United States: Fiscal Year 2004-2005 Presents U.S. Immigration Challenges For Employers

Since September 11, 2001, travelers to the United States have encountered numerous changes in the documentation required to enter the country as well as procedures necessary to apply for temporary visas to stay in the United States. Many of these changes have had a profound effect on businesses operating in the United States that hire nationals from other countries. Perhaps one of the least publicized changes that impacts U.S. businesses is the reduction in the number of H-1B specialty occupation visas. The H-1B visa is used by U.S. businesses to employ citizens of other countries in a wide variety of positions. Specialty occupation visas are needed for positions that require at least a bachelor’s degree. While employers previously enjoyed years of applying for H-1B visas without limit, the Immigration Act of 1990 restricted issuance of H-1B visas to 65,000 per fiscal year. The new cap applied only to "new H-1B visas," not extensions or amendments for the same or different employers. In fiscal year 1996, the Immigration & Naturalization Service (INS) announced the cap was reached by August of 1996, later retracting that statement and claiming the cap had not been reached. It became obvious the INS had not devised an efficient and accurate method of counting new H-1B visa petitions against the cap. In fiscal year 1997, the cap was reached on September 1, 1997.

In fiscal year 1998, due to a strong economy and businesses need for qualified professionals in engineering and intellectual property fields, the cap was reached in May 1998 — more than four months before the end of the fiscal year. Based on heavy lobbying by businesses, the U.S. Congress increased the number of H-1B visas to 115,000 in fiscal year 1999 and later to 195,000 for fiscal years 2001, 2002 and 2003.

In fiscal year 2004, the number of available H-1B visas reverted back to 65,000. While the U.S. Department of Homeland Security (DHS) announced in late February 2004 it had received enough petitions to reach the cap of 65,000 H-1B visas for fiscal year 2004, the information did not reach the entire business community or early enough for employers to properly plan their staffing for the year. The close of the cap means those employers who have not yet received approval on petitions filed for personnel will not be able to have those employees begin employment until October 1, 2004. The early close of the cap for this fiscal year will also affect next year’s cap. Those who filed petitions for this fiscal year and did not receive visas will be counted against the cap for fiscal year 2005, which begins October 1, 2004. Although the DHS and U.S. Citizenship and Immigration Services (CIS) have not issued any formal statements, there has been speculation there may be few H-1B visas left when the new fiscal year begins. If so, employers may not be able to hire any new H-1B workers until October 1, 2005.

In addition, the close of the H-1B cap has created difficulties for employers who are sponsoring employees in other visa categories. In a U.S. Department of State cable sent on February 14, 2004 (No. 2004-State-33493), the State Department advised diplomatic and consular posts to be cautious of individuals applying for visas in other categories, in particular the L-1 visa category. The government agency expects that employers who can no longer hire H-1B employees will turn to other categories. While employers can legitimately apply for any visa category available, the State Department is concerned that businesses will create a U.S. presence and contract out employees who are transferred to the United States in L-1 status, and the petitioner will exercise no supervision or control other than payment of salary. The job-shop scenario is considered an inappropriate use of the L-1 visa category. It is evident by the level of scrutiny currently being used in L-1 adjudications that the CIS is clearly heeding the State Department’s warnings.

With the increasing strength of the U.S. economy, it is expected that businesses operating in the United States will need to rely more on H-1B workers. While the Congress has in the past been receptive to the needs of business, at the present time there is no strong lobbying effort to increase the number of H-1B visas in the coming fiscal year. Employers should carefully plan their staffing or to seek other visa alternatives.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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