Eaton Peabody

USCIS announces H-1B cap reached on first day of Fiscal Year 2005 - October 21, 2004

On October 1, 2004 , the first day of FY 2005, USCIS announced that the annual cap of 65,000 on H-1B approvals had been reached. The USCIS fact sheet making the announcement and setting forth cap procedures may be found at: http://uscis.gov/graphics/publicaffairs/factsheets/H1B_05fnl10012004 pdf. Having reached the annual cap on the first day of the fiscal year essentially precludes employers which are not exempt from the cap from hiring H-1B workers for the entire year. Petitions for non-exempt employment may not be filed until April 1, 2005 for, at earliest, an October 1, 2005 start date.

Application of H-1B Cap and Exemptions
The H-1B cap applies to most employers and aliens. Certain employers, such as colleges/universities and non-profit institutions affiliated with them, as well as government research organizations, are exempt from the cap. Also, certain foreign medical graduates who are beneficiaries of J-1 waivers under the Conrad 30 program remain exempt from the cap, allowing them to commence employment in medically underserved areas. In addition, some secondary schools which wish to employ H-1B teachers may have an argument that they are exempt from the cap as well, although it is unclear whether USCIS has accepted such arguments. For those H-1B employees who have already been counted against the cap, extensions of H-1B status and petitions for concurrent/sequential H-1B employment are generally not subject to the cap. However, where H-1B workers initially work for an employer which is exempt from the cap, and then seek to work for an employer that is subject to the cap, the cap may preclude such sequential employment. Non-exempt H-1B petitions filed for a start date before October 1, 2005 will be returned to the sender without being processed.

Student issues
This H-1B freeze "out" affects primarily for-profit businesses, including high-tech companies. However, the 12 months of post-graduation Optional Practical Training (OPT) in which many foreign students participate generally ends in May or June of the year following graduation. Accordingly, for the Class of 2005, these foreign students will most likely have a gap in employment between the end of their OPT and the commencement of any H-1B employment. When the cap was reached in Fiscal Year 2004 , USCIS allowed F-1 students to remain in the U.S. during this period but they were not authorized to work.

Pending legislation
Although legislation is pending in the U.S. Congress to exempt from the H-1B cap up to 20,000 aliens who hold a master's degree or higher from a U.S. college or university, this legislation is currently stalled.

Obviously, the demand for H-1B workers exceeds the congressionally-mandated cap of 65,000 per year. On September 30, 2003, the H-1B cap returned to 65,000 from its previous level of 195,000. With the national economic slowdown over the past few years, the political will to raise the cap has not existed. As many employers rely on skilled H-1B workers, hopefully, Congress with address the H-1B cap issue soon.

Please contact Matthew S. Raynes, mraynes@eatonpeabody.com, for further information.

This paper is provided as general information, and is not a substitute for legal or other professional advice.