United States: Senators Grassley and Durbin Introduce H-1B and L-1 Visa Reform Act

Stricter H-1B degree requirements. To be eligible for the H-1B classification, a foreign national would be required to have completed a U.S. bachelor’s degree or a foreign equivalent degree in a specific specialty that is “directly related” to the occupation. Though existing regulations already require a direct relationship between a foreign national’s degree and H-1B occupation, the legislation would codify the requirement in federal law with the possibility of more stringent regulations interpreting the requirement. In addition, the bill would restrict foreign nationals from qualifying for an H-1B based on experience or on completion of degree requirements that did not result in receipt of an actual degree by the time an H-1B petition was filed.

Three-year maximum period of stay for H-1B beneficiaries, with exceptions. An H-1B beneficiary would be admitted for a maximum period of three years. An additional three years would be available if the H-1B employee is sponsored for permanent residence and is the beneficiary of an approved Form I-140 immigrant worker petition. The bill would not disturb an H-1B employee’s eligibility for a period of stay beyond six years under the American Competitiveness in the 21st Century Action (AC21) if (1) 365 days have elapsed since the filing of a labor certification or I-140 petition; or (2) the foreign national’s I-140 petition has been approved but an immigrant visa is not immediately available.

Preference system for the allocation of H-1B visas. The annual quota of 65,000 H-1B visas would be allocated under a proposed system that would give higher priority to foreign nationals with a U.S. STEM or other advanced degree or who would be paid a higher wage. The current H-1B cap exemption for 20,000 foreign nationals holding U.S. advanced degrees would remain in place.

If the bill were enacted, H-1B visas under the 65,000 quota would be allocated to petitions in the following order:

• Petitions on behalf of foreign nationals with a U.S. advanced degree in a STEM field from an accredited U.S. institution, earned while the foreign national was physically present in the United States;
• Petitions for foreign nationals to be paid a Level 4 wage under the Department of Labor’s Occupational Employment and Workforce System (OEWS) wage structure;
• Petitions for foreign nationals with a U.S. advanced degree in any field from an accredited U.S. institution, earned while the foreign national was physically present in the United States;
• Petitions for foreign nationals who would be paid a Level 3 wage;
• Petitions for foreign nationals with a U.S. bachelor’s degree in a STEM field from an accredited U.S. institution, earned while the foreign national was physically present in the United States;
• Petitions for foreign nationals with a U.S. bachelor’s degree in any field from an accredited U.S. institution, earned while the foreign national was physically present in the United States;
• Petitions for foreign nationals working in an occupation where there are insufficient qualified and available U.S. workers, as designated in Group I of the Department of Labor’s Schedule A (currently, physical therapists and nurses);
• Petitions filed by employers meeting the following “criteria of good corporate citizenship and compliance with the immigration laws:”  
  • • Have a valid E-Verify registration;
    • Are not under investigation by a federal agency for violation of immigration or labor laws;
    • In the preceding five years, had not been found by a federal agency to have violated immigration or labor laws;
    • In the preceding three years, had 90% of its H-1B petitions approved; and
    • In the preceding three years, had filed an employment-based immigrant petition for at least 90% of its H-1B employees.

Higher H-1B wage requirements. The bill would require employers to pay H-1B employees the higher of the locally determined prevailing wage for the occupational classification in the area of employment, the median wage for all workers in the occupational classification in the area of employment, and the median wage for Skill Level 2 for the occupation as determined by the OEWS wage structure. Each labor condition application (LCA) would be required to describe the methodology used to determine the wage. In a recent Presidential Proclamation, President Trump ordered development of new rulemaking to raise the wage threshold for the H-1B program.

Recruitment and non-displacement obligations for all H-1B employers. All H-1B employers would be required to recruit U.S. workers for positions for which an H-1B worker is sought and offer the job to any equally or better qualified U.S. worker. H-1B employers would be required to post H-1B jobs on a DOL website for 30 days. “H-1B only” job advertising or advertising that indicates a preference for H-1B workers would be prohibited.

