New Regulation Increases Wage Requirements for H-1B Workers and Certain Green Card Applicants
On October 8, 2020, the U.S. Department of Labor (DOL) is expected to publish a new, interim final rule that will impose higher wage requirements for H-1B workers and “green card” applicants whose applications are based on labor certification. The new rule will be effective immediately.
Before employing an H-1B temporary worker, an employer must file and obtain DOL certification of a Labor Condition Application (LCA). In that LCA, the employer must attest that it will pay the H-1B worker the higher of the wage paid to its other similarly-employed employees or the prevailing wage applicable for the occupation in the geographic area of employment.
Similarly, before filing a PERM Application for Permanent Employment Certification to sponsor a worker for permanent residency, an employer must first obtain a Prevailing Wage Determination from the DOL and agree to pay the determined wage when the employee is approved for permanent residency. The new DOL rule changes the Department’s formula for determining the prevailing wage applicable under these programs.
For many years prior to this new DOL rule, the prevailing wage formula has divided the Bureau of Labor Statistics (BLS) Occupational Employment Statistics (OES) wage survey data into four wage levels in order to establish prevailing wages based on the minimum education and experience requirements for the offered position. Prior to the new rule, the lowest wage level, Level 1, has been roughly equivalent to the 17th percentile, and the highest has been roughly equivalent to the 67th percentile.
Notably, for most occupations that qualify for H-1B classification, the highest wage level applies when the employer requires five or more years of experience, though few professionals are earning such high-end salaries after only five years into their careers. Additionally, despite the fact that the OES wage survey data includes discretionary bonuses and certain other elements of non-guaranteed income, H-1B employers have been required to guarantee the prevailing wage as the H-1B worker’s base, guaranteed pay, without considering discretionary bonuses or other non-guaranteed income the H-1B worker is likely to earn.
Despite these safeguards for protecting U.S. workers against the threat of lower cost foreign labor, the new DOL rule changes the formula for determining the four wage levels, such that an H-1B worker must be paid no less than the Level 1 wage, which will now be roughly equivalent to the 50th percentile, or more than 50% of workers in the occupational classification. Occupations requiring experience would generally fall under even higher wage levels, with the highest wage level being roughly equal to the 95th percentile.
The methodology for determining which wage level applies will not change. Accordingly, in most cases, the 95th percentile wage level will apply when the employer requires five or more years of experience. Further, H-1B employers still may only count guaranteed pay while matching an OES-based figure that includes base pay, discretionary bonuses and certain other forms of non-guaranteed compensation.
The effective date of the new rule is slated to be the date of publication in the Federal Register, likely tomorrow, October 8, 2020. The government has indicated that an immediate effective date is necessary to prevent “evasion” of the new rule by filing affected applications before the effective date.
The new rule will apply to both pending and future Applications for Prevailing Wage Determination and to LCAs filed on or after the effective date. It will not apply retroactively to invalidate any certified LCA or already-issued Prevailing Wage Determination.
The regulation will almost certainly be challenged in federal court but is unlikely to be enjoined before it becomes effective and is applied by DOL in the adjudication of LCAs under the H-1B program and in the issuance of Prevailing Wage Determinations under the PERM labor certification program.
Foster will continue to monitor changes in regulations governing the H-1B and PERM labor certification programs and will make future updates available as appropriate via our firm’s website at www.fosterglobal.com.