On December 29, 2025, the Department of Homeland Security formally published its final rule replacing the H-1B lottery with wage-weighted selection in the Federal Register. Starting February 27, 2026, a software engineer offered $150,000 (Level IV wage) gets four entries in the pool; one offered $65,000 (Level I) gets one entry—an 8.5% selection chance versus the prior 25% random odds. The change targets fraud: 758,994 registrations competed for 85,000 slots in FY 2024, with 408,891 duplicate submissions for the same people, up 140% from the year before. Shell companies flooded the system; Disney laid off American IT staff and made them train H-1B replacements paid 40% less. On December 24, a federal judge upheld the separate $100,000 H-1B fee Trump imposed in September, rejecting a U.S. Chamber of Commerce lawsuit.
The fallout is immediate: U.S. consulates in India began canceling thousands of H-1B visa appointments in December, pushing them to mid-2026 due to new mandatory social media screening. India's Nasscom called for delaying wage-weighting until FY 2028, warning it will crush entry-level hiring and favor deep-pocketed Big Tech over startups and research institutions. Twenty states sued Trump over the $100K fee; Vice President JD Vance defended the restrictions as 'true Christian politics,' saying companies shouldn't 'bypass American labor for cheaper options in the third world.' The battle now spans courtrooms, consulates, and Congress: Will wage-weighting stop fraud or just hand visas to Google while strangling the talent pipeline?
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People Involved
Alejandro N. Mayorkas
Secretary of Homeland Security (Finalized wage-weighted H-1B rule December 2025)
Chuck Grassley
U.S. Senator (R-Iowa) (Co-sponsor of H-1B reform bills since 2007)
Elon Musk
CEO of Tesla and SpaceX (Defending H-1B visas amid MAGA backlash, December 2024-January 2025)
Donald Trump
President of the United States (Flip-flopped on H-1B policy; now supports program)
J.D. Vance
Vice President of the United States (Defending H-1B restrictions as pro-American worker policy, December 2025)
Beryl A. Howell
U.S. District Judge (D.C.) (Ruled Trump's $100,000 H-1B fee lawful, December 24, 2025)
Rob Bonta
California Attorney General (Leading 20-state lawsuit against $100,000 H-1B fee)
Organizations Involved
U.
U.S. Citizenship and Immigration Services (USCIS)
Federal Agency
Status: Administering H-1B program; enforcing fraud crackdown
USCIS runs the H-1B cap lottery and processes petitions for the 85,000 annual visas.
CO
Cognizant Technology Solutions
IT Outsourcing Firm
Status: Major H-1B user; sued in Disney case
Global IT services company that files thousands of H-1B petitions annually, often for lower-wage positions.
HC
HCL Technologies
IT Outsourcing Firm
Status: Major H-1B user; sued in Disney case
Indian multinational IT services firm and heavy H-1B petitioner, often criticized for wage suppression.
TH
The Walt Disney Company
Entertainment Conglomerate
Status: Faced backlash and lawsuit over 2015 H-1B layoffs
Used H-1B outsourcing to replace American IT workers in 2015, sparking national controversy.
NA
National Association of Software and Service Companies (Nasscom)
Industry Trade Association
Status: Opposing wage-weighted H-1B rule; calling for delay until FY 2028
India's premier IT industry association representing over 3,000 companies employing 5.4 million workers.
U.
U.S. Chamber of Commerce
Business Advocacy Organization
Status: Lost lawsuit challenging $100,000 H-1B fee, December 24, 2025
Largest U.S. business lobbying group; filed October 2025 lawsuit against Trump's $100K H-1B fee.
Timeline
New System Takes Effect
Implementation
Wage-weighted selection begins for FY 2027 H-1B cap season.
Rule Published in Federal Register
Regulation
Wage-weighted selection rule formally published.
Judge Upholds $100,000 H-1B Fee
Legal
U.S. District Judge Beryl Howell rejects U.S. Chamber of Commerce lawsuit, ruling Trump's September proclamation imposing $100K fee falls within executive authority under Immigration and Nationality Act.
