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The Future of H-1Bs: Evaluating the President's "Hire American" Executive Order

blog8.jpgOn April 18, 2017, President Donald Trump signed the "Presidential Executive Order on Buy American and Hire American." Like past E.O.s, this order again targets immigrants and their employers, particularly H-1B recipients. What follows is a brief summary of the E.O. and it's potential impact on current H-1B recipients and their employers, as well as applicants for FY 2018.

The Goal

Under Section 2(b) of the order, subtitled "Hire American," the President states generally that "in order to create higher wages and employment rates for workers in the United States" it will "rigorously enforce and administer the laws governing entry into the United States of workers from abroad."

This thesis statement is consistent with the President's past Executive Orders which seek to use preexisting immigration laws and resources to harshly and stringently enforce penalties for immigration violators. This quietly recognizes that the Executive Branch has limited authority in rule-making and only has the authority to enforce preexisting rules. The larger implication is that applications and employer compliance will be more heavily scrutinized under current regulations than in the past.

Employers who hire foreign workers, particularly H-1Bs, should expect to be looked at more closely, and lawyers should anticipate more Requests for Evidence to justify the need for foreign workers.

Changes to H-1B

Under Section 5(a) & (b) of the Order, the President specifically addresses the H-1B program and desired policy changes. Section 5(a) seeks to address prevention of abuse and fraud in the H-1B program while Section 5(b) seeks to reform the H-1B process to award visas to the most-skilled or highest-paid petition beneficiaries.

The fraud and abuse language of Section 5(a) likely refers to recent allegations of abuse of the H-1B program by certain IT firms who use the program to outsource jobs to foreign workers. In these cases, workers were hired and then sent to off-site third party locations to essentially act as a cheaper employee for the third party employer. The likely impact of this section is that employers who have off-site workers will experience more compliance reviews and audits. Similarly, for workers in the IT field, particularly those that do not customarily require a Bachelors Degree or higher, they should expect higher scrutiny on their applications.

The biggest impact of this Executive Order is laid out in Section 5(b) which indicates a re-prioritization for H-1B recipients towards higher educated and higher paid workers. Under the current system, there are 65,000 regular cap H-1B visas available with an additional 20,000 for those holding a Masters Degree or higher. During the annual visa lottery, the 20,000 Masters are selected first and then any remaining Masters are put into the regular cap. Additionally, as part of the Labor Condition Application which accompanies H-1B petitions, employers must agree to pay certain wages which are broken down into three levels based on wages within the industry. For example, a Level One wage equates to what the bottom 17% of the industry makes, including entry-level workers. An employer must agree to pay this wage to its H-1B worker so as to be competitive with an American worker.

It is these aspects of the H-1B program which are likely being targeted by the Executive Order.

One possible outcome of the E.O., which has been discussed by Republican lawmakers in the past, would be to reverse the order of cap selection meaning the regular cap is filled first and then the Masters cap. This presumably would increase the number of H-1B recipients who hold Masters degrees. Likewise it is probably meant to discourage employers from petitioning for Bachelors level workers, in theory giving American Bachelor holders a greater chance.

Another outcome, which again has been discussed by Republican lawmakers, is to eliminate the wage level system and switch to a median or average wage system. This again, is probably meant to discourage employers from petitioning for entry-level workers.

Other possible reforms could include advertising requirements seeking US workers first, similar to the Green Card PERM process, or requiring all companies employing H-1B workers to enroll in the e-verify system which can be a burdensome process as it requires providing information for all workers, not just H-1Bs.

These reforms will likely not affect applicants for FY 2018, but could have implications for future years.

The Take Away

Overall the White House and President Trump have limited authority to change the H-1B process without Congressional approval. The program will remain in place for the time being and the number of visas available will remain the same absent Congressional action. That being said, the policy actions laid out in the E.O. indicate that there will be greater scrutiny and closer evaluation of employers and H-1B applicants. This will likely manifest in an increase in RFEs, compliance reviews, and random audits. Practitioners and employers should prepare for such changes.

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