Cap-Exempt Through a Contractor: The Half-Time Rule for Workers Placed at Universities and Research Hospitals

A contractor can file a cap-exempt H-1B for your university or research-hospital placement, but only while half your work time and your duties pass a test that can break the day the assignment changes.

Part of our guide to cap-exempt H-1B employers.

A staffing company, contract research firm or other contractor can file a cap-exempt H-1B for you, even though it is not a university. The condition: you must spend at least half of your work time on duties at a qualifying university, affiliated nonprofit, nonprofit research organization or government research organization, and those duties must directly further its higher-education or research mission. That is the cap exempt H-1B third party placement rule in 8 CFR 214.2(h)(8)(iii)(F)(4), in effect since 2025-01-17. Telework inside the US can count toward the half. The contractor, not the university, is your petitioner and carries the burden of proof.

Status as of 2026-11-01:

• In effect: the half-time rule and the written-affiliation test for nonprofits, both in 8 CFR 214.2(h)(8)(iii)(F).
• Under OIRA review: "Reforming the H-1B Nonimmigrant Visa Classification Program" (RIN 1615-AD00), received 2026-08-24. Its abstract mentions cap-exemption eligibility and third-party placements; no text is public, and it changes nothing today.
• In effect on paper, blocked in practice: the $100,000 H-1B entry restriction (Proclamation 11069). It is not being collected.
• In effect, with an elimination proposed: the 60-day H-1B grace period. Comments on the proposal to eliminate it (RIN 1615-AD22) close 2026-11-10; it covers H-1B and other work visas, not the F-1 grace period. After 2026-11-10, check the Federal Register: a closed comment period still leaves only a proposal.

What is the cap-exempt H-1B third-party placement rule?

You are exempt from the annual H-1B cap even when a for-profit contractor employs you, if you will spend at least half of your work time on duties at a qualifying university, affiliated nonprofit, or nonprofit or government research organization, and those duties directly further its education or research mission. Remote work inside the United States can count toward that half.

The regulation's test is that the worker "will spend at least half of their work time performing job duties at a qualifying institution, organization, or entity and those job duties directly further an activity that supports or advances one of the fundamental purposes" of that entity, "namely, either higher education, nonprofit research, or government research."

Three questions decide your case, in order:

1. Is the site itself a qualifying entity? A university, an affiliated nonprofit, or a nonprofit or government research organization.
2. Does at least half of your work time go to duties at that entity?
3. Do those duties directly further its education or research mission?

If the first answer is no, the other two never matter. For organizations that hire you directly, see our guide to cap-exempt nonprofit and government research organizations and our guide to cap-exempt universities, research hospitals and nonprofits. This page covers the case where someone else employs you and places you there.

What changed on 2025-01-17

The current text came from the 2024 modernization final rule (89 FR 103054). If a recruiter or an older article describes the "majority" test, they are quoting the old rule.

Cap exemption for placed workers: old rule, current rule, what to do (as of 2026-11)

Can a staffing company file a cap-exempt H-1B?

Yes. The contractor is your employer and your petitioner: it files Form I-129, gets the Labor Condition Application (LCA) certified by the Department of Labor and pays your wages. The university or hospital files nothing for your H-1B, but its letters and contracts become the evidence. DHS put it plainly in the final rule: "The burden remains on the petitioner to establish the qualifying work being performed by the beneficiary."

Answering a union's concern about staffing firms, DHS wrote that the duty requirement "is still a meaningful limiting standard that not every third-party employer that simply places its employees 'at' a qualifying institution will be able to meet." Being on campus is not the test. What you do there is.

Two other H-1B rules apply to the same petition:

• The third-party staffing rule. If you are "contracted to fill a position in a third party's organization" and become part of its hierarchy, "and not merely providing services to the third party", then "it is the requirements of that third party, and not the petitioner, that are most relevant" to whether the job is a specialty occupation (8 CFR 214.2(h)(4)(i)(B)(3)). So if you sit inside the lab's or hospital's own team, its requirements for the role are the ones that count.
• Site inspections. USCIS may inspect "third party worksites", and if a petitioner or third party fails or refuses to cooperate, that can lead to denial or revocation (8 CFR 214.2(h)(4)(i)(B)(2)).

