Some History of the H-1B Cap

Date: Monday, January 06, 2003 11:48 AM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

Immigration attorney George Lester wrote a long article about the H-1B cap -
the yearly limit of visas issued. For hard core history buffs this article
is informative but for those of you with less time here is a summary of the
most interesting points:

* In 2000, employers were forced to leave professional positions unfilled
until they could get more H-1Bs.

* It is commonly believed that the first time the cap was ever reached was
in the year 1999. Actually it happened in 1997 but the INS used some
accounting gimmicks to defer approvals. By 2000 the limit had been reached
for 3 years in a row.

* To widespread surprise (he didn't say who was surprised), the near
doubling of the limit for fiscal year 1999 wasn't enough to meet demands.

* In 1999 the INS approved 21,888 H-1B petitions in excess of the fiscal
year 1999 cap. The problem was swept under the rug by passing legislation
called "AC 21" which implemented a retroactive increase for 1999 to cover
all petitions approved by the INS. Lester didn't mention that KPMG was the
company used to improve the accounting of this mess. KPMG, if you might
recall from an earlier newsletter, is a major employer of H-1Bs.

* In 1999 there was a glut of students on F-1 and J-1 visas waiting to
convert to H-1Bs. They were working for employers who were using the
"practical training" part of those visas to hold jobs. Since the cap was
reached the students couldn't get H-1B visas. The foreign students were
granted automatic extensions so they could keep their jobs until they got
H-1B visas.

* In the year 2000 exemptions to the cap were given to: institutions of
higher education or a related or affiliated nonprofit entities, nonprofit
research organizations, governmental research organizations, and for
physicians formerly holding "J-1" status in the U.S. Lester claims that
about 10,000 visas were exempted from the cap but that is probably an
underestimate.

* At a recent Washington D.C. meeting of AILA (American Immigration Lawyers
Association) advocacy personnel from around the country, a legislative
counsel from the staff of Sen. Edward Kennedy (D-Mass.), who is Chair of the
Senate Immigration Committee, said that the H-1B debate next year "will be a
difficult issue."

* Lester predicts that Congress won't raise the H-1B limit for 2004 unless
and until the 65,000 cap is exhausted. In his opinion an increase won't be
necessary until employers "raise an outcry" for more H-1Bs. Congress could
then pass something similar to AC 21 in order to temporarily raise the
limit. In other words, even if the cap is not raised, more H-1Bs could be
imported into the US by using emergency legislation. If AC 21 is used a
precedent the H-1B visas would already be approved before the increase is
passed. A stealth increase of this type would be a politically safe method
for bringing in more H-1Bs if companies decide to exceed the limit.

* Employers constantly complain that the $1,000 fee for filing H-1B
petitions is too expensive. George Bush will rescue these cash strapped
companies by disbanding the training fund which is used to train American
workers to be able to compete in the job market. Now it will cost only $130
to file for an H-1B visa.

http://www.ilw.com/lawyers/colum_article/articles/2002,0812-lester.shtm

H-1B Series: The H-1B "Cap"
by George N. Lester IV

For a few years in the not too distant past, one of the hottest immigration
topics in the media and in the business community was the annual numerical
limit on usage of the H-1B category, dubbed the "H-1B cap." As the U.S.
economy grew rapidly during 1998-2000, employers increasingly turned to the
H-1B program to fill short-term needs for qualified professional staff. This
growth in demand caused the program to reach the applicable annual quota at
various points before the end of the fiscal year in 2000 and each of the
preceding three years, leading to widely publicized difficulties for
employers who were forced to leave professional positions unfilled until the
next yearly H-1B cycle.

