GrayRobinson Immigration E-lert: New H-1B Rules: Salary Increases for H-1B Workers, But Fewer Will Qualify

By: Nicolas Watkins, Shareholder
On the same day last week, the Department of Homeland Security (DHS) and the Department of Labor (DOL) published interim final rules that potentially could have an enormous impact on the H-1B visa program.  The DHS rule will take effect on December 7, 2020, while the DOL rule affects Labor Conditions Applications filed for H-1B visa petitions after October 8, 2020, and Prevailing Wage Requests filed for both H-1B and employment certification application processes on or after October 13, 2020. 
According to the preamble to the DHS final interim rule, these changes have been implemented to protect the interests of U.S. workers in the administration of our immigration system, consistent with the Congressional intent for the H-1B program, Executive Order 13788, Buy American and Hire American (April 18, 2020), and Presidential Proclamations 10014, Suspension of Entry of Immigrants Who Present a Risk to the United States Labor Market During the Economic Recovery Following the 2019 Novel Coronavirus Outbreak, (Apr. 25, 2020), and 10052, Suspension of Entry of Immigrants and Nonimmigrants Who Present a Risk to the United States Labor Market During the Economic Recovery Following the 2019 Novel Coronavirus Outbreak, (June 22, 2020).
1. What Are the Changes?
In short, the changes (i) amend the way that the prevailing wage for H-1B workers is calculated, thereby increasing the prevailing wage for all H-1B occupations; (ii) narrow the definition of "specialty occupation," thereby reducing the occupations in which H-1B workers can be employed; (iii) amend the way that USCIS determines whether a valid employer-employee relationship exists; and (iv) augment the tools available to DHS to verify H-1B compliance for workers sent to third party worksites before, during and after the approval of an H-1B petition. 
A. Change in Calculation of the Prevailing Wage

Under existing law, in order to protect U.S. workers from losing jobs to foreign employees who might work for a lower wage, H-1B employers are required to pay their H-1B workers the higher of (i) the actual wage paid to similarly qualified workers in the same position, or (ii) the prevailing wage for the occupation in the geographic area of employment. One of the first steps in the H-1B visa petition process (this applies also to the employment certification process for employers sponsoring workers for permanent employment under the EB-2 and EB-3 immigrant visa preference categories) is to determine the prevailing wage for the job being offered to the prospective H-1B worker.

The Department of Labor uses four levels to calculate the prevailing wage for a particular position or occupation: Level I (entry level), II (qualified), III (experienced) and IV (fully competent). Until now, each wage level has been based on the wage percentiles of the Bureau of Labor Statistics database of occupational employment statistics (OES) for the occupation in which the proposed H-1B position lies, with Level I being based on the 17% wage percentile, Level II on the 34% percentile, Level III on the 50% percentile, and with Level IV being based on the 67% wage percentile.

The new rule changes the calculation of the prevailing wage to increase the percentile for each wage level to 45% for Level I, 82% for Level II, 78% for Level III, and 95% for Level IV. The change in computing the prevailing wage will not change an H-1B position from one wage level to another.  Instead, it will increase the wage that is attributable to each OES wage level for the position, thereby causing an increase in the lowest wage that the H-1B employer must pay the H-1B worker.  H-1B workers are going to become more expensive to employ.

B. Change in Definition of "Specialty Occupation"

The H-1B visa is for those coming to the United States to perform services in a "specialty occupation." According to the preamble of its interim final rule, DHS is aligning the regulatory definition and standards for a "specialty occupation" with the definition of "specialty occupation" set forth in the Immigration and Nationality Act. The new rule tries to achieve this by making at least three important changes.

(a) There Must be a Direct Relationship Between the Required Degree Field(s) and the Duties of the Position.

