Trump administration outlines major reforms for H-1B visas, including for cap-exempt segment

The Trump administration is preparing sweeping changes to the H-1B visa program, with new regulations expected to tighten eligibility, increase compliance requirements, and alter how H-1B visas are allocated.

According to the Department of Homeland Security’s (DHS’s) regulatory agenda, a proposal slated for December 2025 would revise criteria for exemptions from the annual H-1B visa cap, impose stricter conditions on third-party placements, and heighten scrutiny of employers previously found in violation of program rules.

Currently, exemptions from the 85,000 annual cap (quota) apply to jobs at higher education institutions, nonprofit research organizations, and government research entities. Certain workers already counted against the cap — such as those seeking to extend or change employers — are also exempt. The forthcoming rule is expected to redefine these criteria, potentially narrowing the scope of who qualifies as cap-exempt.

Under the earlier Trump administration, US Citizenship and Immigration Services (USCIS) had issued a policy memo requiring employers who placed H-1B workers at third-party client sites to submit detailed contracts and itineraries. Employers had to prove that specialty occupation work would exist for the entire duration of the requested H-1B period. This effectively limited approval periods to shorter terms (sometimes just a few months) if USCIS believed the contract didn’t cover the full three years. USCIS also applied the ‘employer-employee relationship’ test more aggressively, focusing on whether the H-1B petitioner (the staffing firm/consulting company) truly controlled the worker’s duties, salary, and supervision — or whether the third-party client did. There was a spike in requests for evidence during processing of H-1B visa applications and the rate of denials had also shot up. Later, a district court had struck down parts of this USCIS memo, which was subsequently rescinded by USCIS.

In the context of the proposed rule, an immigration consultant attached to a tech company said, “It looks like the Trump administration is now seeking to strict third-party placement rules into formal regulation, rather than relying on policy memos that can be challenged in court.”

Separately, DHS is set to announce a long-anticipated rule that would reshape the way H-1B cap numbers are assigned. The proposal, which was listed for publication in Aug, would favour workers offered higher wages, as measured by the Department of Labor’s Occupational Employment and Wage Statistics (OEWS). TOI in its edition of July 22 had mentioned that a weighted selection process based on wages was on the anvil.

Indians are major H-1B beneficiaries. For the fiscal ended Sept 2023, they accounted for 68,825 (58%) of initial employment visas and 2.10 lakh (79%) of extensions, far outpacing China, the second-largest source, with significantly lower allotments of 16,094 and 29,250, respectively. Thus, any change will significantly impact Indians aspiring to work in the US.

The planned reform would maintain the existing ‘beneficiary-centric’ registration system — under which each worker has a single entry regardless of how many employers file on their behalf — and would not alter the order of selection between the regular 65,000 cap and the additional 20,000 slots reserved for advanced-degree holders.

If finalized, the changes could significantly affect both employers and foreign professionals. Tech firms and staffing companies that rely heavily on third-party placements may face tighter restrictions, while higher-paid workers could gain a greater chance of selection in the H-1B lottery to the detriment of new graduates, including those from US universities.