In October, President Clinton signed the American Competitiveness in the Twenty-First Century Act (AC21).  This law raises the annual H-1B visa cap to 195,000 for fiscal years 2001, 2002, and 2003.  After 2003, barring future legislation on the annual cap, it will revert to 65,000.

While the INS has not released formal regulations on the new law, it did recently release guidance in a question and answer format.  What follows is a summary of that guidance.

There are a number of workers who are exempted from the cap.  These are:

• Workers employed by an institution of higher learning
• Workers employed by a nonprofit institution related to or affiliated with an institution of higher learning
• Workers employed by a nonprofit or government research organization

Also exempt from the cap are petitions filed between March 22, 2000, when the INS announced that the fiscal year 2000 cap had been reached, and August 31, 2000.  The INS estimates that this will be about 30,000 petitions.

If a worker transfers from a cap-exempt position to one that does not qualify for an exemption, the worker will be counted against the cap at the time of the transfer.

Counting the number of H-1B petitions has been a serious problem for the INS.  Many may recall that earlier this year it was determined that the INS issued too many visas in fiscal year 1999.  There were a number of causes for this.  One of the most common was that workers already on an H-1B visa were counted again when they transferred to a new job.  In the guidance the INS says that it has been making surveys of H-1B data to ensure that this does not continue to happen, and says that it will continue such actions.  The INS says that it reads AC21 as providing forgiveness for the 1999 excess.  The agency does not, however, plan to recapture visas issued before the end of fiscal year 1999 but given a start date in fiscal year 2000.

One provision of AC21 allows workers with pending applications for immigration to receive extensions of their H-1B visa past the six-year limit.  Under this provision, such one-year extensions are not to count toward the cap.  The INS says that it is making system changes to ensure that such extensions are not counted to the cap, and implementing training programs to teach adjudicators when an applicant is eligible for a new six-year period, and therefore counted toward the cap.

According to the INS, AC21 became effective on October 18, 2000, the day after it was signed.  The fee increase from $500 to $1000 will take effect on December 17, 2000, 60 days after it was signed.

There are a number of employers who are exempt from the $1000 fee, which are as follows:

• Institutions of higher learning, affiliated and related nonprofit organizations
• Nonprofit and governmental research organizations
• Employers filing for a second extension
• Primary and secondary educational institutions
• Nonprofit organizations engaged in “established curriculum-related clinical training of students”

Note that only the first two groups are also exempt from the annual cap.  While the fee increase does not take effect until December 18, exempt employers are now exempt from the current $500 fee.  This exemption should be noted on Form I-129W in writing, as the form does not currently provide information for all the new exemptions.

AC21 clarifies when amended H-1B petitions are required.  In the past there has been great confusion about when a corporate change requires an amended petition.  The new law clarifies that an amended petition is not required when there are corporate structure changes so long as the new entity succeeds to the interests and obligations of the petitioning employer as long as the terms and conditions of employment remain the same.

One of the most sought after provisions in AC21 is the “portability” provision, which eases the process of changing jobs.  Under it, H-1B workers can begin working for a new employer as soon as the new employer files an H-1B petition for the worker.  In the past, the worker had to wait for the petition to be approved before he could begin working for the new employer.  Because this provision applies to petitions for new employment filed before or after the enactment of AC21, workers for whom a new petition was filed can begin work for the new employer immediately. 

The primary limitation on this portability provision is that the new employer must have filed a “non-frivolous” petition, which is one with some basis in law and fact.  The INS will further define this in the AC21 regulations.  To take advantage of the portability provision, the worker must be in the US pursuant to a lawful admission, and must not have engaged in unauthorized employment since that admission.

The portability provision has created concern among employers about how they will comply with I-9 requirements, which obligate employers to ensure that all employees are legally authorized to work in the US.  While the worker who begins working for a new employer after the filing of a new petition is work authorized, the I-9 form contains no provision for such a situation.  Employers in this situation should follow current documentation procedures, as well as keeping a copy of the worker’s I-94 and a copy of the receipt notice for the new H-1B petition. 

AC21 also contains a number of provisions designed to help workers in H-1B status with pending immigration applications.  One section of AC21 removes the per-country limits on employment-based immigration if not all available visas are used in a calendar quarter.  Because the State Department issues visas, the INS will not be addressing this issue in its regulations.  If the worker has an application for adjustment of status pending, the INS will extend the worker’s H-1B visa until the adjustment application is adjudicated. 

As previously mentioned, AC21 provides for one-year extensions of a worker’s H-1B visa when the worker has a pending application for immigration.  According to the INS guidance, this provision will apply if the worker has a pending application for a petition for classification as an immigrant worker or application for adjustment of status, and it has been at least 365 days since the filing of a labor certification or immigrant visa petition.

The INS notes that AC21 does not address the status of H-4 dependents, and says that it will examine this issue and will provide guidance in the upcoming regulations.

AC21 encourages the INS to process adjustment of status applications within 180 days and nonimmigrant visa applications within 30 days.  The law recognizes that the INS will require additional funding to meet these goals.  According to this guidance, the INS is in the process of collecting information so that it can inform Congress of how much additional funding is required and where that funding should go.  However, there is no guarantee that Congress will provide this funding, so it is possible that there will be no improvement in processing times.

Congress did indicate that four percent of the $1000 fee should be earmarked for processing.  While the INS has been authorized to hire new employees for processing expected increased filings, because of the length of training, it will be some months before any improvement in processing is seen.

The INS is working on regulations to implement AC21.  However, because the $1000 fee will impact small business, it will likely have to undergo review required by the Small Business Regulatory Enforcement Fairness Act of 1996.  This means that regulations are unlikely to be published before March 2001.  The INS is looking into ways to expedite the review process.