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Employment Options And Open Issues In The Wake Of The
H-1B Cap

by Austin T. Fragomen, Jr.

U.S. Citizenship and Immigration Services (USCIS) has announced that, as of February 18, 2004, it will accept no further cases counting against the H-1B cap for Fiscal Year (FY) 2004. In the wake of the cut-off, employers and their counsel should be aware of a number of open issues relating to H-1B cases, and should become familiar with alternative visa options for foreign national employees whose H-1B cases are foreclosed by the cap. In addition, employers are advised to begin planning for H-1B employment for Fiscal Year 2005, since USCIS will on April 1, 2004 begin to accept advance filings of H-1B cases with employment start dates in FY 2005, which begins on October 1, 2004. It is conceivable that, absent a legislative fix, all FY 2005 cap numbers could be exhausted before the new fiscal year even begins.


On February 17, 2004, USCIS announced that it had sufficient numbers of cases approved or in the adjudications pipeline to reach the H-1B cap for FY 2004 and would accept no further cap-subject filings. The annual cap on H-1B visas for highly skilled foreign professionals reverted to 65,000 for this fiscal year, down from 195,000 in previous years. Note, however, that because 6800 cap numbers were set aside to accommodate the new H-1B1 visa created by the Singapore and Chile Free Trade Agreements, the general H-1B cap level for FY 2004 is effectively 58,200.

In a February 25, 2004 Federal Register notice, USCIS stated that all H-1B petitions received prior to the close of business on February 17, 2004 would be processed to completion. Petitions that are received between February 18, 2004 and April 1, 2004 and relate to any employment with a start date prior to October 1, 2004 will be returned along with their filing fees.


The immigration regulations allow H-1B petitions to be filed up to six months before H-1B employment is to commence. Beginning on April 1, 2004, therefore, petitions with employment start dates of October 1, 2004 or later may be filed; these cases will count against the numerical cap for Fiscal Year 2005, which begins on October 1, 2004.

It is crucial that employers begin H-1B planning for Fiscal Year 2005 and consider filing H-1B cases as soon as possible, particularly given how quickly H-1B numbers were exhausted for FY 2004. Without Congressional action, next year's cap is expected to be reached equally quickly; again, it is conceivable that FY 2005 numbers could be exhausted before the beginning of the next fiscal year, given the availability of six-month advance filing and premium processing. Cases filed via standard processing may not be adjudicated until summer, but should be safely "in the door" and adjudicated to completion if filed before USCIS shuts off new FY 2005 filings. This assumes a process relatively similar to that followed this year. So, filing via Premium Processing may not be critical, but may allow for some peace of mind, particularly given the fact that the USCIS process for dealing with the cap is not totally etched in stone.

In practical terms, there may be fewer than 65,000 H-1B numbers available for FY 2005, as was the case this year. Because of the Free Trade Agreement set-asides for H-1B1 visas, noted above, 58,200 numbers will be available in the standard H-1B pool, though some unused H-1B1 numbers from FY 2004 may be recaptured and become available in a six-week window at the beginning of FY 2005.


The February 25 Federal Register notice left unresolved a number of important questions; these are discussed below.

Extension of Status for F and J Nonimmigrants

USCIS has not addressed the processing of F and J nonimmigrants seeking changes of status to H-1B. F and J nonimmigrants are typically admitted to the United States for "duration of status," or "D/S," meaning that their admission to the U.S. does not have a specific end date. The immigration regulations permit the agency to publish a Federal Register notice extending the duration of status of F-1 and J-1 nonimmigrants on whose behalf an application to change of status had been filed when the H-1B cap is reached. In 1999 and 2000, the most recent prior years in which the H-1B cap was attained, the legacy Immigration and Naturalization Service exercised its authority to publish such a notice. To date, however, this practice has not been adopted for this fiscal year and was not discussed in the USCIS's Federal Register announcement concerning the H-1B case cut-off. As a result, it is unclear whether the agency will extend the duration of status of current F-1 and J-1 nonimmigrants with pending H-1B change-of-status applications. The issue is apparently being vetted with DHS.

If duration of status is not extended, one option for F and J students and exchange visitors may be to change status to the B-1/B-2 visitor category. In the mid-1990s, when H-1B caps were in effect but before the agency was permitted to extend duration of status, these changes of status were possible, provided that the foreign national was engaged in legitimate visitor activities. Note, however, that such changes may affect pending permanent residence applications; in addition, it is unclear how a change to B status would affect the foreign national's record in the Student and Exchange Visitor Information System (SEVIS).

Change of Status to H-1B for Applicants Whose Current Admission Is Not for Duration of Status

Most nonimmigrants are admitted to the United States not for duration of status but for a specific period, with a determined end date as indicated on the Form I-94 Arrival Departure Record or Form I-797 Approval Notice. Though the foreign national's period of status normally expires upon the expiration of the I-94 card, if the foreign national has filed a timely application to change or extend status, he or she is deemed to be within the authorized period of stay and will not accrue unlawful presence in the United States. Such a change of status application would need to be filed before the expiration of the I-94 period.