The Immigration and Nationality Act defines a "specialty occupation" as "an occupation that requires (A) theoretical and practical application of a body of highly specialized knowledge, and (B) attainment of a bachelor's or higher degree in the specific specialty (or its equivalent) as a minimum for entry into the occupation in the United States."  On the other hand, current regulations define a "specialty occupation" more broadly as:
[A]n occupation which requires theoretical and practical application of a body of highly specialized knowledge in fields of human endeavor including, but not limited to, architecture, engineering, mathematics, physical sciences, social sciences, medicine and health, education, business specialties, accounting, law, theology, and the arts, and which requires the attainment of a bachelor's degree or higher in a specific specialty, or its equivalent, as a minimum for entry into the occupation in the United States.
The interim final rule changes the current regulations to make it clear that there must be a direct relationship between the duties of the position and the required degree. As amended, the rule, in part, provides:
A position is not a specialty occupation if attainment of a general degree, such as business administration or liberal arts, without further specialization, is sufficient to qualify for the position. While a position may allow a range of degrees or apply multiple bodies of highly specialized knowledge, each of those qualifying degree fields must be directly related to the proffered position.
As an example, it is pretty obvious that a medical degree directly correlates to the duties of a doctor, or that a law degree correlates directly to the duties performed by a lawyer. The same can be said for an architect and an architecture degree. In these cases, the "specific specialty" requirement contained in the statutory definition relates back to the body of highly specialized knowledge requirement for the specialty occupation in question. 
But what about those occupations for which one of several specific disciplines will qualify a job applicant? For example, an employer might require applicants for a financial analyst position to hold a degree in one of a number of disciplines, from accounting and finance, to business administration majors, economics, statistics, and mathematics. Would that position qualify as a "specialty occupation"? The new rule responds to this question by clarifying that a position may require one of a number of different degrees or bodies of highly specialized knowledge, as long as each qualifying degree field directly relates to the proffered position. 
Following this logic, DHS goes on to confirm what actually has been common practice for H-1B positions to date, that is, that if a general degree such as business administration or liberal arts, without further specialization, qualifies an applicant for a position, then the position will not be a specialty occupation. In such a case, there is no degree required in a specific specialty, and no body of highly specialized knowledge is required that is directly related to the duties and responsibilities of the position.
After this rule change, some occupations will no longer qualify as an H-1B "specialty occupation." For example, an employer might require applicants to possess an engineering degree – whether it be in mechanical, electrical, or general engineering – for the position of Software Developer. Until now, this has been sufficient to qualify as a specialty occupation. However, according to the Occupational Outlook Handbook (OOH), published by the Bureau of Labor Statistics and upon which USCIS relies for guidance, "[s]oftware developers usually have a bachelor’s degree, typically in computer science, software engineering, or a related field." Therefore, in the absence of a degree in computer science or software engineering, the burden will be on the employer to convince USCIS that any engineering degree and the application of a body of highly specialized knowledge in a field other than software engineering are sufficiently related to the job duties of the offered software developer position.  Absence such proof, DHS reasons, someone with a completely or partially unrelated degree may qualify to perform the job. Accordingly, the position will fail as a specialty occupation and the H-1B visa petition will be denied. 
In the same way, if an employer were to require one of a range of degrees, such as mathematics, statistics, economics, accounting, or physics, for a Software Developer position, then the position offered would still fail as a specialty occupation unless the employer can satisfy USCIS that each identified degree in a specific specialty provides a body of highly specialized knowledge that is directly related to the duties and responsibilities of the software developer position.  The burden is on the H-1B employer to show that there is a direct relationship between the degree required and the duties to be performed.  
(b) Bachelor’s Degree Now "Always" Required for the Job
Under existing regulations, standards for a specialty occupation position include that the position must "normally" require a baccalaureate degree, or that the requirement is "common to the industry", or that the knowledge required to perform the job duties is "usually" associated with at least a bachelor’s degree. According to USCIS, this does not reflect the wording of the statute and Congressional intent. 
To conform to the statutory definition of a "specialty occupation" and promote consistent adjudications, DHS has deleted the words "normally," "common," and "usually" from the regulatory criteria.  This changes the existing regulation that has been in place for the last 30 years with the result that the H-1B employer will now have to demonstrate that the bachelor's degree in a specific specialty or its equivalent is a minimum requirement for entry into the occupation in the United States by showing that this is always the requirement for the occupation as a whole, the occupational requirement within the relevant industry, the petitioner's particularized requirement, or because the position is so specialized, complex, or unique that it is necessarily required to perform the duties of the specific position.
The impact of this one change is enormous. The Occupational Outlook Handbook, invariably relied upon by USCIS examiners, describes, amongst other things, the educational requirements for almost all known occupations.  For many occupations that USCIS has recognized as specialty occupations over the last three decades, the OOH states that individuals in such occupations "usually have" a bachelor’s degree, or "typically must have" a bachelor’s degree. By effectively requiring that all occupations must always require a bachelor’s degree as the minimum for entry into the field, many, if not the majority, of H-1B positions will be eliminated. Only those professional occupations such as lawyers, physicians, architects, engineers, mathematicians, university teachers, and few others, will qualify as H-1B positions. 
C. Change in Method to Determine Employer-Employee Relationship            
For every H-1B petition, there must be an employer-employee relationship between the petitioning employer and the proposed H-1B worker. The primary indicator of a valid employer-employee relationship under existing regulations is the ability of the employer to control the work of the employee. Currently, federal immigration regulations define the term "United States employer" as "a person, firm, corporation, contractor, or other association, or organization in the United States" which, among other things, "[e]ngages a person to work within the United States" and "[h]as an employer-employee relationship … as indicated by the fact that it may hire, pay, fire, supervise, or otherwise control the work of any such employee."
When determining whether a valid "employer-employee relationship" exists or will exist, USCIS will now assess all relevant aspects of the relationship in the totality of the circumstances, with no one factor being determinative. Such factors will include:
(i) Whether the petitioner supervises the beneficiary and, if so, where such supervision takes place;
(ii) Where the supervision is not at the petitioner's worksite, how the petitioner maintains such supervision;
(iii) Whether the petitioner has the right to control the work of the beneficiary on a day-to-day basis and to assign projects;
(iv) Whether the petitioner provides the tools or instrumentalities needed for the beneficiary to perform the duties of employment;
(v) Whether the petitioner hires, pays, and has the ability to fire the beneficiary;
(vi) Whether the petitioner evaluates the work-product of the beneficiary;
(vii) Whether the petitioner claims the beneficiary as an employee for tax purposes;
(viii) Whether the petitioner provides the beneficiary any type of employee benefits;
(ix) Whether the beneficiary uses proprietary information of the petitioner in order to perform the duties of employment;
(x) Whether the beneficiary produces an end-product that is directly linked to the petitioner's line of business; and
(xi) Whether the petitioner has the ability to control the manner and means in which the work product of the beneficiary is accomplished.
By this change, USCIS wants to clarify the test for establishing the requisite "employer-employee relationship" based on its interpretation of existing common law. USCIS believes that the existing regulation places undue emphasis on the right to control, and wants to implement the revised rule in order to provide that the "right to control" is just one factor in the overall analysis rather than the primary, determinative test.