H-1B employers would be required to attest that they did not displace and would not displace a U.S. worker with an H-1B for a period of 180 days before or after the “placement” of the H-1B with the employer. The 180-day period could not include any period of training of the H-1B by employees of the employer.

Current law only imposes recruitment and non-displacement obligations on H-1B dependent employers and those deemed willful violators of H-1B program rules.

Restrictions on third-party placement of H-1Bs. Employers would be restricted from placing, outsourcing or otherwise contracting for the services of an H-1B worker with another employer – regardless of the physical location where the services will be provided – unless the employer obtains a waiver from the Department of Labor (DOL).

To obtain a waiver, the employer would need to establish that (1) the secondary employer does not intend to replace a U.S. worker with an H-1B worker; (2) the secondary employer has not displaced and does not intend to displace a U.S. worker with an H-1B worker within 180 days before or after the placement of the H-1B worker at the secondary worksite, not including any period of training of the H-1B by employees of the employer; (3) the secondary employer will not principally control or supervise the H-1B; and (4) the placement of the H-1B worker would not be a “labor for hire” arrangement. DOL would have seven days to adjudicate a waiver application.

Limits on H-1B and L-1 hiring. Employers with 50 or more employees in the United States would be restricted from employing more than 50 percent of their workforce in H-1B or L-1 status. An employer would be required to attest that it had not restructured its organization to evade this limitation.

Stricter LCA review and longer processing times. The Department of Labor would review labor condition applications for “indicators of fraud or misrepresentation of material fact,” as well as completeness and obvious errors. Under current law, LCAs are reviewed for completeness and obvious errors only. If DOL discerned indicators of fraud or misrepresentation in the LCA review, it could initiate an investigation.

DOL would have 14 days to review an LCA, up from the current 7-day review period, which would make it more difficult for H-1B employers to rapidly redeploy H-1B workers to new worksites. The agency would establish a fee for LCA processing, the proceeds of which would fund an H-1B Administration, Oversight, Investigation and Enforcement Fund.

Wage requirements for L-1 employers. L-1 employers would be required to pay any L-1 worker employed for more than one year the highest of (1) the local prevailing wage for the occupation; (2) the median average wage for all workers in the occupation in the area of employment; and (3) the median wage for the occupation for individuals working at OEWS Level 2. The employer would also be required to provide working conditions that do not adversely affect the working conditions of other employees in similar positions. Under current law, the L-1 category is not subject to any wage requirements.

Tougher eligibility standard for L-1B employees. The bill would impose a far more restrictive definition of L-1B specialized knowledge, limiting the classification to foreign nationals who possess proprietary knowledge of the employer’s product, service, or other interests that is not readily available in the labor market and that is “clearly different” from others in the same or similar occupation. Ownership of patents or copyrighted works would not establish a beneficiary’s specialized knowledge unless the beneficiary was a “key person” with knowledge critical for the performance of the job and protected under patent, copyright, or company policy. An employer’s own procedures would not be considered proprietary “unless the entire system and philosophy behind the procedures are clearly different from those of other firms, they are relatively complex, and they are protected from disclosure to competition.

Non-displacement obligation on all L-1 employers. An L-1 employer would be prohibited from replacing a U.S. worker with an L-1 worker at any time. In addition, an L-1 employer could not displace a U.S. worker within 180 days before or after the placement of an L-1 worker.

Limits on placement of L-1 employees at third-party worksites. Employers would be prohibited from placing, outsourcing or otherwise contracting for the services of an L-1 worker with another employer – regardless of the physical location where the services will be provided – unless the employer obtains a waiver from the Department of Labor (DOL).

