In the closing days of Congress in Fall 2004, the H-1B Visa Reform Act of 2004 (“Act”)was included in the Fiscal Omnibus Appropriations bill (H.R. 4818). The Act was signed into law by the President on December 8, 2004. It is therefore officially law. At the same time, Congress also passed another work-related immigration measure, regarding L-1 work visas, which is also discussed in the article The L-1 Visa Reform Act of 2004 on this website.
As background, the H-1b is a non-immigrant (temporary, not “Green Card”) visa which allows an employee (beneficiary) to live and work for a US employer (petitioner) for a specified purpose, and for a specified period of time. [Note: for additional details and background about the H-1 visa category, please read the articles on my website under the heading “Employment in the USA”, including the article “New H-1b Laws“]
First of all, the changes proposed by the Act will not take effect until 90 days after the President has signed the bill into law. The President signed the Act on December 8, 2004. The law will take effect on March 8, 2005. (However, certain sections of the law, including the re-imposition and increase of the ACWIA fee, go into effect immediately).
Changes imposed by the H-1B Reform Act of 2004:
- Increase in cap for advanced degree holders
From the employee’s and employer’s standpoint perhaps the most important benefit of the Act is the increase in the number of H-1b’s allocated each fiscal year. In addition to the meager quota of 65,000 new H-1b’s per fiscal year (which still stands), the Act authorized another 20,000 H-b’s for beneficiaries who have earned a Master’s or higher degree from a U.S. Institution of higher education (i.e. College or University).
The 65,000 visa quota of H-1b visas for FY 2005 (which began October 1, 2004), was exhausted on October 2, 2004! H-1b visa applications can be filed as early as April 1 of the prior fiscal year, and so over the summer of 2004, the USCIS received enough applications to use up the FY 2005 quota of H-1b’s. This trend is expected to continue each year unless the H-1b cap is raised to a more realistic number. Please do not be confused: the H-1b quota is raised by 20,000 only for beneficiaries with advanced degrees – Master’s or higher – from US institutions. Foreign advanced degree holders, foreign undergraduate degree holders or US Bachelors. degree holders will not qualify. I would argue that holders of professional post-baccalaureate degrees (example – lawyers and doctors) from US institutions should also be eligible for the additional visas.
Note: New H-1b applications (for one of the 20,000 .advanced degree. visas) authorized under the H-1b reform act cannot be filed until March 8, 2005.
- Change in calculation of prevailing wages
Another welcome change is the sensible adjustment to the prevailing wage determination provided by the US Department of Labor (USDOL). In order to preserve and protect the wages and living standards of US workers, a H-1b employee must be paid at least the prevailing wage for the occupation in the geographic area of employment. The USDOL has specified that wages can be either one of two classes – .entry-level. or .fully competent.. The USDOL wage determinations do not take into effect that in the workplace, the majority of employees are typically neither entry level nor fully competent, but somewhere in between. Regardless, the USDOL mandates that either wage be paid, giving rise to unreasonable prevailing wage determinations (especially at the Labor Certification stage).
The H-1b Reform Act changes this burdensome USDOL wage determination system somewhat by interspersing two additional wage levels between the USDOL entry and fully-competent wages. The wages for these two intermediate levels are increments of one-third and two-third, respectively of the difference between the entry level and fully competent wage levels. To illustrate: let’s say under the current wage structure, the entry level H-1b wage for a programmer-analyst for Akron, Ohio (Summit County) is $ 30,000 and the fully-competent wage is $ 60,000. The difference is $ 30,000. Divided by three, this is $ 10,000. Under the new system, there would be two additional wage levels. So the wage for the first new level would be $ 30,000 + $ 10,000 or $ 40,000. Similarly, the wage for the second new level would be $ 30,000 + $ 20,000, or $ 50,000. On the flip side, the employer will no longer be permitted to pay a wage within 5% of the prevailing wage as was previously permitted.
The Act affects new, extended, or amended H-1b petitions. In other words, even H-1b renewals which come up after the effective date of the Act will be affected by and evaluated under the above restrictions.
- Increased fees:
Perhaps the most burdensome provision of the Act is the imposition of higher fees. First, the employer H-1b fee is reinstated and increased (by an additional $ 500.00) to a total of $ 1,500. This is in addition to the current H-1b base fee of $ 185.00. The $ 1,500 employer fee can be reduced to $ 750 in case of employers with 25 or fewer employees in the USA.
In addition to the employer fee is another $ 500 fee for .Fraud Prevention and Detection.. Mercifully this fee will not have to be paid on renewals of H-1b’s for the same employer. However, this fee will have to be paid for initial H-1b’s or change of employers. This pushes up the total fee for an employer with more than 25 US employees to $ 2,185.00! ($ 185 base fee, plus $ 1,500 employer fee and $ 500.00 fraud prevention fee).