Nasscom Calls for Delay Until FY 2028
Industry Response
India's IT industry association warns wage-weighted selection will disadvantage startups, small businesses, and entry-level STEM graduates; urges phased implementation starting FY 2028 instead of FY 2027.
DHS Announces Wage-Weighted Selection
Regulation
Final rule replaces lottery with wage-based weighting effective Feb 2026.
Social Media Screening Begins at U.S. Consulates
Enforcement
U.S. Embassy in India starts mandatory online presence reviews for all H-1B and H-4 applicants, canceling thousands of December-January appointments and rescheduling to March-August 2026.
20 States Sue Over $100,000 H-1B Fee
Legal
Coalition led by California, New York, and Massachusetts files lawsuit alleging Trump's September fee violates Administrative Procedure Act and exceeds executive authority.
Trump Imposes $100,000 H-1B Fee
Executive
New fee targets program abuse; Indian IT stocks plunge.
Musk-Bannon H-1B Feud
Political
MAGA coalition splits over visas; Trump sides with Musk, calls program 'great.'
FY 2024 Registrations Hit Record
Data
758,994 registrations submitted; 54% are duplicates for same workers.
USCIS Launches Fraud Investigations
Enforcement
Agency investigates dozens of companies for coordinated lottery gaming.
Grassley-Durbin Bill Reintroduced
Legislation
H-1B and L-1 Visa Reform Act filed again; dies in committee.
Trump Bans New H-1B Visas
Executive
Temporary ban issued, later struck down by federal courts.
Electronic Registration Launches
Policy
USCIS introduces online H-1B lottery registration; fraud explodes.
Trump's 'Buy American, Hire American'
Executive
Executive order directs agencies to review H-1B program for abuse.
Workers Sue Disney
Legal
Laid-off employees file federal lawsuit alleging illegal replacement with H-1Bs.
New York Times Exposé
Media
Disney H-1B scandal breaks nationally, triggering congressional scrutiny.
Disney Layoffs Take Effect
Corporate
Workers laid off after training H-1B replacements paid 40% less.
Disney Notifies IT Workers of Layoffs
Corporate
250 Disney IT staff told they'll be replaced by H-1B workers from outsourcing firms.
First Grassley-Durbin Reform Bill
Legislation
Senators introduce H-1B fraud prevention bill; fails to pass.
Cap Set at 85,000
Legislation
H-1B Visa Reform Act sets 65,000 regular cap plus 20,000 for US master's degrees.
H-1B Program Created
Legislation
Immigration Act of 1990 establishes H-1B visa for specialty occupations.
Scenarios
1
Big Tech Dominates, Startups Shut Out
Discussed by: Startup founders, immigration attorneys, Federal Register public comments
Google, Meta, and Amazon hoover up visas by offering Level IV salaries ($150K+) that small companies can't match. Startups needing niche AI or cryptography talent get frozen out even when offering competitive equity packages, because cash wage determines lottery weight. Indian IT outsourcers pivot to 'staff augmentation' at higher rates, passing costs to clients. Concentration accelerates: top 50 employers capture 60% of all H-1Bs versus 40% pre-reform. Congress holds hearings on unintended consequences but takes no action. Venture capitalists lobby for carve-outs; none pass.
Shell companies and body shops game the new system by listing inflated Level IV wages on registrations, then paying Level I salaries after approval via side agreements or mandatory 'training fee' kickbacks. USCIS scrambles to audit actual compensation post-selection but lacks resources to verify 85,000 petitions annually. Whistleblowers report rampant wage fraud; enforcement lags years behind. Congress debates mandatory wage verification and site inspections. Meanwhile, legitimate employers bear audit burden while bad actors exploit gaps. By 2028, wage fraud eclipses the old lottery manipulation.
