A federal district judge recently issued a 37-page decision vacating a 2008 Department of Homeland Security (DHS) regulation that has helped thousands of U.S. companies hire and retain foreign students holding U.S. degrees in the fields of science, technology, engineering, and mathematics (STEM). This decision, issued in Washington Alliance of Technology Workers v. U.S. Department of Homeland Security, has created considerable uncertainty in the technology sector and could have serious consequences for foreign STEM graduates and the U.S. companies that employ them. Fortunately, however, the judge has stayed the vacatur until February 12, 2016 and there is optimism – but no guarantee – that DHS will be able to save the rule by properly reissuing it before that date.

What Did the 2008 DHS Regulation Do?

Foreign students who graduate from U.S. colleges and universities may stay in the U.S. and work temporarily, for a period of optional practical training (OPT), in an area related to the student’s degree. Many U.S. employers hire these graduates with the idea that, during the OPT period, they will sponsor the graduate for an H-1B visa. An H-1B visa is a non-immigrant visa that allows “specialty occupation” employees to work in the U.S. for up to six years.

Prior to 2008, a foreign student could work in OPT status for no more than 12 months, and this OPT had to be completed within 14 months of the student’s graduation. This relatively short OPT period – combined with the limited availability of H-1B visas and the timing of when those visas must be applied for – meant that employers often did not have sufficient time to get these U.S.-educated foreign students moved into H-1B status so they could continue to work in the U.S.

In 2008, recognizing that the 12-month limitation on OPT employment placed U.S. employers at a competitive disadvantage for these foreign students – particularly in the STEM fields – DHS issued an interim final rule designed to give certain foreign students the opportunity to stay and work in the U.S. for a longer period after completing their studies. Among other things, the 2008 rule provided for a one-time 17-month extension of the OPT period for students with STEM degrees.

Since the 2008 rule was issued, thousands of foreign STEM graduates have taken advantage of this 17-month extension, allowing their high-tech employers to keep them employed in OPT status for up to 29 months.

This additional OPT time is often critical to an employer’s ability to successfully move the STEM graduate into H-1B status. For the past several years, the number of H-1B visa petitions has far exceeded the 85,000 statutory limit, known as the H-1B cap, and DHS has been conducting a lottery to determine which H-1B petitions to adjudicate. By allowing a STEM graduate to stay employed in OPT status longer, the STEM extension increases the odds that the employer will “hit the lottery” and, therefore, be able to retain the U.S.-educated graduate in H-1B status.

Why was the 2008 DHS Regulation Vacated?

The Washington Alliance of Technology Workers (WATW), a labor organization representing U.S. STEM workers, sued DHS, leveling a wide-ranging challenge against the 2008 rule. In the recent decision, the district judge brushed aside most of WATW’s arguments, finding that DHS has broad authority from Congress to establish the rules under which graduates may be employed in OPT status and that DHS’s issuance of the 2008 rule to provide for the 17-month STEM extension was not unreasonable. Nevertheless, the judge vacated the rule because, when that rule was issued, DHS had not provided the public with notice and an opportunity to comment as required by the Administrative Procedure Act (APA). In short, the judge vacated the rule on procedural, not substantive, grounds.

The judge also recognized that making her decision effective immediately would impose a substantial hardship on thousands of STEM graduates and their employers. It was principally for this reason that she has stayed vacatur of the rule until February 12, 2016.

What Happens Next?

This decision was technically a win – a least in the short-term – for the WATW, but the news is not all bad for companies who employ foreign STEM graduates. Because the judge vacated the 2008 rule on the ground that DHS failed to comply with the APA requirements, rather than because it lacked the authority to issue the rule, DHS should be able to reissue the rule in a way that will withstand further judicial scrutiny.

In fact, DHS has already started the rule making process with the intention of getting the rule back in place before the vacatur takes effect. Whether DHS can meet that deadline – and what happens if it can’t – is not clear. In the interim, DHS is continuing to process applications for STEM extensions.

There is one other thing to watch. Recognizing that its victory may be short-lived, WATW has appealed the district judge’s decision, arguing that the judge should have invalidated the 2008 rule for the more substantive reasons put forth by WATW, including that DHS exceeded its authority in creating the 17-month STEM extension. If the appeals court buys WATW’s arguments, there may be no way for DHS to save the STEM extension without Congressional assistance. And, given all the partisan rancor currently surrounding the issue of immigration, it’s hard to imagine Congress stepping in to help.