As amended by AC 21, the statutory provision establishing the H-1B limit
provides that the "total number of foreign nationals who may be issued visas
or otherwise provided nonimmigrant status during any fiscal year" under the
H-1B program may not exceed 195,000 for fiscal years 2001, 2002, and 2003,
and 65,000 for each succeeding year. The limit was 65,000 for all fiscal
years prior to 1999, and was increased to 115,000 for 1999 and 2000, by
ACWIA. The limit applies only to new issuance of H-1B visas or grants of
H-1B status, meaning it applies to H-1B petitions for beneficiaries out of
the country seeking a visa at a U.S. consulate, or in the U.S. in another
status and needing change of status to H-1B who have not held H-1B status in
the U.S. within the prior year. It does not apply to renewal or amended
petitions for beneficiaries already in the U.S. in valid H-1B status,
seeking to transfer H-1B authorization to a new employer or to change or
extend H-1B status with their existing employer, or to anyone who has held
H-1B status in the U.S. within one year prior to the filing of the petition.
Spouses and children of principal H-1B foreign nationals, who are accorded
H-4 status to accompany the principal, are not counted in the numerical
limit. The federal fiscal year runs from October 1 through September 30.

Warning signs that the H-1B program was reaching its capacity under the
original IMMACT 1990 limit of 65,000 first surfaced in 1996. In that year
the INS halted processing of new H-1B petitions for a time as of August 20,
near the end of the fiscal year, on the basis of a preliminary count
indicating that it had reached the cap. A more accurate count showed that it
had not, and processing resumed as of September 6, 1996 and continued on to
the end of the fiscal year on September 30.

The next year INS did indeed reach the cap for the year on new petition
approvals, as of approximately August 15, 1997. Rather than halting
processing, however, the INS dealt with the problem by continuing to process
petitions but assigning approval dates of no earlier than October 1, 1997,
so as to defer counting the approvals to the fiscal year 1998 limitation.
Because the cap was reached with only six weeks to go until the start of the
next fiscal year and the availability of the new year's quota, the effect of
this advance approval was not considered overly disruptive.

Real problems with the cap began in 1998 when growth in the H1B program
accelerated sharply. In that year INS announced on May 11 that it had
reached the annual 65,000 cap in petition approvals and would stop
processing new petitions and reject further filings for the year unless a
petitioner requested a start date of October 1, 1998 or later so that the
petition would be counted against the fiscal year 1999 quota. Petitions
filed through mid-April of the year generally were processed, with
procedural differences among the various INS service centers. Other
petitions filed before the May 11 announcement remained suspended as
"pipeline" cases. Ultimately the INS gave petitioners an option to change
the requested start date on the "pipeline" cases to October 1, 1998, and
then processed them under the 1999 count.

Thus, employers in 1998 were forced to wait with no new H-1B approvals
available for approximately half the year. This generated pressure on
Congress to pass legislation to raise the annual limit. Over the summer and
fall of 1998 Congress considered several bills in a context of controversial
public debate over the H-1B program. High technology employers in particular
complained of a dire shortage of qualified professional workers, and relayed
to Congress how the H-1B program helps them and the overall U.S. economy
grow. Labor advocates described the alleged worker shortage as inflated and
argued that the H-1B program unfairly keeps professional wages down and
hurts U.S. workers. Ultimately, Congress passed the ACWIA legislation with
its temporary increases in the annual limit and its new restrictions on the
program as a compromise.

To widespread surprise, the near doubling of the limit for fiscal year 1999
turned out to be wholly inadequate to meet the continued growth in petition
filings, a problem that was exacerbated by the fact that even before the
start of the 1999 fiscal year on October l, 1998, INS had already approved
approximately 19,500 petitions chargeable to the year's quota that had been
filed during May through September 1998. Thus, by April 1999, petition
processing slowed considerably at the service centers as the INS became
concerned it was close to the total and attempted to monitor the count
carefully. Finally, on June 15, 1999, at a point when the service centers
were processing cases filed in early April, the INS published a notice
announcing that based on the number of petitions approved for the year and
the number on file and pending, the statutory cap had effectively been
reached for fiscal 1999, and further filings would be rejected except those
requesting an October 1, 1999 or later start date. The INS service centers
continued to process pending cases in the "pipeline" slowly, under tight
scrutiny from headquarters to equalize the rate of processing at each of the
four centers so that no advantage could be gained in obtaining approval
because any petition was filed at a particular service center. The INS
finally completed processing of the number of cases it believed would fill
the quota in August 1999. It ultimately processed petitions filed through
April 22, 1999, a cut-off date almost exactly the same as in the prior
fiscal year.