If you have read about the L-1B third-party worksite rule, note the difference: that test asks whether the client controls your work and whether the placement depends on your employer's specialized knowledge. (F)(4) says nothing about supervision. DHS "places the focus on the work being performed by the beneficiary, rather than who pays the beneficiary for that work."

Which placements qualify? Seven scenarios

These illustrate how the tests read; they are not predictions. USCIS decides each case on its evidence.

How (F)(4) reads against common contractor placements (our reading, as of 2026-11)

Does remote work count toward the half-time test?

It can. The rule says work "at" the qualifying institution "may include work performed in the United States through telework, remote work, or other off-site work," and that "USCIS will focus on the job duties to be performed, rather than where the duties are physically performed."

Two limits matter. First, "in the United States" means time worked abroad does not count. Second, location still drives wages: DHS wrote that "the physical location where duties are performed is relevant for wage requirements, as governed by DOL regulations." If you work from home, ask the attorney how your home office is covered by the LCA, like any other place you work.

How is "half" measured?

USCIS has not set a formula. DHS declined to specify that the test be measured "over the course of the petition's validity period" or to set "a number of hours per week," warning that a three-year petition with its first 18 months spent wholly at a cap-subject employer could let a worker change jobs and never reach the qualifying site. Our reading: a record showing at least half throughout is easier to defend than one that only averages out.

What documents prove a cap-exempt placement?

Work through these with the contractor's immigration attorney before you sign or resign anywhere:

1. Ask the contractor's immigration attorney which INA 214(g)(5)(A) or (B) category the site falls under and what proves it. For a nonprofit, that includes the IRS determination of 501(c)(3), (c)(4) or (c)(6) status that 8 CFR 214.2(h)(19)(iv) requires. For an affiliate, it is one of the four links in (h)(8)(iii)(F)(2): shared ownership or control, operation by the university, attachment as a member, branch, cooperative or subsidiary, or a formal written affiliation agreement.
2. Request a placement letter from the qualifying entity, signed by the department head or principal investigator, naming the project, your duties, your share of work time, the dates and the mission link.
3. Read the services agreement or statement of work between the contractor and the site, especially its end date, because the exemption lasts only as long as the placement.
4. Check that the LCA (Form ETA-9035, filed through DOL's FLAG system) covers every place you will actually work, including home.
5. Confirm the petition uses the 09/09/26 edition of Form I-129, the only one the USCIS Form I-129 page says it accepts from 2026-11-09; old mailing addresses work only if postmarked on or before 2026-11-09.
6. Keep timesheets or project codes that show your split, plus a copy of every placement letter.
7. Tell your DSO before you leave OPT or STEM OPT for a cap-exempt H-1B. Cap-gap covers only cap-subject petitions, so to keep working without a gap the petition must be approved and the H-1B must start before your EAD ends; our explainer on whether cap-gap applies to cap-exempt H-1Bs walks through the dates.
8. Call the attorney before any change of site, project or time split, not after.

A worked timeline (example dates)

You are on STEM OPT with an EAD ending 2027-06-30, and an IT contractor offers a data-engineering role placed full time at a university's medical research institute.

The example assumes a decision before 2027-02-01, which is not a given. On 2026-11-01, USCIS's processing-times tool showed 80% of H-1B change-of-status petitions completed within 10 months. Premium processing (Form I-907) promises action within 15 business days for most I-129 classifications, and that action can be a request for evidence rather than an approval. Ask the attorney how the filing date fits your EAD end date.

What happens if your placement at the university ends?

The exemption ends with it. The rule says: "If cap-exempt employment ceases, and if the alien is not the beneficiary of a new cap-exempt petition, then the alien will be subject to the cap if not previously counted within the 6-year period of authorized admission to which the cap-exempt employment applied." If the job converts to cap-subject work, "USCIS may revoke the petition authorizing such employment."

