H-1B cap lottery may favor the highest paid foreign nationals - but will the rule take effect?

In filing an H-1B petition, employers must select one of four wage levels for the applicable occupational title in preparing the required Labor Condition Application. (There is an exception when a private wage survey is used.) The wage levels come from the U.S. Department of Labor’s Occupational Employment Statistics.

On November 2, the U.S. Department of Homeland Security issued proposed regulations that would amend the H-1B cap registration selection process by replacing the current random process with one based on OES wage levels.

Despite having received more than 1,400 comments regarding the proposed rule, the DHS recently issued a final rule that is substantively identical to the proposed rule, and is scheduled to take effect on March 9. The rule will apply only to registrations for H-1B petitions that are subject to a cap, and only if the number of registrations exceeds the applicable cap, as is usually the case.

Because of the March 9 effective date, and the incoming new Administration, it is unclear whether the final rule will apply to this year’s H-1B cap registration process, or whether it will take effect at all. In any event, here is a summary of the process under the final rule:

• If the number of valid OES wage Level IV registrations (highest OES wage level) is less than the cap amount, all of the employers filing Level IV registrations may file petitions, followed by Levels III, II, and I, in descending order until the cap is satisfied.

• If the valid registrations at Level IV are equal to the cap amount, then all of the employers filing Level IV registrations are allowed to file petitions, and there is no need to go to lower wage levels.

• If the number of valid Level IV registrations is greater than the cap amount, then the employers who would be allowed to file H-1B petitions will be selected at random.

There is a good chance that the new rule will not apply to this year’s lottery (Fiscal Year 2022). President Biden is expected to place a 60-day freeze on implementation of regulations that were issued since the election but are not yet effective. The 60-day period will be calculated from the date of the freeze (March 21, assuming President Biden acts today) or 60 days from the effective date of the rule (May 8). Because the H-1B registration period for this year must begin no later than March 18, and because the final rule requires use of a new registration form including wage level information, it will be difficult to implement the new rule for this year’s cap season.

Moreover, there could be litigation challenging the final rule on several grounds, and an injunction could further delay implementation. Grounds for possible legal challenges to the rule might include the plain language of the statute regarding how H-1B cap numbers are to be issued; the argument accepted by various federal courts that Chad Wolf was not lawfully appointed to serve as Acting Secretary of the DHS, thereby making his actions void; and previous acknowledgement by the DHS that a selection process based on factors other than degree level would require a change to the statute (in other words, Congress would have to act).

On the other hand, President Biden has expressed support for a wage-based allocation process, so it is possible that he will allow the final rule to take effect on schedule.

We will keep you posted, particularly regarding whether the final rule will apply to this year’s cap season.

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