The USCIS has announced that it has reached the H-1b cap for fiscal year 2011.  As such, all H-1b petitions subject to the H-1b cap are not eligible for filing until April 1, 2011 with start dates of October 1, 2011.  However, there are some employers that are exempt from the H-1b cap and can file throughout the year: non-profit research organizations, governmental research organizations, institutions of higher education, and non-profit organizations “affiliated or related” to an institution of higher education.

Since the cap exemption was added to the law in 2000, some hospitals have been exempt based upon their affiliation or relation to an institution of higher education.  In some cases, the affiliation has been based upon a jointly-administered program where the hospital provides clinical training for health-care workers (nurses, medical technologists, physicians, etc.) enrolled at that university.

Recently the California Service Center of the USCIS (which now has exclusive jurisdiction for all cap exempt filings) seems to be stricter in its analysis of cap exemption for hospitals.

There has not been any change in the law to prompt the strict scrutiny by the California Service Center.  A few months ago, the Administrative Appeals Office ruled that a hospital that provided clinical training for nurses enrolled at an institution of higher education but was a corporation independent of the institution of higher education was not eligible for the cap exempt.  However, this decision is non-precedent (applying only to that case) and not binding on the USCIS.  In fact, the AAO issued an opinion four years ago that ruled just the opposite on the cap exemption issue. In that case involving a school, the AAO found that there was no legal affiliation but yet ruled that the school was exempt from the H-1b cap because it was involved in a jointly managed program for teacher-training that furthered the essential purposes of the institution of higher education

For hospitals, the uncertainty revolves around the definition of “an affiliated or related entity”.  This phrase was defined by USCIS (then INS) in 1998 in response to the H-1b training fee exemption.  But Congress passed the statute for the cap exemption two years later and neither Congress nor the USCIS (INS) defined that phrase.  Instead, in 2006 the USCIS issued in a memo regarding the cap exemption and determined, among other things, that the same definition for fee exemption should apply to cap exemption.   Under that definition, an affiliated or related organization means “a non-profit entity (including but not limited to hospitals or medical research institutions) that is connected or associated with an institution of higher education” in one of three ways:  (1) through ownership or control by the same board or federation; (2) operated by an institution of higher education; or (3) attached to an institution of higher education as a member, branch, cooperative or subsidiary.

The USCIS is essentially interpreting all three of those options as requiring a legal connection between the hospital and institution of higher education. Based upon the way USCIS is currently examining cap exemption, it is important to evaluate other options. Here are a few strategies, although we recommend that you consult with your HLG attorney regarding specific strategies relevant to your case:

H-1b extensions: If an H-1b employee is working for a hospital that was previously approved as cap exempt, the hospital will need to decide whether they are going to file an extension by still claiming the cap exemption or file as subject to the cap.   if the beneficiary’s status is expiring on or after October 1, 2010, the employer could file an extension on or after April 1st as a non-exempt employer.  However, if the status is expiring before October 1st, the hospital may need to file the extension with the best evidence of cap exempt status.  In doing so, the hospital should have a back-up plan to file another H-1b extension as cap-subject after April 1st so the employee has a fall-back option is the extension based upon cap exemption is denied.

H-1b cap-exempt moving to an cap-subject employer:  if the hospital is hiring an individual who has been working on an H-1b through a cap exempt employer, the non-exempt hospital  needs to wait until April 1 to file the H-1b transfer.   The individual can work between the April 1st filing and October 1st based upon H-1b portability if the underlying LCA and H-1b petition for the cap-exempt employer will carry through until October 1, 2011.

F-1 student on OPT:  a non-exempt hospital can employ an individual based upon optional practical training and file an H-1b subject to the cap beginning April 1st. The employee can work based upon the OPT through October 1 and then begin working pursuant to H-1b approval beginning October 1. Because of the  “cap gap” rule, the employee can continue to work even after the OPT expires if the H-1b is pending and the OPT was valid at the time the H-1b petition was filed.

J-1 Physician: J-1 physicians who receive a J-1 waiver are exempt from the cap. Therefore, a non-exempt hospital filing for a J-1 physician who received a waiver of the two year foreign residence requirement can file based upon the individuals exemption; therefore, it’s not  necessary for the hospital itself to be exempt from the cap.

It’s been rumored that USCIS is in the process of preparing a memo about cap exemption.  Unfortunately, another memo from USCIS is not the resolution we need.  What we really need is USCIS to issue a regulation — after publication in the Federal Register and an opportunity for stakeholders to comment and explain that the definition that USCIS is currently using is not consistent with how most hospitals are organized.   Alternatively, we need Congressional action to further define cap exemption.