H-1B visas are popular with employers because of their broad applicability. There is a total annual supply of 85,000 new H-1Bs. The limited availability of new H-1B visas each year (called the H-1B cap) impacts the ability of employers to sponsor workers for H-1B status, since the supply of new H-1B visas is routinely exhausted before the end of each fiscal year. Last week, the United States Citizenship and Immigration Services (USCIS) announced that the entire supply of new H-1Bs for FY 2014 (October 1, 2013 through September 30, 2014) was exhausted during the initial petition filing period of April 1-5, 2013 (see Legal Update: USCIS Reaches H-1B Statutory Cap for FY 2014).

Practical Law Company asked Lynden Melmed, a partner with the international corporate immigration firm Berry, Appleman & Leiden LLP, to discuss the impact of the early exhaustion of the H-1B cap on employers.

The H-1B visa classification is critical to employers, as it is the most flexible option for employers that hire foreign professional employees. Whether an employer is hiring a graduate of a US university or has just acquired a technology start-up overseas, the H-1B visa classification is sometimes the only option (and often the best in terms of flexibility) to bring foreign national employees onto the payroll.

The H-1B visa classification is also an essential tool for employers that sponsor foreign workers for green cards, as it is one of only a few visa classifications that allows employers to start the lengthy green card process while the employee is working in the US on a temporary visa. Almost 25,000 employers hire H-1B workers each year, confirming its broad use and importance to US employers.

The annual limit on H-1B visas is 65,000 per year. An additional 20,000 H-1B visas are reserved for foreign workers who hold a master's degree or higher. This year, the government received 124,000 petitions in the first five days, the highest level since 2008. When the agency receives that many applications at the beginning of the filing season, it runs a lottery to determine which H-1B beneficiaries will receive a slot.

The excessive demand for H-1B visas means that many US employers must wait a long time before they can hire H-1B workers. Employers can begin applying for H-1B visas on April 1, six months prior to the start of the new fiscal year on October 1st. If an employee does not receive a slot in this year's lottery, the earliest that the employee will be able to begin working in H-1B status is October 1, 2014, an almost 18-month delay.

Employers that have filed H-1B petitions that are not selected in the lottery often face losing an employee or job candidate. That means a job that was filled is now open again, and the employer must backtrack and begin the recruiting process again, a potentially expensive and time consuming process.

The current situation injects tremendous uncertainty into the hiring process, as an employer does not know whether it will be able to hire foreign workers for large periods of time. Predictability is critical to business planning and our current immigration policy on high-skilled immigration is very problematic for employers.

Many foreign students may obtain authorization to work after graduation under a program called Optional Practical Training (OPT). OPT enables a student to stay and work in the US for one year following her graduation provided the employment is related to the student's field of study. US graduates with STEM (science, technology, engineering or mathematics) degrees may qualify for an additional 17 months of OPT, which would result in a total of 29 months of work authorization. To obtain the STEM OPT extension, the student's employer must be enrolled in E-Verify.

Students who remain enrolled in school may qualify for other types of employment authorization that allows them to work for an employer at least on a part-time basis.

Employers should consider whether new employees who are students or recent graduates (whether in the US or foreign universities) may be eligible to participate in a trainee or internship program for which the individual may obtain either J-1 or H-3 status.

Finally, some foreign students may also qualify for one of the work visa options that are potentially available for all workers (see What visa options might be available for employees or prospective employees who are not foreign students?).

Employers that want to hire a foreign national should consider several alternatives to the H-1B visa. Some options exist depending on the worker's citizenship, while others depend on the worker's job or skills.

First, Congress has set aside a portion of the available H-1B visas for foreign nationals from Chile and Singapore. This allocation stems from the US's trade treaties with those countries, and the visas are called H-1B1 visas, to distinguish them from other H-1Bs. Similarly, Australian citizens who are offered specialty occupations (the same required for the H-1B classification) may qualify for E-3 visas. If their offered jobs are on the NAFTA schedule, Mexican and Canadian citizens may qualify for TN status. In addition, certain employees may be eligible to apply for E-1 or E-2 visas if they are nationals of a country with which the US maintains a treaty of commerce and navigation.

The O-1 visa category can be useful if the employee has extraordinary ability in his field or is a researcher with a background of significant achievement. Employers may also use the L-1 intracompany transfer visa program to bring employees to the US from foreign affiliates when the employee has worked at the foreign affiliate for at least a year prior to transfer to the US.

Finally, employers should consider whether a more experienced employee may qualify to participate in a trainee or internship program and thereby qualify for the J-1 or H-3 trainee visa classification.

For a summary of different visa classifications and their requirements, see Key Nonimmigrant Visa Classifications Chart.

Employers should know that each request for nonimmigrant status is evaluated on its own merits, at the time the status is sought. When the H-1B cap has been met, the government agencies responsible for reviewing requests for nonimmigrant status (the USCIS, the State Department's Bureau of Consular Affairs (BCA) and US Customs and Border Protection (CBP)) apply a higher level of scrutiny to evaluate requests for work authorized statuses. While many work situations may qualify a worker for more than one visa classification, the unavailability of the H-1B category raises fears that workers may seek a category that is not appropriate, and thereby weaken the visa category's purpose. Employers should carefully document any requests for alternative visa categories when the H-1B cap has been met.

Employers and potential employees should know that once the H-1B cap is reached, USCIS runs a lottery to determine which H-1B petitions will receive the year's allotment of H-1B visas. This process is random and does not take into account whether the employer or employee is more or less deserving of a visa. Therefore, both employers and employees should not count on receiving an H-1B visa and must have a contingency plan in place in the event that their H-1B petition is not selected in the lottery.

Employers should be cautious when devising a contingency plan. Since qualifications for visa categories depend on highly individualized factors like citizenship, education, work experience and skills, employers must review each impacted employee on a case-by-case basis to assess the impact of the cap and develop possible alternatives. Employers should communicate the impact of the cap, possible alternatives, the employer's intentions of pursuing any or all alternatives and the likelihood of success in obtaining work authorization clearly and realistically to avoid creating false expectations.

As Congress considers broad immigration reform, it is likely that there will be changes to the H-1B visa classification. A bi-partisan group of senators recently introduced the Immigration Innovation Act of 2013 ("I-Squared"), which would raise the H-1B base cap from 65,000 to 115,000, with an adjustment feature based on market demand. However, several groups that oppose the H-1B classification, including the AFL-CIO, are lobbying aggressively against any increase in H-1B numbers and in favor of tighter restrictions on H-1B usage. It is too early to predict whether a comprehensive immigration bill will pass Congress, but it is safe to assume that some combination of additional H-1B visas and enforcement provisions would be part of any final compromise.