Guide to H-1B Cap Exempt Employers

Many of our readers know that the H-1B visa is a critical and very common work visa used routinely by U.S. employers to hire skilled foreign nationals.  The H-1B visa has an annual cap for first-time visas set at 85,000 per year and it has been oversubscribed greatly over the past several years which has caused USCIS to use a random lottery allocation system.

However, many employers are “cap-exempt” and are able to submit an H-1B petition for a candidate at any time and without having to go through the lottery and without having to worry about the annual H-1B cap limits.  This article discusses which employers qualify to be “cap-exempt”, how to make the case and what are unique aspects (pros and cons) of having a cap-exempt employer H-1B.

Background of the H-1B Program and Its Annual Cap

The H-1B visa category was created in 1990 through the Nationality and Immigration Act of 1990 (INA).  Upon the creation of the H-1B visa type,  INA imposed a numerical limitation (“cap”) on the number of H-1Bs that could be issued in each fiscal year which currently stands at 65,000 per year.

There are certain exceptions to the congressionally-mandated maximum.  20,000 H-1B visas issued to foreign workers who obtained their master’s degree or higher from a U.S. university are exempt from the 65,000 cap.    Additionally, the cap does not apply to foreign nationals in the U.S. who are in lawful H-1B status and who are seeking to extend their visa or change employers (basically, who have previously gone under the “cap”).  And then, the focus of this article, are certain employers who are exempt by law from the H-1B cap.

Which Employers Are H-1B Cap-Exempt?

The H-1B regulations describe several types of H-1B cap exempt employers:  (i) institutions of higher education, (ii) non-profit research organizations, (iii) governmental research organizations, (iv) non-profit organizations affiliated with higher education institutions, and (v) other (private, cap-subject) employers who intent to place the foreign worker at a cap-exempt organization described here.

Cap-Exempt Employer: Institution of Higher Education

This cap-exempt employer category is perhaps the easiest to define and understand.   Universities and colleges are the classic and clearest example of a cap-exempt employer.  The organization must be established and recognized as an institution of higher education.    Section 101(a) of the Higher Education Act of 1965, (Pub. Law 89-329), 20 U.S.C. section 1001(a), defines institution of higher education as:

Institution of higher education For purposes of this chapter, other than subchapter IV, the term “institution of higher education” means an educational institution in any State that —

(1) admits as regular students only persons having a certificate of graduation from a school providing secondary education, or the recognized equivalent of such a certificate;

(2) is legally authorized within such State to provide a program of education beyond secondary education;

(3) provides an educational program for which the institution awards a bachelor’s degree or provides not less than a 2-year program that is acceptable for full credit toward such a degree;

(4) is a public or other nonprofit institution; and

(5) is accredited by a nationally recognized accrediting agency or association, or if not so accredited, is an institution that has been granted preaccreditation status by such an agency or association that has been recognized by the Secretary for the granting of preaccreditation status, and the Secretary has determined that there is satisfactory assurance that the institution will meet the accreditation standards of such an agency or association within a reasonable time.

Our experience has been that USCIS is fairly liberal and accepts wide variety of documents that establish that an H-1B petition is an institution of higher education.   Public tax records, website printouts, brochures and other documents are often sufficient to demonstrate that the petitioner is a university and is cap-exempt.

Non-profit Entities Affiliated with Higher Education Institutions

Certain non-profit organizations affiliated with universities may also qualify as cap-exempt employers. These organizations typically work in conjunction with educational institutions, furthering academic missions through research, medical services, or other educational projects. Proving the affiliation is key to securing cap-exempt status.

In order to establish cap-exempt eligibility, the petitioner must show that they are a non-profit which is often done by including 501(c)(3) status documentation or non-profit tax returns.  This criteria is often pretty clear and easy to document.  Additionally, the immigration service will expect strong documentation of an affiliation with a university.   An “affiliation” is defined as:

An affiliated or related nonprofit entity. A nonprofit entity (including but not limited to hospitals and medical or research institutions) that is connected or associated with an institution of higher education, through shared ownership or control by the same board or federation operated by an institution of higher education, or attached to an institution of higher education as a member, branch, cooperative, or subsidiary.

The definition of “affiliated entity” allows for non-profits to claim cap-exempt status by showing close working relationships (affiliation) with a university through partnership or cooperative agreements or memoranda and our office has successfully been able to submit cap-exempt petitions for non-profit employers who are not owned or controlled by a university but where we can demonstrate very close working relationship between the university and the non-profit.   It is important to highlight that the relationship between the university and the non-profit must continue for the entire H-1B petition term.

Example:  Institute A is a 501(c)(3) organization which enters into a Cooperative Agreement with University B pursuant to which Institute A and University B create a joint program allowing University B students to obtain certain training and mentoring programs that are provided by Institute A.  Because the services provided are within and among the primary purposes of Institute A and because Institute A and University B enter into a close agreement, Institute A can successfully claim that they are cap-exempt.  During the adjudication process the immigration service would require to see the agreement between the parties and the agreement should be sufficiently comprehensive.

Cap-Exempt Employer: Non-profit Research Organizations

Non-profit entities that primarily engage in research are also eligible for cap-exempt status.  The petitioner must show that they are a non-profit which is often done by including 501(c)(3) status documentation or non-profit tax returns.  This criteria is often pretty clear and easy to document.