In the context of the H-1B cap exhaustion, these change-of-status applications pose important timing questions. An individual whose status will expire before a new H-1B petition can be filed on his or her behalf (i.e., status expiring before April 1, 2004) will need to file an application to change status to another nonimmigrant classification, such as the B visitor category, until a new H-1B petition can be filed. Note, however, that filing a second application to change status to H-1B may not be possible in all situations. USCIS has in the past discouraged the filing of overlapping change-of-status applications. An applicant for a change of status must also be aware that, in order for the change to be granted, there can be no gaps between the expiration of the foreign national's current status and the commencement of his or her new status.

Cap Count Issues

USCIS has not yet addressed how it will handle cases in the event that its cap counts are inaccurate, i.e., where cases currently in the pipeline exceed remaining H-1B numbers or where there are leftover H-1B numbers after pipeline cases are completed. In addition, the agency has not clearly determined how it will count and make available unused Free Trade Agreement visas.


Though USCIS will no longer accept H-1B cases that count against the 65,000 cap for Fiscal Year 2004, employers should consider the array of visa alternatives that may be available for employment of foreign nationals during this fiscal year.

H-1B Cases Not Subject to the Cap

H-1B cases that do not count against the FY 2004 cap continue to be processed. USCIS counts against the cap only those petitions regarded as "new" employment. New employment generally refers to H-1B petitions that are filed for foreign nationals who are not currently in the United States in H-1B status; however, it should be noted that a change of employment from a cap-exempt nonprofit organization to a cap-subject for-profit entity would be considered new employment, as discussed below. Exempt from the H-1B cap are the following types of cases:

  1. Amended H-1B petitions;
  2. Petitions for extension of H-1B status, whether for an existing or new employer (i.e., in sequential employment situations);
  3. Petitions filed in concurrent employment scenarios;
  4. Petitions for new employment at an exempt organization, such as an institution of higher learning or a related or affiliated nonprofit entity, nonprofit research organizations, and governmental research organizations. It should be noted, however, that where an H-1B employee moves from a cap-exempt nonprofit organization to a cap-subject for-profit company, the case is considered new employment and as such would be subject to the cap. It is unclear, however, how H-1B portability is affected by the cap-subject nature of these changes in employment.
  5. Petitions on behalf of individuals who have already been counted against the cap during the previous six years, unless the beneficiary would be eligible for a full six years of authorized admission at the time the petition is filed; and
  6. J-1 nonimmigrants who are changing status to H-1B and who have obtained waivers of the home country residency requirement through the Conrad 30 Program.

H-1B1 Visas under the Chile and Singapore Free Trade Agreements

Professionals in specialty occupations who are citizens or nationals of Chile or Singapore may be eligible for the new H-1B1 visa, created pursuant to free trade agreements (FTAs) concluded between those countries and the United States. The FTAs came into effect on January 1, 2004, making 1400 H-1B1 visas available for citizens of Chile and 5400 visas available to citizens of Singapore. Though the new H-1B1 numbers count against the H-1B cap, they are set aside from the overall 65,000 cap and currently remain available.

The new H-1B1 visa is similar to the H-1B, but does contain some critical differences about which employers should be aware. Under the H-1B1 visa, foreign nationals are admitted for a one-year period that may be renewed annually; after five renewals, any subsequent renewal would count against the overall H-1B cap. In addition, the dual intent doctrine, which permits most H and L nonimmigrants to pursue immigrant visas without jeopardizing their nonimmigrant status, does not extend to H-1B1 visa holders.

TN Visas for Canadian and Mexican Professionals

Created pursuant to the North American Free Trade Agreement (NAFTA), the TN visa is available to certain professionals who are citizens of Canada or Mexico. To qualify for TN status, the foreign national must be offered a temporary position in one of the professions specified in Schedule 2 of NAFTA and must possess the degree or credential required for the position. The TN visa is granted in one-year increments, with no statutory limit on the period of stay in TN status. Though TN visa holders are not included under the dual intent doctrine applicable to H and L nonimmigrants, USCIS has issued a nonbinding policy statement indicating that the mere filing of an I-140 immigrant petition will not by itself bar the TN visa holder or applicant from entering the United States on the grounds of having abandoned nonimmigrant intent.

L-1 Visas for Intracompany Transferees

The L-1 visa is available to certain employees who have worked for a branch, subsidiary, or other affiliate of the employer outside the United States for at least one consecutive year (or six consecutive months, if the employer has an approved "blanket L" petition). In order to qualify for the L classification, the employee must have worked for at least one consecutive year (or six consecutive months in the case of a blanket L petition) during the last three years in an executive, managerial or specialized knowledge capacity. In addition, the employer must seek to transfer the employee to the United States to assume an executive, managerial or specialized knowledge position.

