Late-Breaking H-1B Rulemaking By Trump Administration Subject to “Midnight Rule” Rollback by New President

On the cusp of the transition of power to President Biden, the Trump administration is pressing forward with three separate rulemakings restricting the H-1B visa program, which employers rely on to hire foreign workers for specialty professions, including in the pivotal science, technology, engineering, and mathematics (“STEM”) fields. The new rules seek to substantially increase the price tag on engaging H-1B talent, narrow eligibility of foreign workers whose academic degrees are not singularly tied to their job role, restrict third-party worksite assignments, and tie the chances of being selected in what has become an annual lottery to those filling senior positions at higher wage levels.

H-1B visas are generally the only way highly educated foreign nationals, including international students, can become employment-based immigrants and contribute to research and development, scientific and technological advances, and new businesses. If the Trump administration rules are allowed to stand, employers will face significant operational challenges, as all H-1B filings – including amendments, extensions, and new cap-subject petitions – will be affected.

The Biden administration will have several tools at its disposal to circumvent the suite of H-1B rules, as well as any other rules issued during the lame duck period between the election and the inauguration – so-called “midnight rules.” These include:

• Blanket moratorium for 60 days. Since 1981, new presidents from a party different from the prior president’s party have typically issued an executive order imposing moratoria of various kinds on regulations.
  • For regulations that have not yet been published in the Federal Register, such orders typically direct agencies not to send pending rules to the Office of the Federal Register for publication or to withdraw them from the Office of the Federal Register prior to publication, so that they can be reviewed by the incoming administration. The result of such review may be the termination of the rulemaking process altogether, the modification of the rule, or the publication of the rule as drafted by the previous administration.
  • For rules that have been published in the Federal Register but that have not yet gone into effect (that is, that have effective dates after January 20), the moratoria typically instruct agencies to postpone or consider postponing the effective dates for up to 60 days. If, after reviewing the published rule the new administration wants to further delay the effective date or make substantive modifications to the rule, it will have to engage in APA rulemaking, as described below.
  • It is fully expected that President Biden will issue a blanket moratorium of some kind similar to the ones described above. The moratorium affords the new president’s team time to evaluate and assess the pending and new rules and, if they wish, institute rulemaking procedures to further delay, revise, or withdraw the prior regime’s rules.
• Administrative Procedure Act rulemaking. The new administration can amend or withdraw final rules through a notice-and-comment rulemaking process. Because the withdrawal or amendment of a rule is itself considered a rule, the agency must undertake the same procedures to amend or withdraw a published rule as would be required for the issuance of an altogether new rule—that is, typically, notice-and-comment rulemaking.
• Congressional Review Act. The new president could press the Democratic-led Congress to use the CRA’s disapproval provisions to block the midnight rules passed by the outgoing administration. This avenue is less frequently invoked, has rarely been successful in the past, and is not necessary in this instance if the Biden administration engages in the APA notice-and-comment process.

In this instance, there is a strong incentive for the new president to rescind the controversial H-1B rules. Several federal courts, including the Northern District of California, the District Court for the District of Columbia, and the District of New Jersey, found the Trump administration’s claims of a nexus between COVID-generated high unemployment and H-1B jobs to be lacking, leading them to set aside the earlier versions of the two rules passed. Setbacks to innovative advances relevant to countering the pandemic, facilitating digital productivity, protection of data, and consumer services have been cited effectively by the business community as harms that would result from the Trump administration’s H-1B rules. Recent studies also highlight how realistic the chances are of jobs and talent going offshore if H-1B visas are unduly restricted. In view of these developments, industry and university proponents of immigrant contributions may persuade the new administration to clean the slate and undertake fresh reforms more calibrated to stimulate economic growth.

We describe below the procedural status of each rule.

• Annual H-1B Quota Selection Will Be Tied to the Highest Prevailing Wage Levels (Final Rule Announced Now With Effective Date by March 2021). The Department of Homeland Security today announced the final rule to amend regulations governing the process by which US Citizenship and Immigration Services selects H-1B registrations (or petitions, if the registration process is suspended) for filing of H-1B cap-subject petitions. Under this rule, USCIS will first select cases based on the highest prevailing wage level for the occupation in the area of intended employment. The rule expressly seeks to incentivize employers to “improve their chance of selection by agreeing to pay H-1B beneficiaries higher wages that equal or exceed higher prevailing wage levels.” This final rule will go into effect 60 days after publication in the Federal Register.
• Prevailing Wage Levels Will Be Increased Substantially Over Time (Rule Expected to be Published by January 13 or 14, with Wage Levels Expected to Rise as of Summer 2021). The Department of Labor initially issued its Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States rule as an Interim Final Rule (“IFR”) in October 2020. The rule, which increased the wages employers were required to pay to H-1B workers by 43 to 71% as of October 8, 2020, was set aside by several courts, including as reported here, for failure to meet good cause exceptions to APA notice-and-comment mandates. Seeking to cure prior procedural defects, DOL has now sent the rule, including its oversight of the comments received after implementation of the IFR, to the Office of Information & Regulatory Affairs in the Office of Management & Budget. Reports indicate the Final Rule will be issued by the middle of next week, i.e., by mid-January, in advance of the inauguration.
• H-1B Eligibility Will Be Narrowed and Third-Party Worksite Contracts Will Be Limited (Rule Expected to be Published by January 19). DHS is reported to be working aggressively to rework its Strengthening the Nonimmigrant H-1B Classification Program rule which, as was the case with the DOL rule, was set aside by the courts because of procedural deficiencies. While the new rule will have some changes from the version published in October 2020, the purpose of the rule will remain to restrict H-1B sponsorship to jobs for which a degree in a specific field is required, and impose limitations on duration of H-1B status for those employed by IT staffing companies or otherwise being placed at third-party worksites.

In addition to the three H-1B rules, DHS plans to issue a new rule to reverse the agency’s longstanding method for calculating unlawful presence, whereby F, J, M, and I nonimmigrants holding an I-94 showing a “duration of status” (D/S) admission will not accrue unlawful presence unless and until there is a specific finding of a status violation by USCIS or an immigration judge. The agency already attempted to make this shift through a 2018 policy memorandum, but was enjoined from enforcing the new policy by the courts.

We will continue to monitor action on these rules, as well as the Biden Immigration Plan, as reported to date in our Immigration Heat Map 2021.

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