Court’s H-1B Ruling Gives Employers Relief From Wage Uncertainty

Employers of H-1B visa workers are breathing a sigh of relief after a California federal judge set aside a recent U.S. Labor Department rule mandating wage increases for those employees, even though many companies hadn’t implemented the two-month-old measure.

U.S. District Judge Jeffrey S. White ruled that the departments of Labor and Homeland Security—which released a companion rule intended to narrow which jobs qualified for the visas—weren’t able to prove that the Covid-19 pandemic and its effect on the economy justified the need to make those visa program changes without first giving the public notice and an opportunity to comment.

The Labor Department released the interim final rule Oct. 6. Taking effect just two days later, it raised the required pay for specialty occupation visa holders by about 30%. Prevailing wage levels are divided into four tiers, and are determined by the worker’s geographic location and specific occupation. The DOL rule set forth new pay rates for those tiers.

But in the wake of the wage rule’s issuance, many employers that use the visa program avoided filing labor condition applications with the DOL data and instead sought out alternative options to the substantial increase in required pay, said Angelo Paparelli, a partner at Seyfarth Shaw’s immigration practice in Los Angeles.

“Frankly, the DOL wages were inflated,” Paparelli said. “Employers have been cowering in fear of these rules taking effect, and were waiting to see what the courts would do.”

The DOL’s Employment and Training Administration, the sub-agency from which the rule was issued, didn’t immediately respond to emailed requests for comment on the court’s decision or what the department’s next steps will be.

It’s unclear whether the Biden administration would pursue a prospective appeal of White’s ruling. The new president takes office on Jan. 20.

Alternative Wage Data

Employers who needed to file labor condition applications to the DOL as part of their sponsorship of H-1B workers while the agency’s new rule was in place had a couple of options to keep pay close to pre-October levels.

“There’ve been a couple of different approaches, as obviously this has thrown employers for quite a loop,” Alka Bahal, co-chair of Fox Rothschild’s immigration practice group in Morristown, N.J., said of the measure. “Wages increased dramatically, and for most of my clients” put H-1B workers out of reach.

The most common option had been to use an alternative wage survey, which must show proof of similarly employed individuals and their pay, including a certain number of salary data points within the geographic locale from multiple employers, and be published within a certain time frame.

“The alternate wage surveys are definitely a popular option, because the new wages the Department of Labor were putting out were nowhere in line with actual numbers,” said Eric Welsh, a partner with Reeves Immigration Law Group in Pasadena, Calif.

The new prevailing wages “weren’t really based on reality, they were based on restrictive measures to throttle employers for hiring foreign workers and force them into the domestic labor market,” he said.

Other Options

But the sudden popularity of the alternative wage survey has complicated the process for businesses employing H-1B workers, because only a small number of vendors can provide the private survey data, Bahal said. Wait times to receive the data have jumped from days to weeks.

In Bahal’s experience over the last couple of months, most other H-1B employers have deferred filing an extension of status or other request for as long as they could, while a few employers have given the visa holders promotions to increase salaries that were in line with the new regulation.

For other companies, “the rule was so rushed, a lot of employers haven’t had an opportunity to adjust their strategy too dramatically,” Welsh said.

“I don’t think there’s an egg to unscramble at this point,” Seyfarth’s Paparelli said. “My sense is that everyone was anticipating that there would be a continuing availability of these private wage surveys” until regulatory changes could be implemented by the courts or the next administration.

The question now is how long will it take the DOL to undo what they did, according to Bahal. “I don’t know that it’s as easy as flipping a switch and going back to the old data, or if there’s more they will have to do.”