US biotechnology companies and foreign nationals: the changing dynamics of access to H-1B visas
A Stephen Dahms1
& Stephen C Trow2
1 A. Stephen Dahms is at the California State University System Biotechnology Program, San Diego State University, San Diego, California, USA sdahms@sciences.sdsu.edu
2 Stephen C. Trow is at Trow & Rahal, PC, an immigration law firm in Washington, DC, USA. strow@trowlaw.com
Recent changes in the H-1B visa program have left biotech employers shorthanded and confused.
Regional biotechnology industry clusters cite access to a skilled labor pool as one of the top two or three most significant hurdles to commercialization. In the United States, a shortfall in the labor pool has required access to foreign workers in a variety of areas and expertise. Starting with efforts in California, the industry was surveyed in 1998−2001, which led to findings that, depending upon the region, between 6% and 10% of the US biotechnology workforce had H-1B visas, with an estimate of 18,000 in the biotech industry nationally, and projected needs of 25% annual increases in some of the clusters. Relatedly, the US Department of Commerce reported in 2003 that the biotech industry workforce grew annually by 12% over the period 1997−2003.
Biotechnology industry surveys of H-1B visa usage1 also found that 80% of biotechnology H-1Bs were from US universities, 75% were graduate-degreed (40% PhD, 35% MS, 20% BS and 5% MD), 85% eventually acquired permanent residency in the US and companies were spending an average of $10,200 on each H-1B worker for processing fees and legal expenses through to a green card, leading to the conclusion that US companies had spent in excess of $150 million over the previous five years to acquire and keep their H-1B workers. These and other survey data also clearly showed that the H-1B worker skill sets sought by biotech companies identically match the most pressing employment needs of the industry overall and that their compensation was equal to, or in most cases, higher than US nationals.
Recent history Access to H-1B visas is limited by a 'cap' or annual limit on the number of new foreign workers who can be granted H-1B visa status. Increasing demand for H-1B visa status first exceeded the cap in September 1997, and then caused major disruptions in May 1998 when processing of petitions for new H-1B workers was suspended for the remaining five months of fiscal year (FY) 1998. In response to pressure exerted by the information technology (IT) industry and the Biotechnology Industry Organization (BIO; Washington, DC, USA), the H-1B cap was raised from 65,000 to 115,000 in FY 1999 and then again to 195,000 in FY 2001, with a provision that the cap would revert to 65,000 on October 1, 2004.
Starting in mid-2001, discussions began within BIO about legislative strategies to raise the cap from 65,000 back to a level that would assure access to these talented foreign nationals. This initiative was derailed by the events of September 11, after which any discussion of increasing the entry of foreign workers was counter to public and congressional opinion.
Although there has not been a biotechnology industry H-1B needs survey since early 2001, it is thought that demands are increasing in the range of 3,500 to 5,000 per year. Fortunately, the law raising the cap for FY 2001 also exempted from the cap all H-1B workers employed at an institution of higher education or a related or affiliated nonprofit entity, or at a nonprofit research organization or a governmental research organization, thus removing approximately 10,000 workers from the H-1B cap.
The current situation On October 1, 2004, when FY 2005 began and the H-1B cap reverted to 65,000, the US Citizenship and Immigration Services (USCIS) announced that it had received enough H-1B petitions during the preceding six months to use up the entire supply for FY 2005. The USCIS indicated that it would continue to process petitions that it received before October 1, but it would not accept any new H-1B petitions that are subject to the cap for FY 2005. It also announced that it would start to accept petitions for FY 2006 on April 1, 2005, six months before the start of FY 2006. Many employers expected that the USCIS would receive enough petitions to exhaust the FY 2006 supply well before October 1, 2005, and made plans to file their petitions in April 2005.
In December 2004, the FY 2005 Omnibus Appropriations Act exempted from the H-1B cap up to 20,000 foreign nationals per year who have earned a master's degree or higher from a US university. This change was prompted by renewed pressure from the IT, semiconductor and engineering industrial sectors, especially the National Association of Manufacturers (which BIO has partnered with on the H-1B issue since the mid-1990s).
