After federal courts blocked their first attempt in December, the U.S. Department of Labor (“DOL”) recently published a new final rule seeking to again increase the minimum wage paid to foreign workers when sponsored for an H-1B visa or green card. The DOL issued the rule on January 14, 2021 with an effective date of March 15, 2021. The DOL announced the new rule just six (6) days before the Biden administration took office. The increased wages will go into effect in a staggered manner between the effective date of the rule on July 1, 2024. The new rule could significantly impact the strategy with H-1B and Green Card filings, but there is still uncertainty as to whether the new rule will actually go into place.
Increasing Prevailing Wage
Employers seeking to sponsor foreign nationals for H-1B visas and most employment-based green cards are required to pay the sponsored employee at least the prevailing wage. The DOL issues prevailing wages each year based on the geographic location and type of job performed. Each job classification is assigned four (4) wage levels. The wage level for a specific occupation increases based on the amount of education, skills, and experience required to perform the job. For example, a Level I wage is typically assigned to an entry-level position, while a Level IV wage is assigned to the most advanced jobs in the job classification.
Currently, Level I wages are set at the seventeenth percentile of the occupations in the job classification, based on wage surveys conducted by the Bureau of Labor Statistics. The new rule increases a Level I wage to the thirty-fifth percentile. Level II wages have been increased from the thirty-fourth percentile to the fifty-third percentile, and Level III has increased from the fiftieth percentile to the seventy-second percentile. Level IV wages will increase from the sixty-seventh percentile to the ninetieth percentile. While not as punitive as DOL’s prior attempt at increasing prevailing wages, the new rule would mark a significant increase.
Perhaps due to disruptions caused by the prior rule’s immediate implementation, the DOL plans to implement the new rule over a period of several years. The new wage levels will not go into effect until July 1, 2021, which is when the DOL typically updates the wages each year based on new survey information. Additionally, when the new wages go into effect, employers will only be required to pay ninety percent (90%) of the new prevailing wage for the first year. The new rule provides additional relief for employers sponsoring a foreign national for a green card, by allowing qualifying employers to pay a percentage of the new prevailing wage rate through July 2024.
Barriers to Implementation
While the new rule is set to go into effect on March 15, the incoming Biden administration has indicated they plan to delay implementation of so-called “midnight regulations” finalized by the outgoing administration for a sixty (60) day period. The rule would also be subject to scrutiny under the Congressional Review Act, which could negate the new wages if approved by a majority of the House and Senate and signed by the President. As with the prior rule, there is also the possibility that implementation could be barred by federal courts.
How Should Employers Prepare?
The new prevailing wages will not impact employers in the immediate future. Because the new rule utilizes a delayed implementation procedure, the new wages will not be in effect for this year’s H-1B filing season which begins in March 2021. Additionally, H-1B employees whose status expires on or before June 30, 2020 will not be impacted.
There are some steps employers can take now to receive the greatest benefit out of the current rule. First, employers should proactively evaluate any H-1B extensions that need to be filed in the second half of 2021. The immigration rules permit extensions to be filed up to 180 days before expiration. As a result, employers could utilize the current prevailing wages for employees whose H-1B status expires months after the new wages go into effect as long as the extension requests are filed before June 30, 2021.
Employers planning to sponsor foreign nationals for green cards through the PERM process in 2021 can benefit from the current wage rules by immediately moving forward with filing prevailing wage requests as well. Once issued, as long as an employer begins PERM recruitment during the prevailing wage validity period, the wage determination is considered valid for the PERM filing. Thus, even though a prevailing wage expires on July 1, 2021, as long as the employer starts recruitment during the validity period, the wage can be used in a PERM application filed months later.
With the uncertainty surrounding the implementation of the new prevailing wage rule, employers should closely monitor for updates.