-1B Caps

Several bills were introduced in Congress at the end of March to alleviate the H-2B cap. One of them, the “Save Summer Act of 2004” (S. 2252), would immediately increase the cap for this fiscal year by 40,000 visas. An identical bill (H.R. 4052) has been introduced in the House.

Another bill, S. 2258, entitled the “Summer Operations and Services (S.O.S) Relief and Reform Act,” would require the CIS to exempt from the existing H-2B cap any H-2B visa holders and applicants for this fiscal year who had obtained an H-2B visa in the previous two fiscal years. It is unclear how the CIS would implement this fix. Senator Orrin Hatch (R-Utah), a co-sponsor of S. 2258, favors this approach. “The number of actual workers admitted will be dictated by the strength of the economy, and not by a random number that resulted from political compromise,” said Senator Hatch, adding that his bill would also benefit those previous workers “who have complied with the law and returned to their home countries at the end of the season.” Stephen Dinan, Summer Jobs at Stake in Visa Bill, Washington Times, Apr. 5, 2004.

Yet another bill, H.R. 4041, would allow employers who hired H-2B workers last year to hire the same number this year. This proposal, however, would not help new H-2B employers.

The speed with which the H-2B bills were introduced is amazing: less than two weeks after the CIS announced the squeeze. By contrast, the H-1B cap was hit on February 17, and employers knew even before the fiscal year began last October that the H-1B cap would clamp down early. Yet the first bill to alleviate the H-1B cap didn’t materialize until April 2, when several Republican members of the House of Representatives introduced H.R. 4166, the “American Workforce Improvement and Jobs Protection Act.” H.R. 4166 would not explicitly increase H-1B numbers. Rather, it would create an exemption from the H-1B cap for foreign graduates of U.S. universities who have earned a master’s or higher degree. This exemption would be capped at 20,000 per year. The bill would also make permanent the $1,000 H-1B training fee and the non-displacement and recruitment attestations for H-1B-dependent employers, both of which expired last October. These additional requirements had been added to the H-1B program for so long as the cap was increased. H.R. 4166 would also impose a new $500 “fraud detection and prevention fee.”

Why are employers so loathe to ask Congress to raise the H-1B cap but so willing to lobby for an increase in H-2B numbers? The answer may lie in three factors: (1) the greater attention that the H-1B category has regularly caught from the media and American labor; (2) the differing nature of the requirements for each visa category; and (3) the nature of the jobs. First, H-1B employers may be exhausted by their earlier efforts in piercing prior H-1B caps and leery of entering the fray once more. In the last few years Congress has held several hearings on H-1B visas, but none concerning H-2B workers. Second, the H-1B visa category, unlike the H-2B category, does not require any test of the labor market. Labor unions charge that for this reason H-1B workers are displacing U.S. workers. Third, even though last year over 60 percent of approved H-1B petitions were for workers in occupations unrelated to information technology, the media have identified H-1Bs with computer jobs. The growing fear about the supposed overseas outsourcing of white-collar U.S. jobs adds fuel to the H-1B fire.

By contrast, “H-2B jobs have no relation to the U.S. jobs being lost to outsourcing,” Senator Edward Kennedy (D-Mass.), a co-sponsor of one of the H-2B bills, told the New York Times. “The jobs are highly local and supplement the work of permanent U.S. employees. They’re temporary jobs with low pay and few or no benefits, and American workers aren’t willing to accept them.” Eduardo Porter, A Shortage of Seasonal Workers Is Feared, New York Times, Apr. 10, 2004, at C1.

Not all members of Congress agree. Senator Jeff Sessions (R-Ala.) opposes lifting the H-2B visa limit. If you add a “huge amount of new labor you drive down good wages,” he told a reporter. Id. Given these divergent views, it is unclear whether Congress will enact an increase in the H-2B cap in time to save summer jobs.

Interim Coping Strategies

In the meantime, employers are trying to figure out strategies to resolve their needs. Some H-1B employees are exempt from the cap. One such category consists of those who work at an institution of higher education or a “related or affiliated nonprofit entity,” or at a “nonprofit research organization or a governmental research organization.” INA § 214(g)(5), 8 U.S.C. § 1184(g)(5) But what do those terms mean? If a private medical practice wants to hire a new H-1B doctor now, can it become exempt from the cap by affiliating with a local nonprofit hospital? If a bioengineering company wants to hire an H-1B scientist, can it avoid the H-1B cap by sharing a research grant with a university? H-1B employers are asking such questions right now, with no clear answers available.

Another H-1B issue concerns “gap in the cap” cases. These relate to F-1 or J-1 students who are in practical training status after graduation. For many of these students that status will expire in May or June. Can they stay here until their H-1B status takes effect October 1? In the past, the immigration agency allowed such students to remain in the United States legally until the new fiscal year started. 8 C.F.R. §§ 214.2(f)(5)(vi), 214.2(j)(1)(vi). The CIS has not said what it will do this year, but rumors abound that given the culture of “no” after the terrorist attacks of September 11, 2001, the agency will not be willing to help such students this year. If so, many of them will have to return home until October 1, when they can obtain an H-1B visa and return to the United States. That in turn will create more work for already overloaded U.S. embassies and consulates abroad.

While the L-1 (intracompany transferee) category may be an option in selective cases, it may be hard, for example, to claim that a job requires specialized knowledge (within the company) when the company recently filled an identical job with someone who knew nothing of its products, processes, or services. The State Department has warned its consular officers that the H-1B squeeze may cause employers to stretch the L-1.

Employers may also consider whether new hires can qualify for other temporary visa categories. For example, the O-1 category is available for persons of “extraordinary ability.” See 8 C.F.R. § 214.2(o). Some artists, athletes, and entertainers may qualify for P visas. See 8 C.F.R. § 214.2(p). Certain professionals from Canada and Mexico can enter in the TN (Treaty NAFTA) category. See 8 C.F.R. § 214.6. None of these other visa categories have annual caps. But not all workers who would normally obtain a H-1B visa will qualify for these alternatives.

H-2B employers also have limited options if Congress fails to act. They could try to hire temporary workers as J-1 trainees. But few summer workers will fit the requirements for that category. And J-1 sponsoring agencies may not be ready or willing to issue the necessary paperwork for this new brand of “trainee.”

Conclusion

It is unclear what Congress will do about the current H-1B and H-2B caps. Congress may do nothing. Or it may raise one or both caps temporarily, just for this year, delaying a real solution. Or it could hide a cap increase by creating an exemption to an existing cap. The only real answer lies in comprehensive immigration reform. But as pointed out in an earlier column, such reform seems far off on the horizon. Stanley Mailman & Stephen Yale-Loehr, Sanity for the Southwest Border, New York Law Journal, Feb. 23, 2004, at 3. For the time being, employers and workers are coping as best they can in an environment of limited and uncertain options.

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