Eaton Peabody

H-1B Visa Reform Act of 2004

Congress recently passed the H-1B Visa Reform Act of 2004, exempting up to 20,000 foreign nationals who have graduated from U.S. universities with advanced degrees from the H-1B cap. The H-1B cap for Fiscal Year 2005 was met on the first day of the Fiscal Year, October 1, 2004. Having reached the annual cap on the first day of the fiscal year essentially precluded employers 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. The new law provides limited relief from the cap.

Application of H-1B Cap and Exemptions Currently, 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. In addition, some secondary schools wishing 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. 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. 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 a cap-exempt employer, 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.

Effect of new law on H-1B cap The new law provides an additional exemption from the H-1B cap for those aliens who have advanced degrees from U.S. colleges or universities. The legislation also clarifies that Conrad 30 waiver beneficiaries are exempt from the H-1B cap, which USCIS had already treated as exempt in practice. Many students who are in a period of post-graduation Optional Practical Training until the summer of 2005 may now pursue H-1B status without having to wait to April 1, 2005 to file. However, at this point, it is unclear how USCIS will administer the 20,000 available H-1B approvals.

Other changes to the H-1B program The new law also makes changes to other aspects of the H-1B program, in some cases reintroducing fees which sunset in 2003. These changes may outweigh any benefit provided by the limited cap relief.

• Fees. Pursuant to the new law, effective December 8, 2004, the $1,000 “training fee” is reintroduced and raised to $1,500 for employers with more than 25 full-time employees. The fee for employers with 25 or fewer full-time employees is $750. In addition, as of March 8, 2005, a $500 “fraud protection and detection fee” will be imposed, regardless of whether an employer has ever been found to have engaged in fraud. Some employers, such as institutions of higher education, will be exempt from these trainings fees as in the past. However, the fraud fee applies to all employers and applies to initial and change-of-employer H-1B petitions.
• Prevailing wage. The wage paid by employers to H-1B workers must now match or exceed the prevailing for the occupation in the geographic area. Previously, an employer could pay an actual wage that was within 95% of the prevailing wage. Moreover, four (rather than the current two) levels of prevailing wages will be established. While this may provide for increased flexibility, the 4 levels have yet to be established, making it difficult to file on March 8, 2005 if there is some question at to the appropriate wage level.
• Dependency attestation. The new law reintroduces the H-1B dependency requirement. This means employers will need to determine whether they are “H-1B dependent” at the time of filing.
• DOL investigative authority. The Department of Labor regains the investigative authority lost in 2003 with the sunset of the previous legislation. This part of the law is retroactive to October 1, 2003. Accordingly, employers should consider performing an internal audit of their H-1B public access files and wage documentation in the event the Department of Labor comes knocking.

The new law providing limited relief from the H-1B cap is effective March 8, 2005.