The INS did take steps in its 1999 announcement to address one of the more
problematic consequences of the cap: students and exchange visitors in the
U.S. who are completing their programs and then must change status to H-1B,
but whose initial status expires because of the unavailability of H-1B
approval. In many cases these persons already work for the petitioning
employer under a "practical training" component of their programs that
expires in the spring or summer. When the practical training employment
authorization runs out these individuals may no longer work until a change
of status to H-1B is approved, which would be delayed until October. Of
greater concern is whether such persons would have to leave the U.S. after
expiration of the applicable grace period in their status (sixty days for
F-1 students and thirty days for J-1 exchange visitors) and wait abroad for
approval of the H-1B petitions on their behalf, rather than remain in the
U.S. In recognition of this problem the INS published a rule allowing such
persons to remain in the U.S. to wait for the October 1 H-1B start date even
if status would expire prior to that date, provided the individuals do not
work without authorization during the waiting period. In the June 15, 1999
Notice and in an Interim Rule published simultaneously the INS formally
announced that persons changing from student or exchange visitor status
facing this "gap" would be automatically granted extension of F-1 or J-1
status to allow them to remain in the U.S. pending a decision on their
change of status petitions or pending an October 1 H-1B start date.

For fiscal year 2000, beginning October 1, 1999, processing of H1B petitions
proceeded quickly until December 1999, when the INS began imposing periodic
"pauses" to obtain an accurate count and keep all four service centers
processing cap petitions at the same rate. After that date processing
progressed slowly through the beginning of 2000, and employers hurried to
file as many cases as possible while the INS would still accept them. On
March 21, 2000, at a time when it was processing cases filed in late January
2000, the INS made an announcement projecting that sufficient petitions had
been filed to reach the cap and therefore that no further petitions seeking
start dates before the beginning of fiscal year 2001 on October 1, 2000
would be accepted. Like the previous year's notice, this was based on the
number of petitions approved for the year combined with the number on file
awaiting decision, so actual processing of pending cases towards the year's
quota continued, albeit quite slowly. Finally, on July 20, 2000, the INS
issued a statement that it had officially reached a total of 115,000
approvals as of that date. (It actually processed petitions filed through
March 17, 2000.) In August 2000, the INS began processing petitions
requesting effective dates of October 1, 2000, the start of the new fiscal
year.

Thus, for the third year in a row, the availability of new H-1B petition
approvals "ran out" for approximately half the year, and prior to the cutoff
employers had to plan their H-1B needs for the year far in advance, and then
deal with the expense and hassle of a mad scramble to get as many petitions
as possible filed before the cutoff, hoping to "beat" all the other
employers doing the same thing.

One interesting dispute arose over a report the INS submitted to Congress in
September 1999 that estimated it had actually approved between 4,500 and
20,000 petitions too many for fiscal year 1999, due to inaccuracies in its
counting methodology. It eventually hired an auditing firm to review its
methodology and help determine the amount of any discrepancy. Based on that
firm's report, issued in April 2000, INS concluded that it approved 21,888
H-1B petitions in excess of the fiscal year 1999 cap. The question then was
what, if anything, the INS or Congress would do about the overage. This
problem was resolved by the AC 21 legislation which, in addition to its
prospective raising of the H-1B cap, implemented a retroactive increase for
1999 to cover all petitions approved by the INS.

AC 21 also retroactively allocated petitions filed after the March 21, 2000
cutoff, but before September 1, 2000, to be counted in fiscal year 2000, and
raised that year's quota accordingly. The fiscal year 2001 count therefore
began from a clean slate with petitions filed only after September 1, 2000,
intended for approval on or after October 1.

