The Department of Homeland Security (DHS) has released yet another rule that will make it harder and more costly for U.S. companies to employ highly skilled workers.

As a companion regulation to the “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States” rule, DHS has released the “Strengthening of the H-1B Nonimmigrant Visa Classification” rule. Like its companion, it is being published as an Interim Final Rule (IFR), but will go into effect after 60 days. DHS expects about one-third of petitions for H-1B visa classification will be denied under the new rule.

The H-1B Rule codifies policies USCIS has been pursuing over the past several years that made it more difficult to obtain H-1B approvals and resulted in more Requests for Evidence (RFEs) and petition denials — all without transparent legislative or regulatory changes. Employers sued the administration in federal court arguing that a number of these policies were “arbitrary and capricious” in violation the Administrative Procedures Act (APA). In response, USCIS settled the cases and agreed to withdraw a number of the most contentious agency policies. In response, DHS is now intending to reimplement many of those policies through the truncated Interim Final rulemaking process. DHS contends that this is necessary in order to protect U.S. jobs during the current COVID-19-related economic downturn. Companies that employ H-1B workers maintain that access to these skilled workers is essential to ongoing operations and benefits the U.S. economy.

Key takeaways of the new rule for employers:

• The definition of a “specialty occupation” is revised to focus more specifically on the relationship between the degree requirements and the duties of the position. This will make it more difficult for those in new, innovative fields, where specific specialty degrees are not yet even available.

• Petitioners will bear the burden of showing a specific bachelor’s degree is always a requirement, not just “normally” a requirement for the position, a near impossible task.

• Contractors will no longer be specifically listed among those who qualify as U.S. employers, although they can still qualify as U.S. employers by proving a bona fide employer-employee relationship.

• The definition of a bona fide employer-employee relationship will focus more heavily on a totality of circumstances standard, rather than any one factor, such as the right to control.

• H-1B workers at third-party locations will be limited to one year, rather than the currently available three years, renewable annually. Petitioning employers intending to place H-1B workers at third-party worksites will have to provide corroborating evidence to prove that specialty occupation work will be available throughout the requested time period. These changes will greatly increase the costs and documentary requirements for certain petitioners who rely on third-party placements.

• The H-1B Rule codifies the scope and potential consequences of USCIS Fraud Detection and National Security Officers (FDNS) worksite inspections. If the FDNS is not able to verify facts related to an H-1B petition or compliance with H-1B requirements due to the failure or refusal of the petitioner or third party to cooperate, such failure may be grounds for denial or revocation of a petition.

Because this far reaching rule is being issued as an Interim Final regulation without opportunity for full notice and comment, litigation seeking to enjoin implementation is likely.  In addition, the rule is likely to be challenged while the validity of Chad Wolf’s appointment as Acting Director of DHS is still being contested.