Wage-weighting kills the incentive for duplicate registrations: no point filing 10 entries for a Level I worker when one Level IV worker has quadruple the odds. FY 2027 registrations drop 40% to 450,000; duplicates fall to under 5%. Outsourcing firms either raise wages genuinely or exit the H-1B market, shifting to L-1 visas and nearshoring in Mexico. Median H-1B salary climbs from $95,000 to $125,000. Universities and research labs win more visas for PhD scientists. Displacement complaints decrease. Critics still argue the cap should rise or the program should end, but consensus forms: wage-weighting fixed the lottery's worst abuses.
4
Congressional Overhaul Replaces Executive Fix
Discussed by: Senate immigration hawks, tech industry lobbyists, bipartisan reform groups
Wage-weighting proves a stopgap. In 2026, Republicans control Congress and pass comprehensive H-1B reform increasing the cap to 110,000 but mandating Level III minimum wages, site audits, and criminal penalties for fraud. Democrats extract green card pathways for STEM PhD graduates in exchange. The bill sunsets DHS's wage-weighted rule, replacing it with statutory requirements. Indian IT firms lobby fiercely; tech giants back the compromise. The law passes with 65 Senate votes. By 2027, the H-1B program looks unrecognizable: higher wages, more enforcement, clearer pathways to permanence.
Historical Context
Canada's Points System Shift (2015)
1967-2015
What Happened
Canada pioneered points-based immigration in 1967, awarding visas based on education, language, age, and skills without employer sponsorship. For decades, immigrants arrived without job offers, leading to credential mismatches—engineers driving taxis. In 2015, Canada introduced Express Entry, a hybrid model: candidates still need points, but employers select from a pre-approved pool, blending supply-driven points with demand-driven hiring.
Outcome
Short Term
Applications spiked; processing times dropped from years to months.
Long Term
Immigrant employment outcomes improved significantly as employer involvement ensured job market fit.
Why It's Relevant Today
The US H-1B wage-weighted system mirrors Canada's evolution: moving from pure randomness toward valuing market signals—here, wages as a proxy for skill and demand—without abandoning employer sponsorship entirely.
Australia's 457 Visa Abuse and Reform (2017)
1996-2018
What Happened
Australia's Temporary Skill Shortage (subclass 457) visa allowed employers to sponsor foreign workers. By 2017, widespread abuse emerged: employers sponsoring workers for fake jobs, paying below-market wages, or using 457s to suppress Australian salaries. In April 2017, Prime Minister Malcolm Turnbull abolished the 457 visa, replacing it with the Temporary Skill Shortage (TSS) visa with stricter wage floors, mandatory labor market testing, and occupation lists tied to genuine shortages.
Outcome
Short Term
Visa grants dropped 20%; businesses protested disruption.
Long Term
Wage protections strengthened; public trust in skilled migration partially restored.
Why It's Relevant Today
Like the 457 visa, the H-1B lottery faced exploitation by employers seeking cheap labor rather than scarce talent. The US wage-weighted rule parallels Australia's wage floor approach: using compensation as a gatekeeper to prioritize genuine skill needs over cost arbitrage.
Disney's H-1B Layoffs (2015)
2014-2015
What Happened
In October 2014, Walt Disney World notified 250 IT workers they'd be laid off and replaced by H-1B workers from Cognizant and HCL—outsourcing firms paying $61,000 versus Disney's $100,000 salaries. Workers spent 90 days training their replacements or lost severance. The scandal broke nationally in June 2015 via the New York Times, sparking lawsuits alleging illegal displacement and congressional hearings on program abuse.
Outcome
Short Term
Disney reversed 35 layoffs; lawsuits filed but largely dismissed on standing grounds.
Long Term
The case became a rallying cry for H-1B critics, illustrating wage suppression and the gap between statutory intent (fill labor shortages) and corporate practice (cut costs).
Why It's Relevant Today
The Disney case epitomizes the problem DHS's wage-weighted rule aims to solve: employers using H-1Bs not for specialized talent but for cheaper labor. By prioritizing higher wages, the new system theoretically blocks the cost-cutting outsourcing model that enabled Disney's layoffs.
