H-1B Visas: Cap Exempt Employers

Foreign nationals employed by certain employers are exempt for the H-1B cap and are not required to enter the lottery to receive an H-1B visa and can apply for their H-1B at any time of the year.  In general, cap exempt employers are institutions of higher education, government research organizations, non-profit research organizations, and non-profit entities that are related to or affiliated with an institution of higher education.

On November 18, 2016, the Department of Homeland Security (“DHS”) published a final rule to modernize and improve several aspects of certain employment-based nonimmigrant and immigrant visa programs.  This rule went into effect on January 17, 2017.  As part of this rule, DHS sought to clarify and improve the method for determining which H-1B nonimmigrant workers are exempt from the H-1B numerical cap due to their employment at an institution of higher education, a nonprofit entity related to or affiliated with such an institution, or a governmental or nonprofit research organization, including a revision to the definition of the term “related or affiliated nonprofit.”

First, DHS clarified that to be exempt from the H-1B cap an institution need only satisfy one of the cap exempt conditions.  Although this was always the case, by codifying that an employer need only fulfil one requirement, DHS eliminated any confusion as to how an entity can qualify for cap exempt status.

Second, DHS expanded the definition of organizations that qualify as “related or affiliated nonprofit”.  Prior to the new rule, the “primary purpose” of the non-profit entities related to or affiliated with an institution of higher education must have been to directly contribute to the research or education mission of the institution of higher education.  In response to public comments that the term “primary purpose” was too restrictive, DHS revised the definition to state that “a fundamental activity” of the nonprofit entity must be to directly contribute to the research or education mission of the institution of higher education.  The change from primary purpose to fundamental activity increases the amount of nonprofit organizations that may claim cap exempt status and allows for more foreign nationals to obtain H-1B status without having to enter the annual cap subject lottery.

Finally, the new DHS rule includes state and local government research entities as “governmental research organizations.”  Prior to this change, only federal governmental research entities were included as cap exempt research organizations.  The inclusion of state and local government research entities further increases the amount of entities that can claim cap exempt status and allows for additional foreign nationals to obtain H-1B status without entering the cap subject lottery.