The new exemption is vitally important for foreign students who graduated from US universities during 2004 and are now working in F-1 or J-1 visa status with practical training authorization that expires before October 1, 2005. The exemption was scheduled to take effect on March 8, 2005, and it was expected that the 20,000 new slots would be taken quickly, so employers made plans to file petitions for qualifying workers on March 8. There were no changes in the other exemptions from the H-1B cap, so employers continued with their plans to file petitions for nonexempt workers on April 1.
However, on March 4, 2005, the USCIS announced that it was not ready to accept petitions for these 20,000 new H-1B slots as scheduled on March 8, and then it announced to great surprise that these 20,000 slots would not be limited to foreign nationals with a master's/PhD degree from a US university. The USCIS did not publish a rationale for this dramatic change, but it appears to be based on a determination that at least 20,000 petitions for master's/PhD graduates of US universities had already been approved during FY 2005, making the 20,000 new slots available to any qualified applicants. In addition, in late March the USCIS announced that it had mistakenly approved at least 10,000 more H-1B petitions during FY 2005 than authorized by the 65,000 cap. This series of announcements left employers wondering whether the 10,000 excess approvals would be deducted from the 20,000 new slots, leaving only 10,000 new slots to be given to any and all qualified applicants.
As of April 20 the USCIS had still not announced the filing date and procedure for the 20,000 new H-1B slots that were expected to be available on March 8, nor had it indicated whether the 10,000 excess approvals would be deducted from the 20,000 new slots. The prospects for recent master's/PhD graduates of US universities to avoid gaps in their work authorization before October 1, 2005, are looking much worse, whereas graduates of foreign universities and bachelor's degree graduates of US universities can now hope for a windfall H-1B approval before October 1. Regardless of how these issues are resolved, the delay and uncertainty have made life more difficult for employers and workers seeking H-1B status.
Fee hikes and usage Employers struggling with the limited supply of H-1B visas and confusion over eligibility for the 20,000 new slots are also facing sharply higher filing fees for H-1B petitions. The FY 2005 Omnibus Appropriations Act reinstated a 'training' fee that had lapsed in October 2003 and increased that fee from $1,000 to $1,500 for most H-1B petitions. The training fee is reduced to $750 for employers that have no more than 25 full-time equivalent employees, including employees of affiliates and subsidiaries. This fee will fund job training and scholarships for US workers, and government processing of H-1B cases.
The Appropriations Act also imposed an additional $500 'fraud prevention' fee for each petition seeking an initial grant of H-1B status or authorization to change employers in H-1B status. This will provide additional funding for visa fraud prevention programs at USCIS and other government agencies. These new fees are separate from the mandatory $185 base fee for an H-1B visa petition, and the optional $1,000 fee for premium processing (faster service) from the USCIS. The total filing fee for a large employer seeking premium processing of an H-1B visa petition is now $3,185.
Over $500 million of H-1B training fees have been collected and routed by the US Department of Labor since 1999 to fund new training programs to help reduce dependency upon foreign nationals, but unfortunately none of these funds has been directed at the graduate-degree education that the biotechnology industry needs. Biotech employers are paying H-1B training fees to create programs to relieve their dependency on foreign workers, yet most H-1B workers in the biotech and high-tech industries are coming from US educational institutions. The problem arises on the supply side of the labor equation, not the demand side. Currently, over 25% of all PhDs in the US are foreign nationals, and over 50% of all graduate students are foreign students. Funding graduate-level training programs will not reduce the demand for H-1B workers if US students decline to enroll in those programs.
Conclusions Clearly, the H-1B visa program provides a temporary solution to shortages in the national and domestic biotech labor pools—shortages that mirror the inadequate production of appropriately trained US nationals by US institutions of higher learning. The reality is that universities have inadequate resources for expanding their training pipelines, especially in specialized areas that follow the basic-research phase of company product development. Efforts should be directed toward influencing greater congressional and federal agency attention to these important topics, especially an increase in the H-1B cap and effective use of the very sizable H-1B fee−derived training funds.
