Written by Kalpana V. Peddibhotla, Attorney, Founder of Peddibhotla Law Firm.
On June 27, 2013, the U.S. Senate took a historic first step in the process of reforming our current immigration system. In a vote of 68-32, the Senate passed the Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744).
This bill helps to reform our current immigration system in certain key ways, including providing a path to “legalization” and ultimately citizenship for the millions of undocumented immigrants in the U.S. The bill acknowledges the important contributions that are made by immigrants every day in helping to support and grow our economy. The bill will help to reduce long backlogs for immigration, especially in certain employment-based categories. It also recognizes the importance of family unity and that through such unity we become a stronger nation.
While the bill has made several important strides forward, it has also introduced measures that will add more costs, bureaucracy, and may encumber an employer’s flexibility in securing global talent.
This article focuses on some of the business, start-up, student and family provisions of S.744.
While a lot of the media and pundits have focused, and rightly so, on the dramatic potential benefits to the over 11 million undocumented immigrants in the U.S., S.744 will also have a significant and potentially negative impact on the H-1B program.
The H-1B visa classification is a non-immigrant visa available to individuals in “specialty occupations,” These specialty occupations include, but are not limited to: IT, Computing, Finance, Accounting, Banking, Engineering, Teaching, Medical, Legal, and Telecommunications. In order to qualify for the H-1B Visa, foreign nationals must have a minimum of a Bachelor’s degree (or equivalent) and the offer of employment must be for a related specialized occupation which requires the minimum of a Bachelor’s degree.
Currently there is an annual cap for new H-1B visas of 85,000 (including the Master’s Cap of 20,000). S.744 would raise this cap to 115,000 new H-1Bs per fiscal year with a potential of going up to 180,000 based upon demand in the days following the opening date to file new cap-subject H-1B petitions.
This increase is based upon current research and demand in recent years that demonstrate that there is a deficit in the number of workers available for these specialty occupation positions.
While the increase in this annual quota is a positive step forward in helping the U.S.to continue to be globally competitive, S.744 introduces several measures that reduce an employer’s hiring flexibility.
- New and More Cumbersome Recruitment Requirements
The opening date for filing cap-subject H-1B petitions is April 1 of each fiscal year for positions commencing on October 1 of that fiscal year. Because the quota of H-1B visas may be exhausted in the first week of April, employers are often forced to make hiring decisions 6 months before the individual can start working for the employer.
S.744 would impose an additional layer to this timeline by requiring an employer to first list the job opening for 30 days with a newly created DOL website developed exclusively for this purpose. Presumably, this is in order to alert eligible U.S. workers of the opening, which essentially assumes that H-1B workers are displacing U.S. workers. However, much of the data and research suggest that H-1B does not actually displace U.S. workers, and in fact, especially here in Silicon Valley, there are not enough engineers available for all of the open positions. In the end, I believe that this new system will unnecessarily burden our immigration system, add more costly restrictions to employers, and create another bureaucratic expense.
- Restricts Hiring of H-1B Employees and Raises Fees
(1) Adds a new definition to H-1B dependent employers.
Under current law and with S. 744, an “H-1B Dependent Employer” is defined as follows:
- If 25 or fewer full-time equivalent employees (FTEs) in U.S., employs more than seven H-1Bs;
- If 26–50 FTEs, more than 12 H-1Bs;
- If 51 or more FTEs, 15 percent of them H-1Bs.
However, a new classification of “H-1B Skilled Dependent Employer” has been added. This is an employer that has at least 15% of its FTEs on H-1B in O*Net job zones 4 and 5 – which is anyone in a technology job. This newly added definition does not have the same prior restrictions based upon the size of a company. So if a company has only 7 employees, and one of those employees is on H-1B, then that company is an “H-1B Skilled Dependent Employer.” Such a company would then be subject to additional attestation requirements.