In practice, four paths open up:

• A new qualifying placement. Another university or research site, under a new cap-exempt petition, keeps you out of the cap.
• A commercial client, never counted before. You need a cap-subject petition, which means a lottery selection first. Our guide to moving from a cap-exempt to a cap-subject employer covers the sequence.
• A commercial client, already counted. If you were counted against the cap earlier in the same six-year period, for example on an earlier cap-subject H-1B, you are not subject to it again, but expect the attorney to file a new or amended petition for the move.
• The contractor lets you go. The H-1B grace period under 8 CFR 214.1(l)(2) still applies as of 2026-11-01: up to 60 consecutive days, or until your petition's validity ends if that is sooner, once per validity period, and DHS may shorten it at its discretion. DHS has proposed eliminating it for H-1B and other workers; comments close 2026-11-10, and it is a proposal, not law.

Bench time between assignments is not time at a qualifying entity, so raise it with the attorney before it happens.

Is a VA hospital or national lab placement cap-exempt?

Not automatically. The regulation says that when "a fundamental activity of a governmental organization is the performance or promotion of basic research and/or applied research, that organization is a government research organization," and that it "may be a Federal, State, or local entity." A federal hospital or laboratory can fit, but the contractor has to show that research is a fundamental activity of that specific organization and that your duties further it.

Our reading for national labs: they are run by different kinds of operating contractors, including universities, nonprofits and companies, so "national lab" alone settles nothing. Ask which legal entity the petition will name as the qualifying organization and what proves its status. For a hospital, ask whether the petition relies on a government-research claim, a university affiliation or neither. In the 2024 final rule, DHS wrote that "government entities may still qualify for cap exemption" and that state and local governments may do so through a formal written affiliation agreement with a university, so the category is a question of evidence, not of labels.

Whatever the category, the half-time and duties tests still apply to you as a contractor's employee. Our reading: patient care, IT support or administration at a federal hospital has to be shown to further its research, while a research coordinator's or data analyst's link is usually easier to document.

The 2026 backdrop: fees, freezes and an unpublished rule

• The $100,000 fee is not being collected. USCIS's I-129 page says a court "vacated agency guidance implementing the $100,000 payment requirement" and that if the order is lifted, "DHS still plans to collect the payment." Changes of status, amendments and extensions that USCIS grants inside the US were never covered; petitions for workers abroad (consular notification) would be if collection resumed. Those consular filings fell: the Congressional Research Service (CRS Insight IN12747, 2026-10-14) reports that in the fee's first eight months, initial H-1B petitions for consular processing from cap-exempt employers dropped 91% from a year earlier.
• The 9-11 fee can reach staffing firms. Per the USCIS Form I-129 page, covered employers (50 or more US employees, more than 50 percent of them in H-1B or L-1 status) pay the 9-11 Biometric Fee on all H-1B and L-1 petitions since 2026-09-09, except amended petitions that do not seek an extension. For H-1B it is $4,000, through 2027-09-30 postmarks, the end date that USCIS policy alert PA-2026-16 (2026-10-27, written for L-1) also gives. A cap-exempt claim does not change whether the contractor is a covered employer.
• State pauses. Florida paused new H-1B hires at 12 public universities (until at least 2027-01-05); Texas froze new H-1B petitions at state agencies and public universities (through 2027-05-31, unless the Texas Workforce Commission permits). At those campuses, ask whether the vendor contract addresses H-1B staff.
• RIN 1615-AD00. The Unified Agenda entry describes "revising eligibility for cap exemptions, providing greater scrutiny for employers that have violated program requirements, and increasing oversight over third party placements." It has been under OIRA review since 2026-08-24 with no public text, so nobody can say yet what it would change; our explainer on the H-1B reform rule at OIRA tracks it.

