The Vermont Service Center (VSC) recently provided guidance on the affect of layoffs on H-1B individuals.  The guidance outlines actions the VSC will take upon learning of a downsizing, as well reiterates the Service's position on when an individual is out of status. 

If the underlying H-1B petition is pending and VSC learns through the media that the Petitioner is going out of business, the VSC will not immediately deny a pending petition. The VSC may send a Notice of Intent to Deny (NOID) based on a determination of statutory ineligibility derived from information not contained in the record of proceeding. This may be overcome with evidence of a successor-in-interest to the original Petitioner.

If the underlying H-1B petition is already approved, the general rule is that the approval of any petition is automatically revoked if the petitioner goes out of business, as the employer-employee relationship has ended. If the VSC determines ineligibility based on information not contained in the record of proceeding, the petitioner will first be put on notice with intent to revoke but will be given the opportunity to overcome with evidence of a successor-in-interest to the original petition.

Effect of revocation of H-1B petition on the Beneficiary's status: Once the underlying H-1B petition is revoked, the Beneficiary's H-1B status terminates as of the date the employment ceased, pursuant to Matter of Lee, 11 I. & N. Dec. 601 (Reg. Comm. 1966), or the date the petition was revoked, whichever is later. The Beneficiary is in violation of status the day after the employment was terminated.

If a Beneficiary, who was issued a visa or otherwise provided nonimmigrant status and counted against the cap, is found to have been issued the visa or otherwise provided status by fraud or willfully misrepresenting a material fact, then the cap number is restored. Otherwise, any alien who has already been counted toward the cap continues to be counted as such [INA §§ 214(g) (3) and (7)].