(2) Restrictions and Attestations
S.744 requires that the H-1B skilled worker dependent employer has first offered the job to any U.S. worker applicant who is equally or better qualified than the H-1B. This requirement would apply to very small companies as described above, even where the H-1B worker may have been one of the founders of the company.
Further, it requires an H-1B skilled worker dependent employers to attest that for 90 days before and after the LCA filing, it has not and will not displace a U.S. worker. Finally, S.744 requires all employers to have taken good-faith steps to recruit U.S. workers using industry-wide standards and offering compensation at least as great as that required to be offered to the H-1B.
While these attestation requirements on the surface appear to add new protections for U.S. workers, the current research suggests that these requirements ignore the realities of the Tech sector, especially here in Silicon Valley. A recent study by the Public Policy Institute of California suggests that H-1B workers are paid as much or more than U.S. workers. Other research, concludes that we have a shortage of qualified engineers and the H-1B program helps to solve that shortage.
Moreover, S.744 will insert the Department of Labor into the entire recruitment process creating potentially cumbersome barriers to companies.
(3) Ban on Outplacement
H-1B Dependent Employers would no longer be able to provide consulting services if such a worker would need to be placed at a third-party site. S.744 institutes a ban on “outplacement” or “outsourcing” or “otherwise contracting services or placement of” H-1Bs by H-1B dependent employers. This ban exists even where the H-1B employer would not be displacing a U.S. worker.
(4) Increases Fees
On top of all of these new attestations and definitions, S. 744 raises the current filing fees for all employers by an additional $1250 per H-1B petition for companies with 25 or less full-time employees; and an additional $2500 for companies with 26 or more full-time employees.
Moreover, it requires H-1B Dependent Employers with 50 or more employees and have 30-50% of its employees in H-1B or L-1B status to pay an additional $5,000 between fiscal years 2015-2024. For H-1B dependent employers with 50 or more employees and have 50-75% of its H-1B or L-1B status must pay $10,000 for fiscal years 2015-2017.
In the end, I believe that small companies, including startups, will be hit the worst by S.744, i.e. with only 1 H-1B employee a company of 7 employees is deemed an “H-1B Skilled Dependent Employer.”
- Removes Backlogs for Employment-Based Immigration and Eases Path to Green Cards for STEM graduates
Currently, there is an annual worldwide limitation on employment-based immigrant visas of 140,000 per year. There are also per country limitations within this immigration quota. Under S.744, the worldwide cap would remain in effect, but the per-country limitations would be eliminated. This would be a tremendous boon for foreign nationals from India and China who currently have enormous backlogs. These backlogs would be eliminated by S.744.
Going forward, the potential for backlogs would be reduced by removing certain categories of people out of the worldwide cap.
For example, individuals who qualify in the first preference category (EB-1) of extraordinary aliens, outstanding researchers, and multinational executives and managers will no longer be counted in the numerical limitations for immigrant visas.
Additionally, foreign students who graduate with an advanced degree from a U.S. university with a degree in the Sciences, Technology, Engineering, or Math (STEM) will also be exempted from a numerical limitation. STEM graduates would also be exempted from the labor certification requirements (PERM).
Spouses and children of employment-based immigrants will also be removed from the numerical limitations.
- “Start-Up Visa”
Here in Silicon Valley, we have been awaiting a “start-up visa.” Currently, any foreign entrepreneur who has desired starting a company has faced enormous barriers in being able to come to the U.S. to pursue their dreams and ultimately help our economy. It is fairly undisputed that foreign nationals have played a significant role in starting some of our countries largest companies, i.e. Intel, Google, Ebay to name a few.
- INVEST X visa
S.744 would finally offer some relief. It would create the INVEST nonimmigrant category or “X Visa.” This visa would provide a nonimmigrant visa for an entrepreneur who, in the three years before application:
- Has had venture capital or combination of entities or investors other investors devoted a qualified investment or combination of qualified investments of not less than $100,000 in total to the alien’s business; or
- The alien’s business has resulted in the creation of no fewer than three jobs and generated $250,000 in annual revenue arising from business conducted in the U.S.
