The US government has withdrawn the Donald Trump era proposal to change the process of granting H-1B visa from the current lottery system to a wage-based system, a move that could cheer the Indian IT companies.

The decision by the Department of Homeland Security comes following a verdict by the US District Court for the Northern District of California, which has vacated the rule.

“The Department of Homeland Security has published a final rule that withdraws the Modification of Registration Requirement for Petitioners Seeking to File Cap-Subject H-1B Petitions final rule, also known as the H-1B Selection Final Rule, issued Jan. 8, 2021. That rule was vacated by the US District Court for the Northern District of California,” the US Citizenship and Immigration Services has said in a note on its website dated 21 December.

“On Sept. 15, 2021, the court in Chamber of Commerce of the United States of America et al. v. United States Department of Homeland Security, et al., No. 4:20–cv–07331 (N.D. Cal. March 19, 2021) vacated the H-1B Selection Final Rule. The rule would have changed the way USCIS selects H-1B registrations (or petitions, if registration is suspended) submitted by prospective petitioners seeking to file an H-1B cap-subject petition by ranking and selecting registrations based generally on corresponding wage levels,” the USCIS note reads.

In January 2021, the USCIS had announced to do away with the traditional lottery system in deciding the H-1B visa grants. But President Joe Biden administration had later announced that it was delaying the H-1B policy of the previous Donald Trump administration on the allocation of the said foreign work visas by continuing with the lottery system until December 31, 2021.

The H-1B visa is a non-immigrant visa that allows the companies to employ foreign workers in speciality occupations that require theoretical or technical expertise. The IT firms use H-1B visa to hire tens of thousands of employees every year from countries including India.

“DHS intends to comply with the court’s decision vacating the H-1B Selection Final Rule. Therefore, since regulatory changes promulgated through the H-1B Selection Final Rule are scheduled to be codified in the Code of Federal Regulations (CFR) at 8 CFR 214.2 on the rule’s new effective date, December 31, 2021, DHS is issuing this rule to withdraw the vacated H-1B Selection Final Rule.

"DHS is not required to provide notice and comment or delay the effective date of this rule because this rule simply implements the court’s vacatur of the H-1B Selection Final Rule and ensures that the vacated regulatory provisions are not codified in CFR. Following the vacatur, the changes made by the H-1B Selection Final Rule do not have any legal effect,” as per a public inspection document uploaded on federal registry of the US government.

“DHS has concluded that each of those three reasons—that notice and comment and a delayed effective date are unnecessary, impracticable, and contrary to the public interest— independently provides good cause to bypass any otherwise applicable requirements of notice and comment and a delayed effective date,” as per the same public inspection document.

The move could cheer the Indian technology firms, and their subsidiaries as they are one of the key users of H1B visas. According to a report published on 8 May and updated on 11 May 2021 in the New York Times, Indian technology majors like Infosys, Tata Consultancy Services and Wipro were among top firms who are “heaviest users of H-1Bs” in 2020.

Indian IT firms and its apex industry association NASSCOM had opposed the January 2021 proposals. After the proposed rules were out, NASSCOM had said in February that “prioritizing purely on wage levels has the potential to significantly damage some of the most innovative companies in the world” along with many hospitals and health care providers, research facilities, universities and other petitioners.”

“We believe it is important for the US to be able to access talent critical to the COVID recovery phase. While NASSCOM member companies have increased local hiring and focus their efforts on local STEM skills development, the visa program bridges a critical skills gap, enabling America to become more competitive globally,” the industry body had said.