Common mistakes

• Assuming the university's exemption covers everyone on campus. Only your time and duties, proved by the contractor, decide it.
• Treating 50% as an average over the petition. DHS declined to measure it that way, citing the risk of abuse, and work for the contractor's other clients never counts toward the half.
• Forgetting that telework must be in the US and covered by the LCA. Remote days still carry wage and worksite obligations.
• Expecting cap-gap. There is none for cap-exempt petitions, so the filing has to be planned with the attorney well before your OPT EAD ends.
• Accepting a reassignment, then calling the lawyer. A commercial client can make you cap-subject and the petition revocable.
• Reading the OIRA item as a new rule. Nothing in RIN 1615-AD00 is public or in effect; today's regulation decides your case.

Frequently asked questions

Can a staffing company file a cap-exempt H-1B?

Yes. Under 8 CFR 214.2(h)(8)(iii)(F)(4), in effect since 2025-01-17, a for-profit contractor can claim the cap exemption for a worker it employs if that worker will spend at least half of their work time on duties at a qualifying university, affiliated nonprofit, or nonprofit or government research organization, and those duties directly further its education or research mission. The contractor is the petitioner and must prove both parts, so the exemption follows the placement, not the company.

What is the half-time rule for cap-exempt placements?

It is the time test in 8 CFR 214.2(h)(8)(iii)(F)(4), which replaced the old majority standard on 2025-01-17. You must spend at least half of your work time, which DHS described as 50% or more, performing duties at the qualifying entity. DHS declined to set an hours-per-week number or to say the test is measured over the whole petition period, and USCIS decides each case on its facts.

Does remote work count toward the cap-exempt half-time test?

It can. Since 2025-01-17 the regulation says work performed at the qualifying institution may include telework, remote work or other off-site work in the United States, and USCIS focuses on the duties rather than where you sit. Work done abroad does not count, and every place you actually work still has to be covered by the Labor Condition Application, because location still matters for wage rules.

What happens if my placement at the university ends?

Under 8 CFR 214.2(h)(8)(iii)(F)(5), if the cap-exempt employment ends and you are not the beneficiary of a new cap-exempt petition, you become subject to the cap unless you were already counted against it in your current six-year period. If the contractor moves you to a commercial client, USCIS may revoke the cap-exempt petition. If the contractor ends your job, the H-1B grace period of up to 60 days still applies as of 2026-11-01, though a proposal to eliminate it takes comments until 2026-11-10 and is not law.

Is a VA hospital or national lab placement cap-exempt?

Not automatically. A federal, state or local entity counts as a government research organization only if performing or promoting basic or applied research is a fundamental activity of that organization, and your duties must further that research. The contractor has to document the specific facility's status and your duties, so ask its immigration attorney which category and evidence the petition will rely on.

Sources

• 8 CFR 214.2, including (h)(4)(i)(B), (h)(8)(iii)(F) and (h)(19) (eCFR)
• Modernizing H-1B Requirements final rule, 89 FR 103054, 2024-12-18 (govinfo)
• Form I-129, Petition for a Nonimmigrant Worker (USCIS)
• How do I request premium processing? (USCIS)
• Check case processing times (USCIS)
• Extension of post-completion OPT and F-1 status for eligible students (USCIS cap-gap page)
• Eliminating the discretionary 60-day grace period, proposed rule (Federal Register)
• Unified Agenda, RIN 1615-AD00 (reginfo.gov)
• Policy alert PA-2026-16, 9-11 fee and covered employers, 2026-10-27 (USCIS)
• CRS Insight IN12747, 2026-10-14 (Congress.gov)

How we checked this: on 2026-11-01 we read the current text of 8 CFR 214.2 on eCFR, the cap-exemption and telework discussion in the 2024 final rule, the USCIS Form I-129, cap-gap and premium-processing pages, the USCIS processing-times tool, policy alert PA-2026-16, the RIN 1615-AD00 agenda entry and CRS Insight IN12747.

This is general information, not legal or tax advice. Your own approval notice, I-94 and I-20 govern; ask your DSO about F-1, OPT and SEVIS questions, and a licensed immigration attorney about the petition and your status strategy.

If you are on OPT or STEM OPT and weighing a contractor placement against a direct cap-exempt or cap-subject offer, F1Jobs helps international candidates run a focused search for employers that sponsor.