A three-year extension of the X visa status would be authorized if additional investments of at least $250,000 have been made, or at least 3 jobs were created and the entity has at least $250,000 in annual revenue.
- INVEST Immigrant Visa
S.744 would also provide a viable path to the Green Card for entrepreneurs by adding a new Immigrant Investor Visa (EB-6) category. This visa would require that the foreign national:
- Have a significant ownership in a U.S. business;
- Be employed as a senior executive in the business; and
- Have a significant role in the founding or early-stage growth of the enterprise. (Includes qualified startup accelerators)
- Have resided in the U.S. for at least two years in lawful status; in the three years prior to filing:
- Have a significant ownership in a business that has created at least five jobs and has received $500,000 in venture capital or other investments; or
- Has created five jobs and generated $750,000 in annual revenues within the U.S.in the two years prior to filing.
These two provisions together will encourage entrepreneurship and economic growth.
- Major Changes to Family Based Immigration
A major improvement to the current family immigration system is to treat the spouses and children of Lawful Permanent Residents (LPRs) as “immediate relatives.” This will eliminate the current backlog in available visas for such individuals.
However, the preference system will be changed to eliminate the category for siblings of U.S. citizens and will set an age cap of 31 for married sons and daughters of U.S. citizens. U.S. citizens will no longer be able to sponsor their brothers and sisters, or petition for their married children over age 31.
- F-1 will allow for “dual intent”
Under current immigration law, the F-1 category for international students requires “non-immigrant” intent. This means that in order to come to the U.S. and study foreign students must have the intention of returning back to their home country at the end of their studies. This policy is not welcoming to many of the brightest minds of the world, as foreign students are not encouraged to stay in the U.S. and contribute to our economy but instead are discouraged from staying in the U.S. after they complete their studies. This policy is at odds with those that do remain in the U.S. to pursue practical training and stay and work in the U.S. under another visa category.
Under S.744, F-1 students, among other classifications, will be allowed to have “dual intent.” This means they can have both the temporary intent to stay in the U.S. only for their studies as well as the intent to remain here permanently to work or pursue other goals in the U.S.
Finally, S.744 provides a path toward a Green Card for young people who were brought to the U.S. as children, have attended U.S. schools, are in every way American, but for being undocumented. These young people have come to be known as “Dreamers” because of past bipartisan attempts in providing them a path to legalization through the “DREAM Act.”
By Kalpana V. Peddibhotla, Peddibhotla Law Firm
 S.744 can either now go to the House of Representatives for consideration or the House can consider its own bill. If the House does not pass a bill then immigration reform is unlikely. If the House passes a bill that is different from the Senate then it will be sent to the Conference Committee. The conference report must be approved by both the House and the Senate before it can go to the President to be signed into law.
 For a general discussion about the various provisions on S.744 including legalization, the merit-based point system for the Green Card, the farmworker program, and the enhanced border security measures
 See Jonathan Rothwell, “The Need for More STEM Workers” (Washington, DC: Brookings Institution, 2012). According to a 2010 survey there were on average 7 job openings in a computer occupation for every eligible graduate from a U.S. college; in San Francisco there were as many as 25 to 1.
 See also, Jonathan T. Rothwell and Neil G. Ruiz, “H-1B Visas and the Stem Shortage: A Research Brief” (Washington, DC: The Brookings Institution, 2013). In a recent 2013 report, H-1B STEM job vacancies were more difficult to fill than other job openings.
 “Intending immigrants” are not counted as an H-1b for the dependency calculation. An intending immigrant is:
– Someone who has a pending or approved Labor Certification; and
– During the 1 year before filing the “intending immigrant’s” labor certification, that employer must have filed an I-140 for 90% of current employees who were the beneficiaries of approved PERMs during the 1 year ending 6 months before the petition in question is filed.
 These family members however might find some limited relief through the merit based point system.