The H-1b Reform Act does not exempt petitioners for the additional 20,000 Advanced Degree beneficiaries from the increased fee. The only exemptions from the employer fee are for employees of institutions of primary and secondary education, higher education and non-profit entities affiliated to such institutions, nonprofits which engage in established curriculum-related clinical training of students, nonprofit research organization, or a governmental research organization. However, the law does not exempt even these employer fee exempt entities from the additional Fraud Prevention and Detection Fee. Hence, under the Act, even these entities will have to pay at least the H-1b base filing fee plus the Fraud Prevention and Detection Fee.
The increased ACWIA fee goes into effect for all applications filed after December 8, 2004. The new Fraud Prevention and Detection Fee goes into effect on March 8, 2005.
Therefore, after March 8, 2005, the fee for a new H-1b application filed through the premium process will be a whopping total of $ 3,185 ($ 185 base fee + $ 1,500 ACWIA fee + $ 500 Fraud Detection Fee + $ 1,000 Premium Processing fee)!
Effective dates for increased fees:
It should come as no surprise that even though the increased H-1b quota for advanced degree professionals will not go into effect for 90 days after enactment of the Act, the increased ACWIA fees become effective upon enactment. Therefore, new or first time-renewed H-1b applications will have to pay the increased employer fee in addition to the base fee (currently $ 185.00). After March 8, 2005, petitioners will have to also pay the the fraud detection fee.
As stated above, the increased ACWIA fee goes into effect for all applications filed after December 8, 2004. The new Fraud Prevention and Detection Fee goes into effect on March 8, 2005.
What will the government do with the increased employer fee? That fee is earmarked for training and scholarships to US workers. The USDOL and National Science Foundation are required to issue grants and scholarships to community based and labor organizations to train US workers to make them competitive with skills and technologies for the new millennium.
The provisions of the Act will be enforced. There is no doubt that with the increased and specifically earmarked .Fraud Prevention and Detection Fee., the USCIS, DOL and DOS will increase their scrutiny of H-1b applications, including post-approval investigation. Once the Act is effective, the DHS (Department of Homeland Security) is required to maintain statistics on H-1B’s, including total number of visas issued, wages paid, country of origin, occupation, and level of education of each H-1b worker who is cap-exempt under the Immigration and Nationality Act. (Presumably this would include even the 20,000 additional higher-education H-1b’s authorized by this Act.) Obviously, the raw data may be used to institute investigations if there is sufficient cause to believe a particular employer is abusing the H-1b process.
A detailed and lengthy section of the H-1b Reform Act goes into specifics of enforcement against employers. Discussion of that enforcement section goes beyond the scope of this article, but for the following three points: any investigation or enforcement action must be commenced by the DOL within one year of the alleged violation. Any investigation and hearing must be concluded within a total of 300 days following the inception of the investigation (60 days for investigation, 120 days for hearing, and 120 days following hearing for decision). The employer will have a .good-faith. defense by showing evidence of trying to comply with the regulations.
The DHS and DOL will have to promulgate regulations or memoranda which will affect the manner in which petitioners apply for H-1b classification. Once the bill is signed into law, the DHS will have to promulgate these regulations, or at the very least, memoranda guiding employers and USCIS (United States Citizenship and Immigration Service – benefits section of the former INS) adjudicators on how to properly calculate the filing fees and file H-1 petitions after the effective date of the Act.
Given the changes in the H-1b visa cap and the statistical data that the USCIS now needs to capture, the USCIS will probably have to redesign the form I-129W and perhaps even the I-129 and Supplement “H”.
Practical effect of the Act:
My assessment of the H-1b Visa Reform Act of 2004 at this point:
First, as noted above the DHS will probably have to revise the I-129 and / or the Supplement “H” as well as the form I-129W data collection form in some way so as to obtain data from the employer as to where the employee will work or be placed, wages, educational level, etc.
Second: employers will have to become used to paying the higher fees (as much as $ 2,000 per application) for H-1b workers.
Third, employers will need to maintain detailed records, documenting the work done by their H-1 employees, in order to justify extensions, amendments, or DHS inquiries. Specific job duties, copies of timesheets, project reports, correspondence, written assignments and other documentation of a similar nature will be helpful in this regard.
In conclusion, Congress has given a lot – specifically another 20,000 visas and sensible prevailing wage reform – but it is also demanding a lot – specifically significant additional fees. The 20,000 additional visas are unlikely to make a long-term dent in the US demand for skilled professionals. Such demand requires a realistic and long-term increase in the overall H-1b quota. However, given the need for highly skilled foreign workers to sustain the US economy, the additional visas are most welcome to employers striving to maintain sustained growth in the face of increasing foreign competition in today.s global economy.
Copyright, Farhad Sethna, 2004; All Rights Reserved.