On December 3, 2018, the Department of Homeland Security (“DHS”) published a proposed rule that, if adopted, will fundamentally alter the H-1B Cap process, replacing the current lottery with an electronic registration system that has the potential to save time, money, and headaches for all H-1B stakeholders. There is some question as to whether DHS will be able to finalize the rule (following the 30-day comment period) and incorporate any and all changes into the online system by Spring 2019. That being said, DHS is motivated to implement the new measures in time for the Fiscal Year 2020 filing season, meaning it is essential to understand how the rule could affect this yearly ritual.

The Current H-1B Cap Process – Submit in Early April and Cross Your Fingers

Before going into the implications of the new rule, it is worthwhile to review the current H-1B Cap process.

H-1B Visas are for specialty occupation workers that are seeking to fill positions that require the attainment of a bachelor’s degree in a specific area of study. To line-up with the government’s Fiscal Year, Petitions must arrive at USCIS within the first five business days of April for October 1 start dates. By and large, most employers must petition for H-1B employees through the yearly disbursement of 85,000 new H-1B Visas – 20,000 H-1B Visas are reserved for graduates of U.S. master’s programs, with the remaining 65,000 available to all employees who have earned at least a bachelor’s degree (U.S., foreign equivalent, or equivalent in formal education and/or progressive professional experience). The program has been heavily oversubscribed in recent years – there were 190,000 petitions submitted last year, which was actually a drop from 2017 and 2016 which saw 199,000 and 235,000 petitions, respectively.

To deal with said oversubscription, each year USCIS conducts a randomized drawing of all petitions that arrive within the initial five-day filing period; first, 20,000 U.S. master’s petitions are selected, and those that are unselected go into the general pool competing for the 65,000 remaining visas. If selected, the petitions proceed to adjudication. If unselected, USCIS returns the petitions to employers along with their filing fees.

Proposed Rule – Play the Lottery Before Filing with USCIS

Under the new rule, titled ‘Registration Requirement for Petitioners Seeking To File H–1B Petitions on Behalf of Cap-Subject Aliens,” DHS proposes to turn this process on its head in a few key ways. First and foremost, the new rule would do away with preparing full petitions that will be submitted to USCIS and hopefully selected in the Lottery. Instead, H-1B employers will only submit a full H-1B Petition to USCIS if their case has been selected after filing an online registration with the Service. The employer will be required to register each H-1B beneficiary for which it intends to file a petition during a designated two-week window that will be announced at least thirty days in advance. An employer will only be authorized to submit a petition for those beneficiaries whose registrations USCIS selected, and will likely have 60-days to do so in order for the petition to be timely filed.

Secondly, the new rule would reverse the order of selecting cap cases. If implemented, USCIS would run the regular cap lottery (65,000) before the U.S. master’s lottery (20,000). While U.S. master’s employees have traditionally enjoyed a higher likelihood of selection thanks to their two bites at the lottery apple, reversing the selection order should give them an even greater advantage in this process, thereby rewarding graduates with advanced degrees from U.S. universities.

The new rule also poses significant cost savings across the board – from avoiding the unnecessary preparation and submission of H-1B Petitions that are not selected, to lessening DHS’ staffing increases to handle H-1B Cap Petitions and return postage for unselected cases. Even with the added costs of implementing the new system and completing registration for individual beneficiaries, DHS approximates an annual cost saving between $42.4 million and $66.5 million. Importantly, though, these cost savings assume a world in which the H-1B Cap program continues to experience significant oversubscription. Indeed, if USCIS does not exhaust its yearly visa allotment, the new measures will actually lead to increased costs.

Lastly, DHS claims that the registration system will help detect and deter abuse in the H-1B Program. Specifically, by tracking the rate at which employers ultimately submit H-1B Petitions for lottery-selected registrations, DHS will possess a stronger understand of which employers are filing registrations with the hope of getting selections, but without the intent to file a petition for each and every beneficiary listed therein.

What Comes Next?

As noted above, DHS will accept comments on its proposal over the next 29 days, meaning the final rule may have significant tweaks and/or filled-in holes. In particular, our Firm is interested in the effect the new rule would have on F-1 Students with post-completion Optional Practical Training (“OPT”). We plan on submitting a comment by the end of the year, and will continue to monitor the regulatory process as DHS receives and responds to ours and other comments submitted.

Further, and as also noted above, it remains to be seen whether DHS will successfully implement the new system in time for Spring 2019, or if this year’s H-1B Cap season will be business as usual. Our Firm will continue to prepare for H-1B Cap season as we have in years past, ready to pivot to the new electronic registration if/when it comes into effect. While less onerous than preparing a full H-1B Petition, to complete the registration will still require the receipt and analysis of case materials to confirm whether an H-1B Petition can move forward.

With that in mind, we invite you to contact our office as soon as possible to commence the H-1B Cap Process for Fiscal Year 2020. In addition to being ready to file under the current regime, the sooner we begin this process the more prepared we will be to adapt to the electronic registration system, if needed. Moreover, we also invite you to reach out if you have any proposed comments for the rule. DHS benefits from receiving input from industry and individuals alike, and we would be more than happy to facilitate a comment from you or your Company.