The new H-1B Modernization Rule: Key Changes for Founders & Startups

The Biden administration’s new H-1B rule will take effect on January 17, 2025, and contains several provisions that should be good news for startups and founders. While some of these provisions are new, many are merely codifying—and in some cases, clarifying—already existing policies, thus making them harder to rescind under the next administration. Here is a summary of the most relevant changes relating to founders and startups: Expanded cap exemptions

• Under the new rule, nonprofit or governmental research organizations no longer need to be primarily engaged in research to be cap-exempt; rather, it is sufficient if research is a “fundamental activity” of such organizations, which has the potential to support entrepreneurship and technological innovation.
• H-1B beneficiaries who are not directly employed by a qualifying research organization but spend at least half their time providing essential work supporting or advancing a fundamental purpose, mission, objective, or function of the organization may also qualify for cap exemption.

A slightly more flexible definition of “specialty occupation”

• A position may qualify as a specialty occupation even if it allows for a range of qualifying degree fields, as long as each field has a logical connection to the job duties. USCIS believes this will allow the H-1B program to better adapt to new and emerging technologies, education, and research fields.

Extended cap-gap protections for international students

• For F-1 students with a pending, timely filed cap-subject H-1B petition, the validity period of their F-1 status and any OPT work authorization will be automatically extended until April 1 of the relevant fiscal year while their H-1B petition is pending. This expansion will help employers attract and retain global talent and avoid disruptions and uncertainty.

Clarified and codified H-1B eligibility for business owners The new H-1B rule clarifies that a beneficiary who has a controlling interest in a petitioning entity—either by owning more than 50% of the petitioner or by having majority voting rights— may be eligible for H-1B status, albeit with certain added conditions:

• Shorter validity periods: The initial validity period is limited to 18 months for the initial petition and another 18 months for the first extension. After that, a second extension may be granted for up to three years.
• Job duties: The beneficiary must perform specialty occupation duties a “majority of the time”. Apart from some incidental duties, non-specialty occupation duties must be directly related to owning and directing a business (e.g., signing leases, finding investors, negotiating contracts, developing a business plan, engaging with potential suppliers and other stakeholders, and talent acquisition). Petitioners should expect USCIS to scrutinize each described job duty as well as the expected —or actual, in case of extensions—time spent on each job duty.
• Sole owners: While the new rule does not allow for “self-sponsorship,” a beneficiary who is the sole owner of a business may still file an H-1B petition as a United States employer if there is a bona fide job offer, the business has a legal presence in the U.S., is amenable to service of process, and has an IRS tax ID number, and the beneficiary will perform specialty occupation duties a majority of the time.
• Concurrent H-1B employment: Beneficiary-owners may seek concurrent H-1B employment in multiple qualifying specialty occupation roles as long as they adhere to the “majority of the time” condition when working for their own business.

While this summary focuses on the changes pertinent to founders and startups, there are several other changes to the H-1B program that founders should be aware of, including the following:

• A new, revised edition of Form I-129, Petition for a Nonimmigrant Worker will become mandatory starting January 17, 2025, and there will be no grace period for previous form versions.
• USCIS codified its on-and-off policy of deference to prior approvals where the same parties and the same underlying facts are involved. This will apply to all nonimmigrant categories using Form I-129 (e.g., H, O, L, TN, etc.) and include requests for extensions of stay, change of status, amendments, and consular processing.
•  Petitioners no longer have to provide itineraries for H petitions.
• Bona fide specialty occupation positions must be available for the beneficiary as of the requested start date. A bona fide job offer may include telework, remote work, or other off-site work within the United States, as well as more flexible work schedules.
•  The rule codifies the government’s authority to request contracts, work orders, client letters, or similar evidence to determine if the position is bona fide (trade secrets contained in such materials may be redacted or sanitized).
• Site visits may be performed at the petitioner’s headquarters, satellite locations, or the locations where the beneficiary works or will work, including the beneficiary’s home or third-party worksites. A refusal to cooperate may result in a denial or revocation.
• Finally, a reminder that the H-1B registration fee for the upcoming FY2026 cap selection season will be $215 (up from $10 in 2024).