Much less clear is the way an employer can demonstrate that they are a “research organization” by being primarily engaged in basic or applied research.   The definition comes from 8 C.F.R. 214.2(h)(19)(iii)(C):

A nonprofit research organization is an organization that is primarily engaged in basic research and/or applied research. […] Basic research is general research to gain more comprehensive knowledge or understanding of the subject under study, without specific applications in mind. Basic research is also research that advances scientific knowledge, but does not have specific immediate commercial objectives although it may be in fields of present or potential commercial interest. It may include research and investigation in the sciences, social sciences, or humanities. Applied research is research to gain knowledge or understanding to determine the means by which a specific, recognized need may be met. Applied research includes investigations oriented to discovering new scientific knowledge that has specific commercial objectives with respect to products, processes, or services. It may include research and investigation in the sciences, social sciences, or humanities.

Until not long ago, USCIS would routinely accept a general research statement by the employer as sufficient evidence of “research organization”.   In recent years, however, the immigration service requires much more extensive documentation of basic or applied research.   Below are some ways that the “research” aspect of an organization can be demonstrated or highlighted:

• Analysis of tax return documents (IRS Form990) showing research as a key part of the organization’s mission;
• Articles of incorporation (or similar) discussing “research” as an activity;
• Websites, annual reports, publications or similar work product highlighting research activities;
• Analysis of annual budget, spending patterns, hiring/employee organizational structure and similar to highlight and quantify research activities;
• Receipt of research grants;
• Testimonials, publications, awards or similar recognition of research work done by the organization.

Also, we have seen USCIS start to focus on the amount of research done in relation to the overall size of the employer.  The immigration service has been relying on the word “primarily engaged” from the definition to closely analyze an employer’s operations.  For example, proving that there are 5 research employees for an organization of 40 employees may not be sufficient. Similarly, showing that 20% of the an organization’s budget is dedicated to research may not be enough without other claims of research activities.  Our experience and approach has been to very carefully analyze and present aspects such as budget, operations, work product and staffing to make a successful claim.

Example:   Foundation C is a non-profit 501(c)(3) which engages in funding and promoting research into disease treatment.  The organization can demonstrate that 100% of its budget is dedicated to research activities.

Example:  Institute D is a non-profit 501(c)(3) which engaged in advocacy, research and public relations in a specific area of interest.  The organization has staff of 25 but can demonstrate that at least 15 staff members are directly or indirectly involved in research and publication activities.  Additionally, it can show extensive list of research publications.

Governmental Research Organizations

Government-funded research institutions, such as national laboratories or agencies that conduct scientific studies, are also considered cap-exempt.   Petitioners must demonstrate that they are a government organization which in most cases is very easy because there are often sufficient government or public documents.   Similarly, the employer will have to establish the research nature of their activities and this approach is similar to non-profits discussed above.

Example:   NIH (National Institute of Health) is a government agency which engaged in research in multiple medical fields.  There are many publicly available documents to demonstrate its eligibility as a government research organization cap-exemption.

Cap-Exempt Employment: Employed AT a University or AT a Non-Profit/Government Research Organization

Most of the exemptions above apply to the employer.  However, there is a way to make a cap-exemption apply to a specific beneficiary if their cap-subject third-party employer can show that the beneficiary will be placed to work AT a cap-exempt employer if the beneficiary will perform job duties at a qualifying cap-exempt institution that directly and predominately further the normal, primary, or essential purpose, mission, objectives or function of the qualifying institution, namely, higher education or nonprofit or governmental research.

In order to make a successful cap-exempt petition claim, the employer (not a qualifying university or a non-profit/government research organization) will need to demonstrate that they are placing the specific beneficiary to work at a qualifying university or non-profit/government research organization and that there is a connection between work performed and the nature of the institution.  In addition, the petitioner will have to demonstrate that the recipient of the work is a qualifying institution (university or a non-profit/government research) organization.

Example: Company A wishes to place its employee to work as a Scientist onsite at the NIH campus in Bethesda, MD.  Company A can file cap-exempt petition once it can demonstrate that the work is closely related to NIH’s research/science mission and that NIH is a government research organization.

Example:  Company B wishes to place its employee who is sports marketing analyst to work at the athletic department of University Z where the employee will work solely on promoting the athletic events of the university.

Special Benefits:  Concurrent Employment and Working for Multiple Employers

It is possible (and increasingly common) for an H-1B worker who is employed by a cap-exempt employer to take up a concurrent second job at a private employer that would normally be cap-subject.   The H-1B rules permit concurrent employment at multiple H-1B petitioners and when one employer is a cap-exempt, it is possible for additional employers to file concurrent H-1B petitions for part-time (or even full-time) concurrent employment.

In terms of process, once a cap-exempt employer secures H-1B approval for a foreign worker and the H-1B petition and status are in effect, a second employer (which would normally be subject to the cap) can file a cap-exempt concurrent H-1B petition for the same foreign worker.   The second petition does not have to be in any way related to the cap-exempt university/non-profit research employer; however, the underlying cap-exempt employment must continue in order for the concurrent H-1B to be valid.

Portability Limitations to Foreign Workers of Holding H-1B Approval by Cap-Exempt Employer

An H-1B cap-exempt employer petition is only valid for as long as the foreign workers remains with the qualifying university or non-profit/government research employer.  As a result, if an H-1B worker wishes to move from a qualifying cap-exempt employer to a private cap-subject employer, they will need to go through the H-1B cap lottery selection process (or they must have done so in the past).   As a result, H-1B employees working at cap-exempt employers generally have somewhat limited options in terms of changing employers.

Conclusion

H-1B cap-exempt employers offer a significant advantage in navigating the challenging H-1B cap lottery system.   We hope that this alert has been successful in raising awareness in how employers and individuals can best find opportunities to work by securing an H-1 visa.

Our office has been very active in successfully building cap-exempt employer petitions and we will be able to assist – please contact us for case evaluation or book a phone consultation for advice.   In the meantime, please feel free to subscribe to our free weekly newsletter to obtain developments on this and related topics.