D. Changes for H-1B Visa Holders Placed at Third-party Worksites.

(a) Increased scrutiny of employer-employee relationship

Historically, H-1B employers, particularly service providers, have found it difficult to show that the placement of an H-1B worker at a customer’s worksite maintains the required employer-employee relationship between the H-1B petitioning employer and the H-1B worker placed at the third party site.  The new rule will make this even harder to demonstrate.

From now on, USCIS will use the litany of "non-exhaustive" factors to be considered "in the totality of the circumstances" to scrutinize the purported employer-employee relationship in order to determine whether, the required employer-employee relationship exists between the off-site H-1B worker and the H-1B petitioning employer.

In order to assist it in its determination of the existence of the required employer-employee relationship based on new, more comprehensive qualifying criteria, USCIS will also now be requiring the petitioning H-1B employer to submit corroborating documentation such as "contracts, work orders or other similar corroborating evidence on a case-by-case basis." In its preamble to the new rule, USCIS adds that this will be so in all cases, regardless of the location of the employee. This is not only to demonstrate the employer-employee relationship, but also to show that the H-1B worker will perform services in a specialty occupation, and continue to do so throughout the period of approved employment.

Finally, and again in order to make it easier for USCIS to monitor the activities of the H-1B employee for continuing compliance with H-1B requirements for third-party worksite placement, USCIS is changing the maximum period of stay granted for an approved H-1B petition for a third-party worksite placement from three years to one.

2. What Does the Future Hold?

Both the DHS H-1B changes and the DOL wage amendments were issued as interim final rules, by-passing the usually required notice and public comment periods. Further, the changes will likely have an enormous impact on the present H-1B visa program, making it more uncertain and more costly, and, overall, more difficult to satisfy the H-1B qualifying criteria.

The changes in the H-1B regulations will affect a large number of H-1B employees and their employers in a host of industries. Many existing H-1B workers will be filling positions that no longer qualify for the H-1B visa. Expiring petitions and periods of stay will not be extended. Although there are 85,000 new H-1B visas granted each year, the number of foreign workers in the United States on H-1B visas at any given time runs at just shy of half a million. The new rules will, no doubt, disrupt employment.

Due to both the administrative process and as the methodology that DHS and DOL have used to make these changes to the H-1B regulations, a legal challenge can be expected. That legal challenge will likely be brought under the Administrative Procedures Act, upon the basis that there is no "good cause" upon which to justify the waiver of the usual notice and public comments periods for these interim final rules. If the challenge is successful, then, both DHS and DOL will have to start the rule publishing process all over again. Of course, whether the process will be corrected and the rules published properly will depend very much on which party is in the White House next year.

The Immigration world is constantly changing.  However, rest assured that we at GrayRobinson are responding to all immigration and other issues affecting our clients as they arise.  We are here to help; please let us know if you need us.