DHS Issues Final Rule Modernizing the H-1B Program

On December 18, 2024, the Department of Homeland Security (DHS) published the final rule titled “Modernizing H-1B Requirements, Providing Flexibility in the F-1 Program, and Program Improvements Affecting Other Nonimmigrant Workers” (89 FR 103054), effective January 17, 2025. This rule introduces significant updates to the H-1B program, while also codifying many existing USCIS practices.

H-1B Amendment Petitions

The final rule codifies the Administrative Appeals Office’s decision in Matter of Simeio Solutions, LLC (2015) and existing guidance that emerged from that decision, requiring employers to file an amended H-1B petition before implementing material changes to an employee’s job, such as changes in worksite location or job duties. The rule also prohibits H-1B workers from working under the materially changed employment terms (i.e., in the new role or in the new location) until the H-1B amendment petition is approved and takes effect, unless the worker is eligible for H-1B Portability. Under 8 CFR 214.2(h)(2)(i)(H), an H-1B worker is eligible for portability if: (i) she was lawfully admitted to the U.S. in, or otherwise provided, H-1B status; (ii) a nonfrivolous H-1B petition for new employment was filed on her behalf, including for new employment with the same employer, with a request to amend or extend, before the H-1B period of stay expires; and (iii) she has not engaged in unauthorized work in the U.S. since her last admission through the filing of the petition for new employment. The new rule highlights how important it is for employers to keep track of their H-1B workers’ work locations and positions, since USCIS has said that working in a manner or location not previously authorized before filing a new or amended petition “may constitute a violation of status.”

H-1B Beneficiary-Owners

The rule revises the definition of a “U.S. employer” to include entities in which the H-1B beneficiary has a controlling interest, provided that the majority of the beneficiary’s time is spent on specialty occupation duties. “Controlling interest” is defined as owning more than 50% of the entity or having majority voting rights.

In this same vein, the rule also clarifies that individuals with a controlling interest in a petitioning organization can be eligible for H-1B status, provided they meet all other H-1B requirements and—although they may perform duties directly related to owning and directing the petitioner’s business—will spend the majority of their time performing specialty occupation duties. This change facilitates the hiring of entrepreneurs and startup founders under the H-1B program, albeit for shortened validity periods at the beginning. The initial petition and first extension to sponsor an H-1B beneficiary-owner will be approved for only 18 months. Thereafter, all extensions filed on behalf of the H-1B beneficiary-owner would be eligible for up to a 3-year validity period.

H-1B Cap Exemptions

The following employers are cap-exempt (i.e., exempt from the annual quota and thus the H-1B lottery): institutions of higher education; nonprofit entities that are “related to” or “affiliated with” institutions of higher education; nonprofit research organizations; and government research organizations.

The rule revises the definitions of “nonprofit research organization” and “governmental research organization” to allow such entities that conduct research as a “fundamental activity”—but are not primarily engaged in research—to qualify for H-1B cap exemption.

Additionally, the rule updates the regulations to permit certain beneficiaries who are not directly employed by a cap-exempt organization to qualify for cap exemption if they spend at least 50% of their time performing essential work that supports or advances the organization’s fundamental purpose, mission, objective, or function.

The rule also modified the definition of “nonprofit or tax-exempt organization” by removing the requirement to provide IRS approval for tax-exempt status specifically related to research or educational purposes. However, the petitioner must still demonstrate that it qualifies as a nonprofit or tax-exempt institution of higher education, a related or affiliated nonprofit entity, a nonprofit research organization, or a governmental research organization.

Redefining “Specialty Occupation”

The rule amends the definition of “specialty occupation” to emphasize that the required degree must be directly related to the duties of the position. Employers must demonstrate a “logical connection” between the degree and the job responsibilities. If a position allows for a range of degrees, each must be directly related to the role’s duties. In response to comments, DHS revised its stance on generalized degrees in the final rule, removing previous language that specifically excluded business administration and liberal arts degrees from qualifying for specialty occupations. The rule now clarifies that a position is not considered a specialty occupation if a general degree alone is sufficient to qualify for the role. USCIS will evaluate whether the beneficiary’s actual course of study is directly related to the duties of the position, rather than treat the degree title as determinative.

The rule also allows for certain general degrees to qualify if they include a major, minor, concentration, or specialized coursework. Although DHS did not go as far as to codify that positions requiring a “general engineering degree” automatically qualify as specialty occupations, the final rule left some daylight for argument, acknowledging that general engineering degrees can meet the specialty occupation criteria if employers demonstrate how specific fields of study within the degree provide highly specialized knowledge directly related to the job’s duties.

DHS specifies that an MBA is not considered a general degree, although they do not equate an MBA with a general degree in business administration. Employers should be prepared to demonstrate how a beneficiary’s specialized study in business administration equates to a degree in a specific specialty and how it directly relates to the job’s duties.

Longer Cap-Gap Period

To prevent employment authorization gaps for F-1 students transitioning to H-1B status, the final rule extends the “cap-gap” period. Previously, the cap-gap extension began after the student’s OPT or STEM OPT expires and lasted through September 30th of the same year. Under the new rule, cap-gap extends through April 1st of the following fiscal year. This welcome change allows eligible F-1 students to continue working without interruption while awaiting the approval of their H-1B Cap Change of Status petitions.

Site Visits & Third-Party Placement

The final rule expands USCIS’s authority and compliance authority for H-1B site inspections, which are conducted by immigration officers in the Fraud Detection and National Security Directorate (FDNS). It allows USCIS to conduct inspections at the petitioner’s worksite, neutral locations, and any place where H-1B work is performed, including third-party client sites and the private residence of an H-1B beneficiary if remote work is conducted from home. Additionally, the rule authorizes USCIS to interview third parties and H-1B beneficiaries without the presence of the employer or their representatives.

While the rule does not introduce new site visit requirements, it reinforces DHS’s commitment to using site visits as a tool to detect and deter fraud and noncompliance within the program. Employers should be prepared for potential site visits, during which DHS officials may verify information related to H-1B petitions, including worksite locations and employment conditions.