The U.S. H-1B Quota and its Effect on Indian Companies

By Krishna Palagummi

This article provides an overview of H-1B visa program, quotas, and how quotas and recent changes to the program impact businesses of Indian origin. The H-1B temporary work visa category is used by employers to bring skilled professionals from overseas to work in the U.S.  In order to obtain an H-1B visa, the position must require at least a bachelor’s degree, and the individual being petitioned for the H-1B visa must have at least a bachelor’s degree or its equivalent in a related field.  The Immigration Act of 1990 established for the first time a numerical limit, or cap, on the H-1B visa category.  The cap was set at 65,000 visas per each fiscal year (“FY”), which for immigration purposes typically begins on October 1st and ends on September 30th of the following year.

The H-1B quota was met for the first time in FY1997 and again in FY1998.  This was primarily because of the booming information technology industry in the U.S.  In 1998, under the Clinton Administration, Congress passed the American Competitiveness and Workforce Improvement Act (ACWIA), which temporarily increased the cap from 65,000 to 115,000 for FY1999 and FY2000, and then reduced it to 107,500 for FY2001.  However, because of the increasing demand for H-1B workers in the U.S., Congress passed the American Competitiveness in the Twenty-First Century Act in 2000, which further raised the H-1B quota to 195,000 for FY2001, FY2002, and FY2003.  Beginning FY2004, the H-1B cap was reduced to its pre-ACWIA number of 65,000.  In 2004, Congress passed the Consolidated Appropriations Act, which created a special H-1B quota of 20,000 visas per year for U.S. advanced degree holders (master’s degree or higher).  Since FY2005, the H-1B quota has two categories – the general H-1B quota continues to be 65,000, while the U.S. master’s quota is 20,000 visas per year.

Traditionally, the 65,000 H1-B quota was cumulative of all countries around the world.  However, in 2003, the United States entered into free trade agreements with Chile and Singapore, which created a new visa category (H-1B1 visa) within the 65,000 H-1B quota.   Effective January 1, 2004, the H-1B1 visa category provides Chile with 1,400 visas and Singapore with 5,400 visas each year.  This means that the general H-1B quota available to the rest of the world is only 58,200 in any given year.  Unused H-1B1 visas from Chile and Singapore are generally added to the subsequent fiscal year’s H-1B quota in the first 45 days.

For the past 12-15 years, there has been intense debate about the quota system for the H-1B visa category.  If there is a quota system, then what should the quota be?  If the quota system should be discarded, then how should the number of H-1B visas be determined?  There have been arguments presented for and against the H-1B quota and more importantly, for and against the H-1B visa program itself.  In order to better understand the H-1B quota, the downside of having numerical limits on the H-1B visa category, and how this impacts businesses of Indian origin, one must first consider and analyze the historical data surrounding H-1B visas.

 

Year Total Available Date Quota Reached Cap
FY1999 [10/1998-09/1999] 115,000 06/15/1999
FY2000 [10/1999-09/2000] 115,000 03/21/2000
FY2001 [10/2000-09/2001] 195,000 Unused: 31,400
FY2002 [10/2001-09/2002] 195,000 Unused: 115,900
FY2003 [10/2002-09/2003] 195,000 Unused: 117,000
FY2004 [10/2003-09/2004] 65,000 02/17/2004
FY2005 [10/2004-09/2005] 65,000 + 20,000 10/01/2004
FY2006 [10/2005-09/2006] 65,000 + 20,000 08/10/2005
FY2007 [10/2006-09/2007] 65,000 + 20,000 05/26/2006
FY2008 [10/2007-09/2008] 65,000 + 20,000 04/03/2007
FY2009 [10/2008-09/2009] 65,000 + 20,000 04/07/2008
FY2010 [10/2009-09/2010] 65,000 + 20,000 12/21/2009
FY2011 [10/2010-09/2011] 65,000 + 20,000 Ongoing as of 12/2010

 

In FY1997 and FY1998, when the quota was 65,000 visas per year, it was met quickly, prompting Congress to increase it to 115,000 for FY1999 and FY2000.  However, as shown above, the H-1B quota was met in about eight months in FY1999 and in about four months in FY2000, despite the significant increase in available visas.  However, in the years that followed, from FY2001 through FY2003, several thousand H-1B visas went unused.  When the quota was decreased to 65,000 (+20,000 U.S. masters) between FY2004 and FY2009, all H-1B visas were used.