AC 21 further exempted certain new petitions from being counted in the cap
at all. These include petitions filed

by an institution of higher education or a related or affiliated nonprofit
entity,
by a nonprofit research organization,
by a governmental research organization, or
for certain physicians formerly holding "J-1" status in the U.S. who have
received state sponsorship to waive the requirement that they return to
their home country in exchange for participating in a program to practice in
a medically underserved area in the U.S.
This freed up an additional number of petitions from the cap, estimated to
be approximately 6,000 to 10,000 in a typical year.
As it turned out, the 195,000 cap for Fiscal Year 2001 was sufficient to
fully cover demand for new H-1B approvals. In November 2001, after the
September 30, 2001 end to the fiscal year, INS reported that it had approved
163,200 H-1B petitions against the 195,000 cap for the year. And, for the
2002 fiscal year, running to September 30, it appears new H-1B filings have
declined and INS is again on track to finish the year within the 195,000
limit. In the most recent release of figures, INS reported that during the
first quarter of the current fiscal year, from October 1, 2001, to December
31, 2001, approximately 28,000 H-1B petitions were approved against the
195,000 limit, and an estimated 18,000 petitions that may count against the
cap were pending.

Assuming H-1B filings do not significantly increase, it is likely that for
FY 2003, beginning this October 1, the 195,000 limit will again be
sufficient to meet demand throughout the year. However, for FY 2004,
beginning October 1, 2003, the limit reverts to 65,000, just one third the
current number. Already, the debate over whether Congress should extend the
higher limit is shaping up to be highly contentious, and immigration
advocates are uncertain at best over the prospects of passing favorable
legislation. Labor groups and others are arguing that with the weakened US
economy, particularly in IT and other technology sectors, the H-1B program
hurts laid-off U.S. workers and therefore Congress should let it revert to
pre-1998 levels. Employers and other advocates of business immigration will
need to organize and make their case well to counter these arguments. At a
recent Washington D.C. meeting of AILA (American Immigration Lawyers
Association) advocacy personnel from around the country, a legislative
counsel from the staff of Sen. Edward Kennedy (D-Mass.), who is Chair of the
Senate Immigration Committee, said that the H-1B debate next year "will be a
difficult issue."

What will happen? My prediction is that Congress will take no action, if
any, unless and until the 65,000 cap is exhausted early in the fiscal year
and then employers raise an outcry over being cut off from the program for
several months, analogous to the "crisis" level of the situations in 1998
and 2000 which resulted in ACWIA and AC 21.

Employers looking ahead will thus have to engage in strategic planning for
filing of H-1B petitions early in the 2004 fiscal year. One benefit for H-1B
filers of this Congressional inaction, though, will be the petition filing
fee reverting to $130, as authority for the $1,000 education and training
component of the fee expires along with the additional cap numbers.

About The Author

George N. Lester IV is of the Immigration Practice Group (the "Group") of
the law firm of Foley, Hoag & Eliot LLP. Foley, Hoag & Eliot LLP is a
full-service law firm of 200 lawyers in Boston and Washington, D.C. It was
the first large law firm in Boston to develop an expertise in business
immigration law, and for over thirty years its Group has represented
employers in a full range of procedures to obtain temporary or permanent
authorization to employ foreign professionals. Mr. Lester has practiced
immigration law for ten years, and regularly speaks to business, academic,
and professional groups on immigration topics. As part of his regular AILA
activities, Mr. Lester meets with officials of the INS Vermont Service
Center to discuss H-1B and other liaison topics. He also serves as Treasurer
and a Board Member of the Political Asylum/Immigration Representation
Project (PAIR) in Boston, and received that organization's Pro Bono Attorney
Award for Dedication and Commitment to Human Rights in May 1996. Mr. Lester
is a 1989 graduate of Northeastern University School of Law.

This article is the fourth in a series by George N. Lester of Foley Hoag LLP
based on a chapter he authored titled "Specialty Occupation Professionals,"
in the treatise Business Immigration Law: Strategies for Employing Foreign
Nationals, edited by Rodney A. Malpert and Amanda Petersen, and appears here
with the permission of the publisher. Published by Law Journal Press.
Copyrighted by NLP IP Company. All rights reserved. Copies of the complete
work may be ordered from Law Journal Press, Book Fulfillment Department, 105
Madison Avenue, New York, New York 10016 or at www.lawcatalog.com or by
calling 800-537-2128, ext. 9300.

The opinions expressed in this article do not necessarily reflect the
opinion of ILW.COM.
Copyright � 1999-2002 American Immigration LLC, ILW.COM

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