Earlier this year, the administration had an executive order which limited the number of H-1Bs for the remainder of the calendar year. On October 6, 2020, the Department of Labor and Department of Homeland Security jointly announced an interim final rule (IFR) that would reform the prevailing wage calculation used by DOL in its foreign worker programs. The rule was published in the Federal Register October 8th.
By doing these rules, the government believes it would impact abuses in the H-1B program such as limiting "body shops" and "shadow employers", companies that recruit individuals on H1-B visas in order to contract them out to U.S. companies. The new rule would require companies to make "real offers to real employees." Second, the rule would narrow the definition of specialty occupations. The new rule would require the agency to closely adhere to the statutory definition of "specialty occupation." For example, under the IFR, an H1-B applicant would have to possess a bachelor’s degree that is specifically tailored to the area in which he or she will be employed. A general bachelor’s degree would not be acceptable.
A “shadow employer” has been identified generally as Indian outsourcing companies, the main middlemen in the H-1B business. If H-1B’s are granted to these companies, the initial visas for these employees would be one year, not three years. This problem was also identified under the Obama administration. H-1Bs, particularly those from India, were brought in by these companies and were paid less than market rates. The Los Angeles Times, in an editorial on February 16, 2015, identified that six of the top 10 companies receiving H-1B visas for workers in 2013 are based in India. The editorial also reported that
“Reports from the Center for Investigative Reporting, the New England Public Policy Center for the Federal Reserve Bank of Boston, and the Economic Policy Institute have spotlighted fraud and abuse problems with the H1-B program. A 2011 General Accounting Office report concluded that the departments of Labor and Homeland Security asserted insufficient oversight of the visa workers’ qualifications and wages, in part because of problems with the immigration laws themselves, including a lack of enforcement provisions. The Obama administration responded with some administrative fixes, but Congress has yet to address fundamental problems with the law.”
Various laws were previously introduced to change the wage system for H-1Bs. In November 2015, Senators Grassley and Durbin introduced bipartisan legislation that would reform the H-1B visa program. Specifically, they stated that
“The H-1B visa program was never meant to replace qualified American workers, but it was instead intended as a means to fill gaps in highly specialized areas of employment that cannot be filled by Americans. The abuse of the system is real, and media reports are validating what we have argued against for years, including the fact that Americans are training their replacements,” Grassley said. “There’s a sense of urgency here for Americans who are losing their jobs to lesser skilled workers who are coming in at lower wages on a visa program that has gotten away from its original intent. Reform of the H-1B visa program must be a priority.”
The issue of the H-1Bs is long known, yet long avoided.
The new interim regulations are apparently targeting outsourcing firms, which, in turn, control of 36% of the H-1B visas, which are in the IT industry. For example, the new regulation adds definitions that distinguish a “worksite” from a “third-party worksite.” Under the rule, a worksite is the physical location where the work is actually performed by the H-1B worker and must conform to the U.S. Department of Labor LCA rules. A third-party worksite is a place “other than the beneficiary’s residence in the United States” that is not owned, leased, or operated by the petitioner.
The rule also clarifies how USCIS will determine whether an employer-employee relationship exists between the H-1B petitioner and the beneficiary. The regulation draws from longstanding common-law factors and adds new elements such as whether the beneficiary produces an end-product that is directly linked to the petitioner’s line of business. It also includes commonly used elements such as right to control, supervise, hire, and fire.
These rules would also target the prevailing wages of the H-1Bs. The 2005 Prevailing Wage Determination Policy Guidance for Nonagricultural Immigration Programs (“2005 Guidance”), provided four “skill levels” for H-1Bs: Level I “entry level,” Level II “qualified,” Level III “experienced,” and Level IV “fully competent”. Wages were set at 17, 34, 50, and 67 percent of the prevailing wage scales respectively. The new rules would raise the levels to 45, 62, 75, and 95 percent of the prevailing wage ranges respectively. By doing so, it is expected that these wages would discourage the use of cheap foreign labor especially in the IT industry where most are paid at Level 1 wages.
It will be important to note that these provisions may impact other H-1Bs. Acting Deputy Secretary of Homeland Security Ken Cuccinelli anticipates that the IFR will affect approximately one-third of H1-B petitions. Therefore, it is important to consult with the immigration attorneys to determine if these new interim regulations will impact H-1B planning for the organization.
Additional ASE Resources
Webinar: Understanding the New Restrictions on H-1B Visas - The U.S. Departments of Labor and Homeland Security have recently taken action to further restrict use of the H-1B. These changes will raise the costs of visa and permanent resident sponsorship significantly and limit the types of positions and individuals who may qualify – including both current and future employees. Employers who hire H-1B workers directly or who contract services from firms providing H-1B workers off or on site will be impacted. Join ASE and Scott Cooper, Practice Leader for Fragomen, as he discusses the key components of the recent changes and how it will impact employers. Tuesday, October 27th, 10:00 a.m. - 11:00 a.m. Complimentary to ASE members; $150 Nonmembers. Register here.
Source: Fragomen 10/6/20, CNN 10/7/20, Center for Immigration Studies 10/6/20, Los Angeles Times 2/16/15, Senator Chuck Grassley press release 11/10/15