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DOL goes forward with H-1B visa program final rule, adds phase-in provisions

By Pamela Wolf, J.D.

It also adjusts the Level I wage and Level IV wage downward to the 35th percentile and 90th percentile, respectively.

The Department of Labor has released the “unofficial” version of its final rule amending regulations governing the prevailing wages for employment opportunities that U.S. employers seek to fill with foreign workers on a permanent or temporary basis through certain employment-based immigrant visas or through H-1B, H-1B1, or E-3 nonimmigrant visas. The final rule adopts with changes an interim final rule (IFR) that amended the DOL’s regulations governing permanent (PERM) labor certifications and Labor Condition Applications (LCAs) to incorporate changes to the computation of wage levels under the DOL’s four-tiered wage structure based on the Occupational Employment Statistics (OES) wage survey administered by the Bureau of Labor Statistics (BLS).

The final rule is effective 60 days after its publication in the Federal Register.

The DOL said that the primary purpose of the changes is to update the computation of prevailing wage levels under the existing four-tier wage structure to better reflect the actual wages earned by U.S. workers similarly employed to foreign workers. The regulatory action will permit the DOL to more effectively ensure that the employment of immigrant and nonimmigrant workers admitted or otherwise provided status through the affected programs does not adversely affect the wages and job opportunities of U.S. workers.

Targeted to abuses. On October 6, 2020, the Departments of Labor and Homeland Security jointly announced the IFR to reform the prevailing wage calculation used by DOL in its foreign worker programs. In a briefing, DOL and DHS officials explained that the existing prevailing wage rate methodology had led to abuses by employers and resulted in employers bringing in low-paid foreign workers, causing U.S. workers’ wages to stagnate or to the complete exclusion of U.S workers from the work force.

Under the new rule, the prevailing wage rate paid to H1-B workers is intended mirror the wages paid to U.S. workers. Further, employers will have to attest that they will pay nonimmigrant workers, during the period of authorized employment, the higher of the prevailing wage or the actual wage paid to other employees with similar experience and qualifications.

H1-B system improvements. The regulatory action is intended to significantly improve the H1-B system by:

  • Getting rid of “body shops” and “shadow employers,” companies that recruit individuals on H1-B visas in order to contract them out to U.S. companies. The new rule requires companies to make “real offers to real employees.”
  • Narrowing the definition ofa specialty occupations. The new rule requires the agency to closely adhere to the statutory definition of “specialty occupation.” Agency officials argued that the term had been interpreted too broadly in the past. For example, under the rulemaking, an H1-B applicant would have to possess a bachelor’s degree that is specifically tailored to the area in which he or she will be employed. A general bachelor’s degree would not be acceptable.

Notice and comment snag. The IFR, chosen as the vehicle to deliver change rather than the traditional notice and comment process—using the COVID-19 pandemic as justification—hit some snags along the way, namely challenges by several groups and a series of adverse court rulings. Following the district court’s decisions in Chamber of Commerce (No. 20-cv-07331; N.D. Cal. Dec. 1, 2020) and ITServe Alliance (No. 20-cv-14604; D.N.J. Dec. 3, 2020) (both involving notice and comment challenges), the Office of Foreign Labor Certification took immediate action to comply with the courts’ directives, including issuing a public announcement on its website on December 3, 2020, outlining the steps it was taking in response to the courts’ orders, the final rule notice noted.

Procedural flaws don’t taint final rule. Notwithstanding the courts’ orders to set aside the IFR on procedural grounds, the U.S. Supreme Court has acknowledged and affirmed the proposition that a procedurally flawed interim final rule does not taint a final rule relying upon an IFR as a proposed rule, the DOL said. The department is satisfied that it meets the Administrative Procedure Act’s objective requirements necessary for the promulgation of a final rule in this case. The IFR provided sufficient notice to the public by allowing for a 30-day comment period; “gave interested persons an opportunity to participate in the rule making through submission of written data, views or arguments”; the rule contained a “concise general statement of their basis and purpose”; and the rule will be published more than 30 days before it becomes effective. Thus, the DOL says it has the legal authority to pursue the final rule based upon its compliance with the APA’s procedural requirements satisfied in the IFR.

More about the final rule. As explained in the IFR, the DOL concluded that the existing wage levels were not consistent with the statutory requirement that a government survey employed to determine the prevailing wage provide four wage levels commensurate with experience, education, and level of supervision. Further, the existing wage levels were artificially low and provided an opportunity for employers to hire and retain foreign workers at wages well below what their U.S. counterparts earn, creating an incentive to prefer foreign workers to U.S. workers. This incentive is at odds with the statutory scheme and causes downward pressure on the wages of the domestic workforce. Therefore, the DOL revised wage provisions at 20 CFR 655.731 and 656.40 to adjust the existing wage levels to ensure that the wage levels reflect the wages paid to U.S. workers with similar experience, education, and responsibility to those possessed by similarly employed foreign workers.

Changes following comments. The IFR had a 30-day public comment period that closed on November 9, 2020. During that time, the DOL received 2,340 comments. After careful and thorough consideration of those comments, the DOL adopted a number of modifications in the final rule to the wage methodology established by the IFR, including:

  • Adjusted the Level I wage and Level IV wage downward to the 35th percentile and 90th percentile, respectively;
  • Implemented several changes in how it uses data from BLS in the H-1B and PERM programs that will further reduce the incidence of inappropriately inflated wages identified by commenters; and
  • Adopted a phase-in approach to how the new wage levels will be applied to give employers and workers time to adapt to the change.

Together, the DOL believes these measures appropriately address commenters’ concerns and will ensure that, going forward, the prevailing wage rates provided by the department fully protect the wages and job opportunities of U.S. workers.

Phasing in changes. The DOL acknowledged commenters’ reliance interests on the current wage methodology and understood that immediate changes to wage rates could cause some economic uncertainty for both employers and foreign workers. Thus, among other things, the DOL adopted a series of transition provisions in the final rule to make it easier for employers and workers to adapt to the changed wage levels, thus avoiding disruption and striking a proper balance between stakeholders’ reliance interests and the DOL’s obligation to comply with the INA and pursue a policy that is protective of U.S. workers.

For many job opportunities, the new wage rates will phase in through two steps over a year-and-a-half period. For job opportunities that will be filled by workers on track to become lawful permanent residents, and who thus have greater reliance interests in the old wage methodology, the new wage rates will phase in through four steps over a three-and-a-half-year period.