DHS has published a Notice of Proposed Rulemaking that would eliminate the up-to-60-day discretionary grace period currently available to E-1, E-2, E-3, H-1B, H-1B1, L-1, O-1, and TN nonimmigrants) following cessation of the employment underlying their status. Written comments to the proposed rule must be submitted by November 10, 2026.
It is important to note that this is only a proposal, and the existing grace period remains in effect while DHS considers comments. Employers that will be impacted by the proposal are encouraged to submit comments explaining how elimination of the grace period would affect their business.
What the Proposed Rule Would Do
- The proposed rule eliminates DHS’s discretionary authority to allow E-1, E-2, E-3, H-1B, H-1B1, L-1, O-1, and TN nonimmigrants up to 60 days (or until the end of their authorized validity period, whichever is shorter) to remain in status after their qualifying employment or activity ends.
- Restores the agency’s pre-2017 policy, under which nonimmigrants are considered to have failed to maintain status starting the day after their employment ceases, unless they are otherwise authorized to remain.
Background
DHS created the discretionary grace period in 2016 as part of the AC21 final rule, effective January 2017, specifically to improve job portability and give high-skilled workers a reasonable window to find new sponsorship after a layoff or resignation rather than being forced to leave the country immediately. DHS now takes the position that:
- the grace period was never required by statute,
- the policy disconnects nonimmigrant status from the specific employment that justified admission, and
- the policy adds unnecessary complexity to adjudications, citing more than 1.9 million petitions and applications since FY 2018 that required USCIS to assess whether the grace period could apply.
What Employers Need to Know
- No transition period is proposed. If finalized as written, workers whose employment ends after the effective date would need to depart the United States immediately absent another basis to remain, rather than having up to 60 days to find a new sponsor or pursue a change of status.
- The H-1B category will be the most affected. DHS’s indicates that its data shows 99% of nonimmigrants who used the grace period pathway over the last five years were in H-1B status, with an average of roughly 65,752 workers per year experiencing job loss or a change of employer.
How to Plan for the Rule Change
If this rule takes effect as proposed, there will no longer be a window to file a new petition while a worker stays in the U.S. after their prior job ends. Employers wishing to plan ahead for this change should consider the following:
- Time new petition filing strategically to avoid a gap in status. Employers should plan to have any new petition filed, and ideally approved, before the prior employment relationship ends. Similarly, H-1B portability, which lets a worker begin new employment upon filing of a new H-1B petition, remains available, but requires advance filing while the individual is in valid H-1B status.
- Revisit severance, notice, and relocation policies for terminated employees. A longer notice period where feasible, combined with return-transportation and transition support, may help offset the diminished regulatory flexibility. Note that employers remain statutorily responsible for return transportation costs for dismissed H-1B and O-1 workers regardless of this rule.
- Avoid overhauling processes prematurely. Given the legal and policy objections outlined below, this rule will likely be challenged in court and may be delayed or modified before it becomes effective. Nevertheless, employers may wish to build contingency plans now without assuming the rule will take effect exactly as proposed.
Our Perspective
We expect this proposed rule will draw a significant number of comments and, if finalized in its current form, major legal challenges. A few issues worth noting:
- Inadequate treatment of reliance interests. DHS acknowledges that employers and workers have built hiring plans, housing decisions, and family arrangements around the grace period for nearly a decade, then summarily dismisses those interests as “misplaced” because the grace period was always discretionary.
- DHS acknowledge it has data gaps. The rule’s central data source (Form I-129 withdrawal filings) does not exist at all for several of the affected classifications, including E-1, E-2, E-3, L-1, and TN. DHS is proposing a uniform policy change across categories for which it admits it is incapable measure the full impact.
Beyond the legal exposure, the policy rationale will likely be challenged on several grounds, including:
- U.S. competitiveness. Forcing an immediate departure, rather than allowing a worker to remain while a new employer’s petition is pending, makes the U.S. a harder place for U.S. employers to retain skilled talent relative to competitor countries, contravening Congressional intent in creating these classifications in the first place.
- Real-world hardship is not reflected in the analysis. Workers with mid-school-year children, signed leases, or pending home purchases would have to leave immediately rather than have even a short runway to wind down their affairs, issues that DHS’s does not meaningfully address.
Meltzer Hellrung will continue tracking this rulemaking through the comment period and will provide updates as DHS moves toward a final rule. If you have questions about how this proposal could affect your workforce planning, or if you are interested in submitting a comment, please contact your Meltzer Hellrung professional.
