On October 8, 2020, the U.S. Department of Homeland Security (DHS) and the U.S. Department of Labor (DOL) published new regulations that could dramatically tighten the eligibility requirements for H-1B visa petitions and substantially raise the wages that must be paid to foreign nationals in certain visa classifications, including H-1B and many employment-based green card categories. These new regulations are part of the Trump Administration’s wider effort to restrict legal immigration programs and further the goals of the Buy American, Hire American Executive Order. The regulations—which are effective on October 8, 2020 for the DOL rule and on December 7, 2020 for the DHS rule—are likely to be challenged in federal court.

New H-1B Restrictions

The H-1B visa program allows U.S. employers to hire highly skilled foreign nationals on a temporary basis to fill “specialty occupations,” which are defined as occupations requiring at least a Bachelor’s degree or the equivalent. The new regulations aim to narrow the definition of specialty occupations and restrict the placement of H-1B workers at third-party worksites, which is a common practice among information technology and other consulting companies, through the following changes:

• Mandating that, in order to qualify as a specialty occupation, the degree required must be “directly related to the specific specialty” and cannot be a more generalized degree, such as business administration, liberal arts, or engineering without further specialization.
• Tightening the factors used to determine whether a position qualifies as a specialty occupation by making it insufficient to show that a degree in a specific specialty is “normally,” “commonly,” or “usually” required by the occupation, the industry, or the employer, which were the standards in the previous regulations. It is unclear whether, under the new regulation, an employer will need to demonstrate that a specific degree is always required (which is unrealistic for many real world occupations), or whether some lesser threshold will be permitted.
• Defining “employer-employee relationship” more restrictively and expanding the criteria to be considered.
• Distinguishing “worksites,” which are premises owned/leased/operated by the employer or the employee’s residence, from “third-party worksites,” and requiring additional evidence for H-1B petitions involving the latter.
• Reducing the visa validity period for H-1B employees at third-party worksites from three years to one.

These new rules often correspond to previous policies and adjudicatory practices at U.S. Citizenship and Immigration Services (USCIS). Recently, employers have successfully challenged many of these policies and practices in federal court in the face of unprecedented scrutiny under the Trump Administration, which has increased the denial rate for H-1B petitions from 6% in 2015 to 29% in 2020. In issuing these regulations, the Administration now seeks firmer legal footing for its more restrictive interpretation of the H-1B visa program.

New Wage Requirements

The DOL also issued new regulations that aim to increase the minimum wages paid to foreign nationals under the following visa programs: H-1B (temporary specialty occupations), H-1B1 (temporary specialty occupations for Singaporean and Chilean nationals), E-3 (temporary specialty occupations for Australian nationals), and PERM Labor Certification (part of the process for many employment-based immigrant visas, or “green cards”).

As part of these visa programs, sponsoring employers must submit applications to the DOL to certify that the foreign national employee will be paid either the “actual wage” paid to similarly situated U.S. workers, or the “prevailing wage” for the particular occupation and intended area of employment, whichever is higher. The prevailing wage is typically determined using DOL wage data from government surveys and a scale of four wage levels ordered by experience, from entry-level to fully experienced.

Under the new regulations, minimum wages will increase significantly by changing how DOL survey data corresponds to each of the four prevailing wage levels. In the previous rules, the entry-level (Level 1) prevailing wage was set at the 17th percentile of the average wage for the particular occupation and location. The Level 1 wage will now increase to the 45th percentile. Similarly, the Level 2 wage will increase from the 34th to the 62nd percentile, the Level 3 wage from the 50th to the 78th percentile, and the Level 4 wage from the 67th to the 95th percentile.

In practice, these changes will dramatically increase the minimum wages that must be offered to foreign nationals in affected visa categories, as is demonstrated by the following example. The annual prevailing wages for a Software Developer in the Baltimore area will increase by tens of thousands of dollars for each wage level: $70,179 to $107,869 (Level 1), $94,037 to $143,603 (Level 2), $117,894 to $179,358 (Level 3), and $141,753 to $215,093 (Level 4).

The DOL rule and the new prevailing wages are effective immediately. The new wage levels will not apply retroactively to applications the DOL has certified previously. They will apply to new applications submitted to the DOL on or after October 8, 2020 for the H-1B/H-1B1/E-3 visa programs, and to new and still-pending requests for prevailing wage determinations for the PERM Labor Certification process.

Challenges Are Likely

Both the DHS and the DOL regulations are likely to be challenged in federal court. In implementing these new regulations as “interim final rules,” the Trump Administration bypassed much of the normal rulemaking process, including the notice and comment period. The Administrative Procedure Act only allows for “good cause” exceptions to the normal process, and it is uncertain whether the Administration’s pandemic-related excuses will be sufficient. Furthermore, the courts could enjoin the implementation of these rules pending the outcome of the litigation. The future of these new restrictions, and how or how long they will be implemented, is therefore unclear.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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