H1B Cap for Fiscal Year 2004
Posted Sep 12, 2003

As regular readers of MurthyDotCom and the MurthyBulletin know, the H1B "cap" is set to return to 65,000 in fiscal year (FY) 2004 (October 1, 2003 to September 30, 2004). This is an enormous decrease from the current cap level of 195,000. Accordingly, many current and potential H-1 workers are concerned about what this all means for them. In order to make an evaluation, it is necessary to understand what the cap is, and to examine prior years, in order to predict what is likely in FY2004.

What is the Cap and What Happens if it is Reached?

The "cap" is the limit on the number of H1B petitions for "new employment" that can be approved in a particular fiscal year. Once this cap is reached, H1B petitions for new employment can be filed, but must contain a start date for employment that is in the following fiscal year. Exactly what this means depends upon whether one is in the U.S. and, if so, when that person's status ends.

Once the cap is reached, one who is located outside the U.S. will not be able to obtain an H1B petition approval until the following fiscal year. For one already in the U.S., the consequences depend upon his or her status and the status expiration date. Once the cap has been reached for the year, it will not be possible to change status to H-1 in that fiscal year. For one whose status ends prior to the next fiscal year, it will not be possible to change status even when the new H1B numbers become available. The reason for this is that the expiration of the status creates a gap and a change of status requires that the individual have continuous status. This leaves some people stranded, without a way to change their status to H1B. Obviously, it also impacts employers, who cannot hire the workers needed during the time between the cap having been reached and the start of the next fiscal year.

Who is Subject?

The first important matter is to understand whether the cap applies to a particular case. It only applies for NEW employment. Individuals in H1B status, who previously have been counted against the cap, are not counted against the cap again when they file to extend H1B status, whether through the same or a new employer. This is, therefore, not an issue for almost all of those who are already in the U.S. in H1B status. (The only exception to this is for individuals previously employed by organizations not subject to the cap, who then seek to change to a non-exempt employer.) There are limited cap exemptions for petitions filed by a rather small group of employers. This exemption includes certain institutions of higher education and their affiliates, non-profit research organizations, and government research organizations.

The cases subject to the cap are those filed by employers not included under the listed exemptions for new employment. This filing may be for individuals who have never held H1B status, whether they are in the U.S. or abroad. It also includes individuals who held H1B status but left those jobs and departed the U.S. and seek to reenter through a new employment offer. A typical example of a cap case would be students seeking to change to H1B after graduation. As will be explained below, this is a very important issue for students, given that graduation for most of them typically occurs in May.

When will the Cap be Reached?

There is no way to predict precisely when the cap will be reached. We can only look at prior years to approximate the timeframe. The number of H1B filings has been lower in the past two years than in prior years. Estimates based on these years are rather optimistic in terms of how long it will take to reach the cap. If the economy improves, the cap could be reached much sooner. For example, in FY2000, the substantially higher cap of 115,000 was reached in March 2001. If the demand returns to the levels they were in 2000, and the H availability remained at 65,000, the cap could be reached well before the end of the second quarter.

FY2003 (October 1, 2002 to September 1, 2003)

At the end of August 2003, the CIS [See BCIS Now Prefers to be USCIS! in this 12 Sept 2003 edition of the MurthyBulletin and available on MurthyDotCom.] issued H1B usage statistics for FY2003. In the first three quarters of FY2003 (October 1, 2002-June 30, 2003), 56,986 H-1 cases had been counted against the cap. CIS statistics show that almost 16,000 more cap cases are pending. Accordingly, if the usage remains the same in FY2004, the cap will be met before the end of June 2004. Without knowing the filing dates of the pending cases, we cannot estimate the latest possible time to file a cap case in FY2004. However, it is clear that, if the filings remain at the same levels, the cutoff will occur before the end of June 2004.

Overall, the number of filings was slightly higher in FY2003 than FY2002. However, the petitions in the third quarter were 15% higher than in the third quarter of FY2002. The cause of the increase is not clear. The number of filings reflects economic realities, both good and bad. When the economy is good, more employers seek new employees and more H1B petitions are filed. However, when the economy is slow, petitions are filed as people move from job to job. This does not affect the cap. The ability to file one-year incremental extensions beyond the normal six years under certain circumstances also impacts the number of cases filed, but not the cap.

