The New AEWR Methodology: A Win for H-2A Employers?

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On November 5, 2020, the U.S. Department of Labor published a Final Rule regarding the Adverse Effect Wage Rate (AEWR) applying to the H-2A program, titled “Adverse Effect Wage Rate Methodology for the Temporary Employment of H-2A Nonimmigrants in Non-Range Occupations in the United States.”

An employer seeking to employ foreign workers under the H-2A program is required to offer, advertise in its recruitment, and pay a wage that is the highest of the AEWR, the prevailing wage, the negotiated collective bargaining rate, the federal minimum wage, or the state minimum wage. Essentially, the AEWR is a minimum wage that provides a floor below which the wages of H-2A workers cannot fall.

As a result of the Trump Administration’s Executive Order (E.O.) 13788, “Buy American and Hire American,” a new wage methodology will be implemented and will no longer use the farm labor survey administered by USDA. Instead, for workers that fall under the SOC codes listed below for field and livestock worker occupations, the AEWR baseline wage will be frozen at the current 2020 rate of $14.29 per hour until 2023. The current AEWR was based on the average annual gross hourly wage rate for field and livestock workers combined as reports for the state or region by FLS published in November 2019. For all other occupations, the DOL will set the AEWRs based on the statewide annual average hourly wage for the occupational classification as reported by the OES survey. If the OES does not report a statewide annual average hourly wage, then the AEWR will be determined by the national annual average hourly wage reported by the OES survey.

Beginning in calendar year 2023 and annually thereafter, the AEWRs for field and livestock workers that are based on FLS SOC codes will be adjusted by the percent change in the Bureau of Labor Statistics Employment Cost Index (ECI) for the preceding 12 months. Over the last ten years, the ECI has increased by approximately 2.24% each year on average, with the lowest increase year-to-year at 1.7% and the highest year-to-year increase at 2.9%. The applicable SOC codes are the following:

  • 45-2041 – Graders and Sorters, Agricultural Products
  • 45-2091 – Agricultural Equipment Operators
  • 45-2092 – Farmworkers and Laborers, Crop, Nursery and Greenhouse
  • 45-2093 – Farmworkers, Farm, Ranch, and Aquacultural Animals
  • 53-7064 – Packers and Packagers, Hand
  • 45-2099 – Agricultural Workers, All Other

To analyze the impact on H-2A employers, it is important to review the historical AEWR rates for New York:

Year

AEWR Hourly Rate

% Increase

2020

$14.29

7.8%

2019

$13.25

3.3%

2018

$12.83

3.6%

2017

$12.38

5.5%

2016

$11.74

4.3%

2015

$11.26

0.4%

2014

$11.22

2.8%

2013

$10.91

 

Effective, 2023, the AEWR are estimated to resemble the below:

Year

Hourly Rate

2.24% Increase (Average)

2.9% (High)

2023

$14.29

$14.63

$14.70

2024

$14.61

$14.94

$15.13

2025

$14.94

$15.27

$15.57

Based on an increase using the 2.24% average ECI increase, the yearly rates under this revised calculation would result in a significantly lower hourly wage rate than the previous FLS survey-based methodology for field and livestock positions.

For H-2A workers that do not fall into one of the above-mentioned categories, the Department will annually set the AEWRs based on the statewide annual average gross hourly wage reported by the BLS OES survey. If the OES survey does not report a statewide annual average gross hourly wage for the SOC, the AEWR shall be the national annual average gross hourly wage reported by the OES survey. Job examples for these categories include agricultural truck drivers, managers, supervisors, and construction workers. Wages for these occupations are not subject to a freeze. The 2019 BLS OES statewide hourly rates can be found at https://www.bls.gov/oes/current/oes_ny.htm#45-0000.

Some positions may overlap and be classifiable under the BLS OES Survey or fall under the FLS-based AEWR. As an example, a job opportunity involving driving duties may be properly classified under SOC 45-2091 (Agricultural Equipment Operators), SOC 53-3032 (Heavy and Tractor-Trailer Truck Drivers), or a combination of the two, depending on the duties described in the employer’s job order. A job opportunity for workers to drive tractors and other mechanized, electrically-powered or motor-driven equipment on farms to plant, cultivate, and harvest a crop (including driving tractors in and out of fields carrying bins and driving forklifts to transfer and stack bins of full product onto trailers), which requires 12 months of experience operating such equipment, would be properly classified under SOC 45-2091 and subject to the FLS-based AEWR.

In contrast, a job opportunity for workers to drive semi tractor-trailer trucks to and from specified destinations within an area of intended employment (including maneuvering trucks into and out of loading and unloading positions as well as driving in both on-road (paved) and off-road conditions), which requires 12 months of experience operating such equipment and a valid Class A CDL or equivalent, would be properly classified under SOC 53-3032 and subject to the OES-based AEWR. In the event an employer seeks workers to drive both tractors and other mechanized, electrically-powered or motor-driven equipment on farms and semi tractor-trailer units, as described above, the employer’s job opportunity constitutes a combination of SOC 45-2091 and SOC 53-3032, subject to either the FLS-based AEWR for SOC 45-2091 or the OES-based AEWR for SOC 53-3032, whichever is a higher rate per hour. The current statewide average hourly wage rate for New York for 53-3032 is $25.58, which is significantly higher than the FLS-based AEWR.

Another potential classification that could fall outside of the livestock and field worker classification is SOC 47-2061 – Construction Laborers. DOL has confirmed in its FAQs that the appropriate SOC code and corresponding AEWR will depend on the nature of the job opportunity and the duties to be performed by workers. Generally, construction-related work falling under SOC 47-2061 – Construction Laborers does not fall within the FLS occupations for field and livestock workers and, therefore, will be subject to the OES-based AEWR that will be annually adjusted by the Department on or about July 1 of each year. The 2019 statewide rates are set at $25.97.

DOL estimates approximately 97% of farmworkers will fall into one of the job categories eligible for the wage freeze. If the job duties on the Application for Temporary Employment Certification do not fall within a single occupational classification, the applicable AEWR shall be the highest AEWR for all applicable occupational classifications.

If the prevailing hourly wage rate or piece rate is adjusted during a work contract, and is higher than the highest of the AEWR, the prevailing wage, the agreed-upon collective bargaining wage, or the Federal or State minimum wage in effect at the time the work is performed, the employer must pay that higher prevailing wage or piece rate, upon notice to the employer by the Department.

The final rule is effective 45 days after publication in the Federal Register on November 5, 2020. The new wage methodology for livestock and field positions, even estimated at the highest ECI percentage increase, would still be less than the average yearly increases in the AEWR under the current system and protect H-2A employers from the erratic and unpredictable increases that have been occurring for years under the current methodology. It essentially eliminates the runaway wage increases that were common when the AEWR was based on the Farm Labor Survey. The prior system’s wild fluctuations in the minimum wage rate made it difficult for farmers and ranchers to plan and budget for seasonal labor expenses. The new system will help ensure H-2A wages keep pace with wage increases in the overall economy.

In the Final Rule, DOL explicitly referenced a forthcoming second final rule addressing further proposed changes that will address other aspects of the certification of agricultural labor or services performed by H-2A workers, as well as enforcement of contractual obligations applicable to employers of those workers.

Despite this win, comprehensive and flexible agricultural guest worker reform is still critically needed to truly solve the agricultural labor crisis.

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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