My wife's COS to h1b was approved in Jan 2014. But she never joined the work as she did not agree with the terms of employment contract. Her employer has told that the employer would be revoking her H1b soon for not joining the work. Does she need to file anything to be back in the h4 status? or is it automatic? If she finds another employer now(or later after changing to h4), can that employer file her H1b without being counted for the cap? without the paystubs?
Since COS was approved but your wife did not join the employer, she did not maintain status since Jan 2014. Ideally she should depart and enter on H-4.
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A change back to H4 is not automatic, there will need to be a filing. I agree with my colleague that the failure to take up the position is a problem that needs to be addressed, sooner rather than later. H-1B status is "portable" and can sometimes be transferred to a new employer, but only when the current H-1B status is valid and viable. Since that is in question, you should consult an attorney as soon as possible to determine the best course of action.
She joined the company and ran out of status right the way. Now she needs to either seek nunc pro tunc adjudication of her H4 or seek consulate processing.
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Has to file COS to go back. Might be a problem though. If she didn’t work for the company, CIS may deem her in violation of her status for some time.