US Senate H1B Visa Reform Bill 2025: What It Means for Workers and Companies

The US Senate has reintroduced sweeping reforms to the H-1B and L-1 visa programs, intensifying scrutiny of foreign worker visas just days after the Trump administration imposed a controversial $100,000 fee on new H-1B applications.

Senate Judiciary Committee leaders Senator Chuck Grassley (R-Iowa) and Senator Dick Durbin (D-Illinois) unveiled the H-1B and L-1 Visa Reform Act (S.2821), joined by Senators Tommy Tuberville (R-Alabama), Richard Blumenthal (D-Connecticut), and Bernie Sanders (I-Vermont).

The bipartisan legislation aims to close loopholes that lawmakers say allow outsourcing firms and tech giants to replace American workers with cheaper foreign labor, while shifting the visa allocation system toward higher wages and US-educated STEM degree holders.

Key Details of the Bill

• Merit-Based Selection: Replaces the lottery system with a wage- and skill-based process, prioritizing higher salaries and US-trained graduates.
• Dual Coverage: Applies not only to H-1B visas for specialty occupations but also to L-1 visas, which allow multinationals to transfer employees to the US.
• University Hiring in Jeopardy: A companion bill, the Visa Cap Enforcement Act (introduced by Senator Tom Cotton), would remove the long-standing exemption for universities and non-profits, forcing foreign faculty and researchers into the same annual cap of 65,000 visas.
• Political Timing: Comes amid tech layoffs and rising public anger at US companies that continue filing thousands of H-1B petitions while cutting domestic jobs.

Political and Official Responses

• Sen. Grassley (R): “The programs were meant to fill genuine skill gaps, but instead they’ve been used to cut out American workers. Our legislation is needed now more than ever.”
• Sen. Durbin (D): Linked the issue to layoffs, accusing companies of filing “visa petitions for foreign workers at depressed wages” while slashing US jobs.
• Trump Administration: Commerce Secretary Howard Lutnick confirmed further H-1B reforms are coming before the new fees take effect in February 2026.
• Sen. Tom Cotton (R): Announced additional bills to “put American workers first” and close university exemptions.

Industry and Economic Impact

• Indian IT Firms at Risk: Indian nationals make up 71% of H-1B holders, with nearly 750,000 professionals currently in the US. New compliance costs could cut EBITDA by 7–15% for major Indian IT companies.
• NASSCOM Warning: Called the $100,000 fee “damaging to America’s innovation ecosystem,” though noted Indian firms have been increasing US local hiring.
• Legal Experts: Predict stricter compliance checks, higher costs, and more reliance on remote contracting and offshore delivery.
• Universities: The Cotton bill could severely impact higher education budgets, with universities like Wisconsin employing hundreds of H-1B faculty.

Geopolitical Fallout

The reforms could reshape global talent flows:

• Reverse Brain Drain: Indian tech hubs like Bangalore, Hyderabad, and Pune may benefit as skilled professionals return home with global experience.
• Competitiveness Concerns: Critics warn that the US risks undermining its innovation advantage if talent is driven away.
• Long Road Ahead: While bipartisan support improves the bill’s chances, historically only 5% of US immigration bills become law.

FAQs

Q1. What is the H-1B and L-1 Visa Reform Act of 2025?

The H-1B and L-1 Visa Reform Act is a bipartisan bill introduced in the US Senate on September 30, 2025, by Senators Chuck Grassley and Dick Durbin. It seeks to restructure the H-1B lottery into a merit-based system, close outsourcing loopholes, and apply stricter compliance rules for employers.

Q2. Why was this bill introduced now?

The bill follows mass layoffs in the US tech sector while companies continued filing large numbers of H-1B petitions. It also comes shortly after the Trump administration imposed a $100,000 fee on new H-1B visa applications, increasing political pressure for reform.

Q3. How will the bill affect Indian professionals?

Indians make up around 71% of H-1B holders. The reforms could raise costs for employers hiring Indian workers, reduce opportunities for contract-based roles, and potentially push some professionals to return to India, strengthening domestic tech ecosystems.

Q4. What changes are proposed to the H-1B system?

The bill replaces the random lottery with a merit-based selection system, prioritizing higher wages and US-educated STEM graduates. It also expands oversight to prevent companies from displacing American workers with cheaper foreign labor.

Q5. How does the legislation affect universities?

A companion bill, the Visa Cap Enforcement Act, would remove exemptions that allow universities and research institutions to hire foreign faculty outside the 65,000 annual H-1B cap. This could significantly impact higher education staffing and research projects.

Q6. When will the reforms take effect?

If passed, most changes would align with new visa fee rules scheduled for February 2026. However, given that only 5% of immigration bills become law, the bill’s fate remains uncertain.

Q7. What are the economic consequences for Indian IT companies?

Indian IT firms could face $150–550 million in additional annual costs due to higher visa fees and compliance burdens, potentially reducing their EBITDA margins by 7–15%.

Q8. Could this bill reduce America’s global competitiveness?

Yes, critics argue that the reforms may deter global talent from coming to the US, pushing skilled workers back to countries like India where tech ecosystems are booming. Supporters, however, say it will protect American jobs and ensure fair wages.