These statistics reflect the reality of business needs in the United States.  Between 1997 and 2000, when industry was booming, there were significant filings.  Between 2000 and 2003, a combination of factors resulted in unused H-1B visas including, but not limited to, a substantial increase in the H-1B quota, a change in the U.S. administration in 2000, and the terrorist attacks in the U.S. on September 11, 2001 which resulted in an economic downturn.  Between 2004 and the early part of 2008, a combination of factors including steady economic growth, scarcity of qualified professionals in the U.S. to fill positions, and a decrease in the H-1B quota resulted in the H-1B quota being met shortly after opening on April 1 of each year,.  Once the global recession began in December 2007, many industries suffered large losses, resulting in smaller hiring budgets, including fewer visa sponsorships.  This is reflected in the number of H-1B filings for FY2010, which remained open until December 2009.  The FY2011 H-1B quota has not been met as of the date of this article (January 17, 2011).

 

H-1B Quota – Usage by Indian Companies

A substantial portion of H-1B visas each year is used by companies of Indian origin, that is, companies either owned by persons of Indian origin in the United States or India-based companies with ongoing business operations in the United States.  In FY2009, 6 of the top 10 H-1B filing companies were of Indian origin, accounting for a total of 4,654 visas.  This may not appear to be a lot when compared to the total number of visas available, but the U.S. was right in the middle of a deep U.S. recession in 2009.  In FY2008, 7 of the top H-1B filing companies were India-based.  These 7 companies accounted for a total of 11,944 visas.  In prior years, the number of H-1B filings by India-based companies was even greater.  The foregoing numbers do not reflect H-1B filings by other large India-based corporations and hundreds of small and mid-size Indian business entities.

Industry leaders have argued that the H-1B quota should either be increased, or eliminated altogether in favor a system in which industry needs dictate the number of H-1B workers each year.  In his March 2007 testimony before the Senate Committee on Health, Education, Labor and Pensions, Bill Gates of Microsoft Corporation presented a convincing argument that there should be no limit on H-1B visas:

[M]y basic view is that an infinite number of people coming, who are taking jobs that pay over $100,000 a year, they’re going to pay taxes, we create lots of other jobs around those people, my basic view is that the country should welcome as many of those people as we can get, because people with those great talents, particularly in engineering areas, the jobs are going to exist somewhere, and the jobs around them are going to be created wherever those uniquely talented people are…So, even though it may not be realistic, I don’t think there should be any limit. Other countries have systems where based on your education, your employability, you’re scored for immigration, and so these people would not have difficulty getting into other rich countries…

Bill Gates’ view is shared by other CEOs whose companies were in dire need of qualified foreign professionals but were unable to bring them to work in the U.S. due to quota limitations.  In the boom years, the H-1B quota numerical limit was the primary impediment to talented individuals reaching American shores for work.  But beginning in 2007, a new impediment emerged. The U.S. Citizenship and Immigration Services has been involved in heightened scrutiny of every H-1B case being filed, for the stated reason to curtail fraud and speculative employment (“benching”) by some employers. This has resulted in an overly strict adjudication process.  The USCIS now subjects H-1B employers to elaborate and often redundant document submission requirements, far removed from realistic industry practices.  All of this has had a direct impact on thousands of Indian companies.

In addition to burdening H-1B employers with painfully elaborate document requirements, there was another roadblock to the H-1B visa category recently.  In August 2010, a bill in the U.S. Congress passed into law which substantially increased the H-1B and L-1 filing fees for certain employers.  Employers with 50 or more employees out of which 50% are in the H-1B or L-1 categories are now required to pay an additional $2,000.00 per H-1B and $2,250.00 for an L-1 visa. The chief sponsor of the fee increase bill was Senator Charles Schumer (D-NY), who said: the bill raises fees on H-1B visas (for temporary skilled workers) for companies who have more than 50 percent of their employees on H-1B visas (this does not affect U.S. tech companies).  The bill also raises fees on L visas (given to multi-national transferees) for foreign companies.  The L visa is often used by foreign companies to circumvent the requirements of the H-1B visa.

Senator Schumer’s bill intended the fee increase to impact “non-U.S. tech companies,” or in other words companies of foreign origin.  To be sure, most companies utilizing the H-1B visa category happen to be of Indian origin.  This piece of legislation, although not specific in its language, specifically targeted Indian business.  Despite the protest from the Indian government, the fee increase remains in place.  As a result, there has been a further drop in the number of H-1B filings over the past few months.

In order for the U.S. to again attract talented professionals from around the world, it must break itself from the unwritten protectionist policies by addressing the H-1B quota issue, easing the visa adjudication process by making it more fair and reasonable, and desisting from passing draconian laws that have a direct negative impact on businesses of foreign origin.

 

Krishna Palagummi is an immigration attorney and advises companies in finance and technology industry domains.  He primarily handles business/employment immigration matters.  His practice is based in New Jersey.  He may be contacted at  kpalagummi@gmail.com

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