To obtain a waiver, the employer would need to establish that (1) the secondary employer does not intend to replace a U.S. worker with an L-1 worker; (2) the secondary employer has not displaced and does not intend to displace a U.S. worker with an L-1 worker within 180 days before or after the placement of the L-1 worker at the secondary worksite, not including any period of training of the L-1 by employees of the employer; (3) the secondary employer will not principally control or supervise the L-1; and (4) the placement of the L-1 worker would not be a labor-for-hire arrangement. DOL would have seven days to adjudicate a waiver application.

Expansion of blanket L program to USCIS petitions. The bill would permit employers with an approved corporate blanket L petition to receive expedited processing of individual L-1 petitions at USCIS, though the bill does not make clear what such expedited processing would entail.

New and formalized requirements for “new office” L-1 petitions. The bill would codify current requirements and impose additional obligations on employers seeking to transfer a manager, executive, or individual with specialized knowledge to work in a new U.S. office. A petitioner would be required to submit a detailed business plan and demonstrate that it has adequate physical facilities and financial resources to begin to do business as soon as the petition is approved. The petition would be valid for an initial period of 12 months. Extensions would be permitted only if the petitioner could demonstrate that the new branch had followed the business plan and was regularly, systematically, and continuously providing goods and services through the new office, though DHS would have the discretion to grant extensions in extraordinary circumstances to employers who do not meet these conditions.

Elimination of the use of B-1 in lieu of H-1B. Under current policy, a foreign national who is classifiable in the H-1B category can enter the United States as a B-1 business visitor to provide services in certain limited circumstances. The Grassley-Durbin bill would prohibit this usage of the B-1 category.

Broad investigatory and enforcement authority to DOL. The bill would grant DOL and DHS much broader authority to initiate and conduct investigations, including the power to issue subpoenas. Mechanisms for individuals to make complaints against H-1B and L-1 employers would be expanded. DOL and DHS would not be obligated to notify an employer of an investigation if it believed that providing notice would impede the investigation. DOL would be authorized to hire an additional 200 staff for the administration and enforcement of H-1B program rules, funded by a new LCA processing fee.

Increased whistleblower protections. The bill would provide increased protection to current or former employees or job applicants who file complaints and would prohibit employers from taking adverse action against them. Whistleblowers would have 24 months to file complaints, up from the current 12-month complaint period.

Increased penalties for H-1B and L-1 program violations. Employers who violate H-1B or L-1 program rules would be subject to fines of at least $5,000 per violation and up to $25,000 for willful violations or willful fraud or misrepresentation. If an employer displaced a U.S. worker in the course of a willful failure, fraud or misrepresentation, it would be subject to a mandatory penalty of $150,000.

Annual H-1B and L-1 compliance audits. DHS and DOL would be permitted to audit H-1B and L-1 employers without cause. The agencies would be required to conduct annual audits of at least 1% of all H-1B and L-1 employers, and of any employer with more than 100 employees and a workforce of more than 15% H-1B or L-1 employees.

Annual report to Congress on nonimmigrant programs. DHS would be required to submit an annual report to Congress on the H, L, O, P and Q nonimmigrant programs. The report would provide statistics on usage of these programs, including lists identifying:

• All H-1B and L-1 petitioning employers;
• All employers with a workforce of more than 15% H-1B or L-1 workers;
• All employers with a workforce of more than 50% H-1B or L-1 workers; and
• All employers granted a waiver of the H-1B and L-1 third-party placement prohibition.

The Grassley-Durbin bill comes as the Trump Administration pursues increased restrictions and tougher enforcement on the H-1B program, including a $100,000 fee for new H-1B petitions, a proposal to give priority in the annual H-1B cap lottery to foreign nationals offered the highest wages, plans for a proposed regulation to increase H-1B wage thresholds, and Project Firewall, an initiative to ramp up H-1B investigations and enforcement. The bill offers different and additional approaches to H-1B program criteria, administration, and enforcement, and also seeks to impose new restrictions on the L-1 visa program, which the Trump Administration has not yet addressed.

Fragomen closely follows immigration legislation and will provide updates as the Grassley-Durbin bill progresses.