November 22, 2004 - New legislation affecting the H-1B, L-1 and prevailing wage rules passed the Congress last Saturday, November 20, 2004 as part of the Consolidated Appropriations Act. The legislation is expected to be signed into law by mid-December, with most of the provisions taking effect within three to six months.

Among its H-1B provisions, the so-called "L-1 Visa and H-1B Visa Reform Act":

• Sets aside 20,000 additional H-1B visas for Master's (or higher) level graduates of U.S. colleges and universities annually, allowing for the filing of new H-1B petitions for qualified individuals. The extra visas will be in addition to the current 65,000 numerical cap. While the new visa allotment will be effective 90 days after enactment, further clarification is needed regarding the earliest date qualifying petitions can be filed.
• Imposes a $1,500 H-1B "Education and Training Fee" for each H-1B petition filed for a new employer, change of employer, and first extension for an existing employer. Employers with fewer than 25 full time employees (including U.S. affiliates and subsidiaries) will pay a lower $750 fee. The Education and Training fee change will be immediately applicable upon enactment. Second and subsequent extensions filed by the same employer are exempt from the Education and Training fee.
  
• Mandates a $500 Fraud Detection and Prevention fee per petition to all initial H-1B applications. The legislation states that fraud fee provisions will be effective 90 days after enactment, but will not be required for same-employer extensions.
  
• Permanently reinstates the non-displacement and recruitment attestations for H-1B dependent employers. The additional attestations will become effective 90 days after enactment.
  
• Allows the Department of Labor to self-start H-1B investigations without receiving a formal complaint, based only on "reasonable cause to believe" an employer has violated the H-1B rules (effective 90 days after enactment).
  
• Excuses employers who act in good faith from minor technical violations of the H-1B compliance rules, such as incorrect prevailing wage determinations. Employers will have a 10-day period to correct technical deficiencies.

The H-1B Visa Reform Act also changes the way that prevailing wages are determined for both H-1B and permanent residency petitions (per labor certification) by:

• ·Eliminating the 5% variance from prevailing wage for purposes of labor certifications, H-1B and H-1B1 visas, and requiring payment of 100% of the prevailing wage. While this provision is effective 90 days after enactment, clarification will be required on its applicability to applications that were filed under the 95% rule and are currently pending.
  
• Requiring that Department of Labor wage surveys provide at least 4 levels of wages commensurate with the experience, education and the level of supervision requirements for the position. The rules also allow employers to carve out two middle tiers from the two-level Department of Labor OES survey according to a formula (effective 90 days after enactment).

With the L-1 provisions, Congress was concerned with perceived abuses of the classification; the new legislation:

• Eradicates the 6-month pre-employment requirement for Blanket L employers. Effective 180 days after enactment, all L applicants must have at least one year of continuous employment with the employer abroad before applying.
  
• Imposes a $500 Fraud Detection and Prevention fee per petition to all initial L-1 applications. As noted above, the $500 fee is slated to be effective 90 days after enactment, and will not be required for same-employer extensions.
  
• Prohibits the issuance of L-1B "specialized knowledge" visas to foreign nationals primarily performing contract labor at client sites. The prohibition will apply in either of two situations: (1) if the employee will be principally controlled and supervised by the client; or (2) if the work does not involve the provision of a product or service for which specialized knowledge specific to the employer (effective 180 days after enactment).
  
• Requires the creation of statistical reports on L-1 visa usage, including the issuance of the L-1B classification to employees working primarily offsite.
  
• Calls for the DHS Inspector General to report regarding vulnerabilities and potential abuses of the L visa program within six months from enactment, and create an Interagency Task Force comprised of representatives from DHS, DOJ and DOS to implement changes based on the report and raise related issues relevant to "national goals and transnational commerce."

BAL Comment:

While additional H-1B visa numbers are very welcome, the new provisions include serious setbacks for employers utilizing the H-1B and L-1 visas. The altered approach to wage calculations will also adversely impact the labor certification program for permanent residence applications.

In return for unprecedented filing fee increases, H-1B employers are afforded a limited number of additional H-1B visas, but only for Master's level graduates from U.S. universities. L-1 employers garnered no benefits from the new rules, but many losses. The L-1 rules re-impose the one-year overseas employment requirement, while increasing fees and client worksite limitations.

Requiring that employers pay 100% of the prevailing wage established by DOL approved wage surveys means that employers will have reduced flexibility for qualifying some positions for certification by the Department of Labor, as well as for H-1B visas.

BAL expects enactment of the new provisions by mid-December, and will comment as further details emerge.