L petitions are approved for an initial period of three years. Executives and managerial level employees are granted L-1A status and are permitted a maximum stay of seven years in the U.S. Non-managerial, specialized knowledge employees are granted L-1B status and are permitted a maximum stay of five years. Note that time spent in the U.S. in H-1B status counts against the L-1 stay, and time spent in L-1 status will count against the six-year limit on H-1B time. Like H-1B nonimmigrants, L nonimmigrants may have the dual intent to stay for the duration of their nonimmigrant employment while simultaneously pursuing permanent residence without jeopardizing their nonimmigrant status.

Employers should note that the L-1 visa category, like the H-1B classification, continues to be the focus of much public and government scrutiny. Most recently, in the wake of the H-1B cap exhaustion, the Department of State (DOS) has issued a cable that alerts consular posts to potential L-1 fraud and abuse issues, now that H-1B visas for new employment are unavailable for the remainder of FY 2004. In particular, DOS is concerned that employers will use the L-1 category to transfer low-wage employees to U.S. businesses that are not affiliates, branches or subsidiaries of the petitioning employer. The cable therefore urges consular officers to ascertain that an employer-employee relationship exists between the petitioner and the employee, as evidenced by the control and supervision exercised by the petitioner over the foreign national. If the employment relationship exists exclusively between the foreign national and a U.S. business unaffiliated with the petitioner, the officer may refuse to grant the visa. Where the visa applicant is to be employed as a specialized knowledge worker, DOS will place particular focus on whether there is evidence that the foreign nationals has knowledge specific to the petitioner's products, processes or procedures. Where the employee is working with a U.S. company on that company's own products or generic products and is not using knowledge specific to the petitioner, the specialized knowledge criteria are not met and the visa may be refused.

J-1 Classification for Business Trainees, Experts, Scholars and Others

The J-1 visa category may be used by foreign nationals to enter the United States as exchange visitors to participate in U.S.-government-approved exchange programs, for the purpose of gaining experience, studying, or doing research in their respective fields. Note, however, that in some cases, exchange visitors may be required to comply with strict home-country residence requirements immediately following the completion of U.S. training.

Employers seeking to sponsor exchange visitors must first establish an approved exchange visitor program. Such programs may be sponsored by businesses, government agencies, educational institutions, hospitals, and nonprofit associations. A wide variety of qualified visitors may be sponsored for J-1 classification, including business trainees, college and university professors, research scholars, and foreign medical graduates participating in U.S. internships and residencies. The period of admission for J-1 visitors varies according to the type of exchange program, but generally ranges from 18 months for most trainees to 42 months for professors and research scholars.

O-1 Visas for Individuals of Extraordinary Ability

The O-1 visa classification is available to individuals who can demonstrate extraordinary ability in the sciences, education, business, athletics, the arts or the motion picture or television industry. Three types of O-1 visa are available, each with different standards of extraordinary ability. Foreign nationals who seek O-1 classification in business, the sciences, education or athletics are subject to the most rigorous standard, and must show that they are among the small percentage of people who have risen to the very top of their field of endeavor, as demonstrated by sustained international or national recognition for their achievements in the field. Foreign nationals seeking O-1 classification in the arts are held to a somewhat lesser standard, and must demonstrate prominence and a record of extraordinary achievement in the field of endeavor. Finally, those seeking O-1 classification for extraordinary achievement in the motion picture or television industry must fulfill the least restrictive standard, demonstrating a very high level of accomplishment, above that ordinarily encountered in the field.

An O-1 petition may be approved for an initial period of three years, and O-1 status may be extended in one-year increments, with no statutory limit on the number of extensions available. Visa holders are not required to maintain a residence abroad. O-1 nonimmigrants are not specifically included in the dual intent doctrine, which permits H and L visa holders to pursue permanent residence in the United States without jeopardizing their nonimmigrant status, but State Department regulations indicate that the filing of an immigrant petition or approval of a labor certification is not a basis for refusal of an O nonimmigrant visa.

E Visa Classification for Treaty Traders and Investors

E visa classification is available to principals and employees of companies whose country of majority ownership has concluded a commerce or investment treaty with the United States. E-1 treaty trader status is available to businesspeople who seek to engage in substantial trade in goods or services between the United States and the country of majority ownership of the business. The E-1 visa applicant must be employed in a supervisory or executive capacity and must possess highly specialized skills essential to the efficient operation of the firm. E-2 treaty investor status is available to individuals who seek to develop and direct the operations of an enterprise in which the visa holder or his or her employer has invested or in the process of investing a substantial amount of capital. Treaty investors must be employed in a supervisory or executive capacity, or must possess highly specialized skills.

E nonimmigrant status is granted for an initial period of two years and may be extended indefinitely, as long as the foreign national intends to leave the United States when his or her period of authorized stay ends. E visa holders are not required to maintain a residence abroad. Though not explicitly included under the doctrine of dual intent that applies to H and L nonimmigrants, the immigration regulations state that a foreign national will not be denied E status simply because an immigrant visa petition or request for permanent labor certification has been filed or approved on his or her behalf.