DHS is working on a new H-1B rule called Reforming the H-1B Nonimmigrant Visa Classification Program, and it’s currently under review by the White House’s Office of Management and Budget (OMB) for review, the last step before a proposal is published in the Federal Register for public review and comment.
DHS describes the goal of the current proposal as protecting American workers’ wages and jobs while cracking down on program misuse. The White House has also flagged this as a rule as having a major expected impact on employers, so it is likely to include more than minor technical revisions.
While DHS has only described the rule in broad strokes, it is worth understanding the direction this is heading, keeping in mind there is nothing to act on today. We will send a full breakdown as soon as DHS makes the proposal public.
What We Know
DHS has said the rule will touch three areas:
- Who qualifies for a cap exemption. This affects universities, nonprofit and government research organizations, and related entities that currently file H-1B petitions without going through the annual lottery.
- How closely employers with a history of H-1B compliance issues get reviewed. This could mean more scrutiny for companies that have had past problems, such as failed site visits or documentation issues.
- How H-1B workers placed at client or third-party worksites are managed. This builds on existing rules where the client’s job requirements — not the sponsoring employer’s — determine whether the role counts as a qualifying “specialty occupation.”
What a Similar Rule Looked Like During the First Trump Administration
In October 2020, the first Trump administration issued a rule with several changes that align closely with what DHS is now describing. Although litigation prevented the rule from having full effect, it serves as a useful preview of the specific changes that could appear in the proposal:
- A narrower specialty occupation standard. Instead of allowing a “normally required” bachelor’s degree in a related field, the 2020 rule would have required a bachelor’s degree to always be a strict, direct match to the job’s day-to-day duties, with no broader or related fields allowed.
- A stricter test for who is really the employer. For contract and consulting arrangements, the 2020 rule would have required companies to prove they had actual “right to control” the worker, hiring, firing, pay, and day-to-day supervision, with detailed internal documentation like manager-employee communication protocols and performance review records.
- A one-year cap on third-party placements, down from the standard three years, meaning far more frequent refiling, fees, and vetting for any worker placed at a client site.
- Expanded, more aggressive site visits, including unannounced inspections, remote/electronic work audits, and automatic revocation or denial if a company did not cooperate.
What This Could Mean for Employers
- Sponsorship, as or through a cap-exempt entity, may become more challenging. The 2024 rule made it easier for research-affiliated organizations to qualify for cap exemption even when research was not their main activity. A tighter standard here could push some filings back into the regular lottery.
- For jobs that involve work at client sites, expect more scrutiny. Staffing and consulting arrangements are a clear target. Based on how a similar 2020 rule was structured, be ready for a possible return to shorter validity periods for third-party placements (potentially one year instead of three), meaning more frequent refiling and fees.
- For staffing models for H-1B workers that rely on contract or consulting arrangements, having thorough documentation of the employer-employee relationship may be critical. The 2020 rule attempted to require detailed proof, including manager-to-employee communication records and internal performance review processes, to document the petitioning company, not the client, actually controls hiring, firing, pay, and supervision.
- Past compliance issues may result in enhanced future scrutiny. If your company has had a difficult site visit, an RFE tied to worksite verification, or similar issues, that history may matter more under a rule aimed at “greater scrutiny” of past violators. Site visits themselves could also become more frequent or intrusive — the 2020 proposal extended inspections to remote and electronic work setups, not just physical offices.
- Nothing needs to change in your process today. The rule has not yet been formally proposed, there is no comment period open and no compliance deadline. Nevertheless, now is a particularly valuable time to review your cap-exemption basis, your third-party placement files, and your compliance record in advance of any requirement to do so.
FY 2028 Cap Season Timing
If DHS finalizes this rule close to when next year’s H-1B registration period opens, employers could have a narrow window to adjust cap-exemption claims or restructure third-party placements. Programs that have already thoroughly reviewed their H-1B documentation will be in a much better position regardless of the specific details of the final rule, as issues such as verifying cap-exemption basis, reviewing third-party contracts and auditing compliance files is useful regardless of any proposed rule changes.
Our Perspective
We will continue to track this rule and will provide a more detailed update as soon as DHS publishes the proposed text. If your company would like to review how this proposal could affect your cap-exemption strategy, your third-party placements, or your overall program planning for next cap season, please reach out to your Meltzer Hellrung professional.
