New Regulation Significantly Increases Prevailing Wage Requirements for H-1B and Green Card Petition...For Now

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On Oct. 8, 2020, the U.S. Department of Labor published a new regulation that significantly raises the required prevailing wage which must be paid to foreign workers in connection with H-1B, H-1B1, and E-3 nonimmigrant visa petitions, as well as many employment-based green card petitions that are filed through the PERM labor certification process. In short, the new DOL rule alters the methodology by which the prevailing wage is calculated for purposes of the H-1B/H-1B1/E-3 and PERM programs.

Under both the H-1B and PERM programs, employers are required to pay the higher of the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question, or the “prevailing wage” for the occupational classification in the area of employment. In most cases, the required prevailing wage for such positions/programs is determined using the DOL’s Occupational Employment Statistics (OES) wage survey, which sets out four wage levels for each positional classification in each geographical area throughout the United States.

The wage levels range from Level I (for “entry-level” positions) to Level IV (for “fully competent”) positions. The wage amounts listed in the OES Online Wage Library for the different levels in each occupational classification correspond to different percentile wages for the occupation and geographical area. For example, the Level I wage amount corresponded to the 17th percentile wage for a position in a particular geographical area, the Level II wage corresponded to the 34th percentile wage, and so on.

Beginning Oct. 8, the DOL inflated the required prevailing wages by re-assigning the prevailing wage levels to different percentiles, as follows:

  • Level I wage: now corresponds to the 45th percentile wage, up from the 17th percentile
  • Level II wage: now corresponds to the 62nd percentile wage, up from the 34th percentile
  • Level III wage: now corresponds to the 78th percentile wage, up from the 50th percentile
  • Level IV wage: now corresponds to the 95th percentile wage, up from the 67th percentile

This means that Level I, entry-level H-1B workers must be paid more than at least 45 percent of workers in the same occupation in their particular geographic area; Level IV, “fully competent” H-1B workers must be paid higher than 95 percent of workers in their occupation and geographic area.

In practice, this rule means that any Labor Condition Applications filed for certification on or after Oct. 8 are subject to the new/higher prevailing wage minimums. Any LCAs filed/pending or certified before Oct. 8 may rely on the previous prevailing wage structure, so although this rule has an immediate effect, it does not impact workers with existing or approved H-1B petitions. However, it could come into play when filing an H-1B amendment or extension for such an employee. For green card processes, any prevailing wage determinations issued on or after Oct. 8 will be based on the new wage structure, including those pending as of Oct. 8; only those prevailing wage determinations that were issued before Oct. 8 will be based on the previous lower wage levels.

Note that even under the new rule, employers do in some cases still have the option of using alternative sources for determining the prevailing wage for a position. For example, employers may still utilize private wage surveys that satisfy specific criteria set forth by the DOL. In addition, unionized positions that are subject to a Collective Bargaining Agreement may continue to rely on the applicable CBA to determine the prevailing wage rate and would be exempt from the DOL’s OES wage calculations.

Clearly, this new rule would have devastating effects on the ability of many U.S. employers to continue employing H-1B workers. In the week since the rule’s implementation, there has been widespread media attention to some of the particular consequences of this rule. For example, because of the formula by which wages are calculated, nearly all physicians nationwide have become subject to a default prevailing wage requirement of $208,000 per year – which applies to all physicians regardless of whether they are in a large city or in a rural area, or whether they are an experienced physician or a medical resident. This rule would make it impossible for medical facilities in rural areas of the country, or for community health centers, to afford to pay a foreign physician to serve as a primary care or family medicine practitioner.

The National Foundation for American Policy recently published an in-depth analysis of the DOL’s new H-1B wage rule that highlights other bizarre outcomes of this rule. For example, the required minimum annual salary for an entry-level (Level I) computer and information systems manager in East Stroudsburg, Pennsylvania increased 206.5 percent under the new wage rule. A pediatrician in Wichita, Kansas at Level I must be paid 177 percent more per year under the new DOL wage rule. Employers in New York would need to pay a financial analyst $208,000 per year – more than three times the market wage of $66,428, according to a private wage survey for that area.

Partially due to the unworkable results of this new rule, combined with the rushed manner in which this rule was implemented (without going through the traditional regulatory rule-making process) there is widespread belief within the immigration bar that this rule ultimately will not survive legal challenges. The first lawsuit seeking to enjoin this new rule was already filed in federal court in New Jersey on Oct. 16 by a group of technology consulting firms, arguing that the government used faulty data when setting the new wage amounts. Additional lawsuits are expected to be filed in the coming days as well.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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