Key Changes to the H-1B Visa Program: Self-Employment, Lottery Exemptions, Cap-Gap Approvals, and Site Visits

Below are the key highlights:

1. Self-Employment Permitted

For the first time, an H-1B visa applicant can be an owner-beneficiary of the US employer. Traditionally, H-1B’s could not be used by foreign entrepreneurs looking to start a US business and petition for themselves. Now, they can take control of their professional destinies, allowing them to innovate and contribute to the US economy in new ways. Under the new rule, the H-1B applicant can have a majority or controlling interest in the US employer. This change facilitates access to H-1B visas for entrepreneurs, startups, and businesses owned by beneficiaries, potentially leading to job creation and new industries in the United States.

The owner-beneficiary is permitted to perform tasks traditional of an owner running a business, such as signing leases, finding investors, negotiating contracts, developing a business plan, engaging with potential suppliers and other stakeholders, and talent acquisition. However, they must demonstrate that they will perform “specialty occupation” duties, which are duties that require at least a bachelor’s degree in a specialized area of knowledge, the majority of the time.

The initial petition and first extension for such self-owned entities are limited to 18 months, with subsequent extensions permitted up to three years and up to a cumulative total of six years.

2. Client Involvement for Third-Party Placements

The new rule states that, when the H-1B applicants are contracted to fill a position in a third-party’s organization and becomes part of that third-party’s organizational hierarchy by filling a position in said hierarchy (and not merely providing services to the third party), the application must include evidence that the third-party client requires at least a bachelor’s degree in a specialized area for that role. This can be accomplished in a variety of ways, such as with a letter from the end-client, the job description for that role from the end-client, the Masters Services Agreement with the end-client, or a Statement of Work with the end-client.

This is true only when the end-client normally employs personnel in the proffered position and the H-1B worker is augmenting the end-client’s regular staff. The rule differentiates the situation where the services are for tasks outside the scope of the client’s normal operations, giving the example where an IT consulting/staffing company places an H-1B worker to work at real estate company. In this example, the H-1B is not integrated into the client’s hierarchy and evidence of the client’s requirements for the H-1B role is not required.

Employers must be diligent in gathering and presenting the necessary documentation to demonstrate compliance with the new requirements. This may involve additional coordination with client companies to ensure that all information is accurate and up to date.

3. Lottery Exemption Expansion

Normally, an employee applying for their initial H-1B must be selected through a lottery system implemented every March, with an approximate 30% chance of selection. However, there are categories of entities which are lottery-exempt and can sponsor an H-1B worker any time, such as (1) colleges and universities, (2) nonprofit institutions affiliated with colleges and universities, (3) nonprofit research organizations, and (4) nonprofit governmental research organizations. The new H-1B rule expanded the ability to qualify for some of these exemptions.

The US Department of Homeland Security (DHS) broadened the definition of ‘‘nonprofit research organization’’ and ‘‘governmental research organization’’ by allowing organizations that conduct research as a “fundamental” activity. It no longer has to be the institution’s primary mission or activity. Institutions can have multiple fundamental activities.

The employee now does not have to be directly employed by the qualifying institution, but rather just has to show that they will spend at least half of their work time performing job duties at the qualifying institution. Further, they do not have to work on-site at the institution. They can work remotely.

DHS stated that it will look at the petitioner’s mission statement, descriptions of the petitioner’s research efforts and ongoing research projects, the petitioner’s operating budget dedicated to research as evidenced by relevant tax forms, and staffing descriptions that indicate the level of staffing dedicated to research.

4. Site Visits

The new rule codifies an existing practice — site visits by the Fraud Detection and National Security Directorate (FDNS) unit within DHS. In essence, employers, by submitting an H1-B application, are consenting to site visits to verify that the employment conditions comply with the terms stated in the H-1B application.

Such verifications and inspections may include verification of the employer’s basic business information; visits to the petitioner’s or/and-client’s facilities; interviews with the employer or end-client officials; reviews of the employer or end-client records related to compliance with immigration laws and regulations; and interviews with any other individuals possessing pertinent information, as determined by the US Citizenship and Immigration Services (USCIS), which may be conducted in the absence of the employer or the employer’s representatives. The interviews may be conducted on the employer’s property, or as feasible, at a neutral location agreed to by the interviewee and USCIS away from the employer’s property. An inspection may be conducted at locations including the petitioner’s headquarters, satellite locations, or the location where the beneficiary works, has worked, or will work, including third-party worksites, as applicable.

If USCIS is unable to verify facts, including due to the failure or refusal of the employer or end-client to cooperate in an inspection or other compliance review, then there may be a denial or revocation of any H-1B petition for H-1B workers performing services at the location or locations that are a subject of inspection or compliance review, including any third-party worksites.

The USCIS has explained that to “fully cooperate” means to comply with the scope of the reviews, including granting access to the premises to include the employer’s place of business and any site where the work is performed, making a representative of the employer available for questions, submitting or allowing review of pertinent records, providing access to workers and allowing interviews with such employees to take place in the absence of the employer or employer’s representative, and at a location mutually agreed to by the employee and USCIS officers, which may or may not be on the employer’s property. If the individual being interviewed is represented and wishes to have their representative present, they may ask their representative to join telephonically or reschedule the visit at a later time.

Before allowing officers access to the employer’s property and people, they should verify the identity of the officers. If an H1-B beneficiary is unsure of the authenticity of the identification or whether the officer is acting in their official capacity, FDNS officers can provide supervisory contact information to verify their identities and official nature of the inquiry.

5. Degree Must Be Directly Related

The new H-1B rule codifies an existing practice that requires that applicants have a degree “directly related” to their job duties, ensuring their education aligns with job responsibilities. There must be a “logical connection between the required degree, or its equivalent, and the duties of the position.” Thus, where the degree’s relevance is not obvious on its face, an analysis of the coursework, etc., should be included with the application to show the direct correlation. DHS will look at degree transcripts, curriculum of courses leading to the specific degrees, and course descriptions or syllabi to determine degree relevance.

The degree required cannot be in a generalized field, like liberal arts. The employer must specify a more narrow, relevant field of study. If several fields of study are “normal” and acceptable for that job, then employers must show that each acceptable degree field is directly related to the job duties.

6. Cap-Gap Extension

Many H-1B lottery applicants are F-1 foreign students working with Optional Practical Training (OPT), as shown by their Employment Authorization Document (EAD) card. Traditionally, if an F-1 student was picked in the H-1B lottery and they submitted their H-1B application while their OPT and EAD was still valid, the OPT and EAD would be automatically extended through October 1 of that year, unless their H-1B application was denied prior to October 1 (called “cap-gap”). The new H-1B rule extends the automatic “cap-gap” employment authorization for F-1 students from October 1 to April 1 of the fiscal year, or until the validity start date of the approved petition, whichever is earlier. Denial of the H-1B application continues to result in the immediate termination of employment authorization. This change provides more flexibility to minimize employment disruptions for students and employers.

If you have any questions about H-1B’s or other immigration-related topics, please reach out to Berin S. Romagnolo or Nancy A. Noonan.