FY2002 (October 1, 2001 to September 30, 2002)

In FY2002, a total of 79,100 cap cases was filed. This was a significant decrease from the prior year and is below the current FY2003 levels. However, even with the lower numbers, the demand exceeded the number of H1B cap cases that will be available for FY2004. In FY2002, there were 60,500 cases approved in the first three quarters (ending June 30, 2002) and 18,000 cap cases pending. Thus, the filings would again indicate that the numbers will run out before June 2004.

FY2001 (October 1, 2000 to September 30, 2001)

The number of filings in FY2001 was far greater than in FY2002 and FY2003. By the end of the second quarter in March 2001, approximately 72,000 cap cases had been approved. If the demand were to increase to these previous levels, it is predictable that the numbers would run out halfway through the fiscal year; by sometime in February, or even earlier. Hopefully, if the economy improves and there is a shortage of workers in any field for which the H1B is appropriate, the numbers will again be increased to allow aptly skilled workers to provide talent in the way that IT workers fueled our technology-based economic boom.

How are H1B Numbers Counted?

The cap year is based upon the date the foreign national is authorized to begin employment. Thus, cases filed at the end of a fiscal year may end up counting against the next year's numbers. Since there are still a few weeks left in the current fiscal year, people concerned about the cap may decide to use premium processing in an effort to obtain a decision within this fiscal year. Of course, the employment start date would also have to be within the current fiscal year.

In the past, Legacy INS would announce that it had enough petitions approved and pending to meet the cap. The petitions would be adjudicated in the order received and counted against the cap. They would adjudicate all pending petitions and count them against the cap as they were approved. Cases with Requests for Evidence (RFEs) essentially would be taken out of the queue until the RFE response was filed. Petitions pending when the cap was announced, which did not meet the cutoff, would be adjudicated with a start date of October 1 of the next fiscal year. This would affect whether they could be processed as change-of-status cases. If a person could not maintain status through to the following fiscal year, a change of status could not be granted and consular processing would be necessary. Any case filed later would need to have a start date in the next fiscal year.

Previous Special J and F Rules

In the past, when the cap was reached, special benefits were extended to F and J nonimmigrants who filed before the cap announcement, but did not make the cap in the particular year. These individuals had their durations of status extended, and then their requests to change status could be approved in the next fiscal year. Of course, they were not authorized to work during the time that their H1B petitions were pending, until the change of status was approved, usually on October 1 or after the start date of the new FY.

This is why the cap issue is particularly important for students. Since graduation for most students is usually in May, and they generally obtain one year of Optional Practical Training (OPT), many wait until the end of their OPT to have their employers file the H1B petitions. This could take them beyond the point of the cap announcement or, at least, beyond the period when they will make the cap cutoff for the fiscal year.

What about Premium Processing?

It is not clear how the cap count and premium processing will work together. Premium processing did not exist during the years when the cap was reached. Since cases are counted against the cap as they are adjudicated, though, premium processing may be the best way to proceed, especially as the cap cutoff date approaches. If many are willing to spend the extra $1000 for premium processing, however, then the potential to benefit from premium processing may dwindle.

Other Changes

In addition to the change in the cap, the $1,000 employer-funded training fee only applies to cases filed before October 1, 2003. For more information on this topic, see our article, H1B Training Fee Eliminated from Oct 1, 2003, also in this 12 Sept 2003 edition of the MurthyBulletin, and available on MurthyDotCom.

What to Do?

Individuals who are subject to the cap should be mindful of potential problems. They should urge their employers to file their cases as early as possible in FY2004. One may file the H1B six months before the employment start date. As indicated above, premium processing may be an option to increase the potential for obtaining an approval prior to the cap being reached. In past years, Legacy INS issued reports of estimates regarding the cap, as the filings mounted. If CIS continues with this practice, the MurthyBulletin and MurthyDotCom will, likewise, update our readers.

We urge Congress to raise the cap to allow for sufficient availability of H1Bs to employers seeking talent and skill from foreign nationals. While we support the need to protect U.S. workers, the fate of the U.S. economy depends upon having professional workers who are best suited to these positions. When U.S. companies cannot find sufficient numbers of U.S. workers, they must search for the appropriate talent worldwide to ensure that their companies prosper and the economy continues to grow. Limiting this ability does not serve anyone in the long run. It hampers our economy and thereby harms the overall well-being of our country and our people.