On January 14, the U.S. Department of Labor (DOL) published in the Federal Register a final rule that will impose higher wage requirements for H-1B workers and “green card” applicants.   

The DOL had previously published the same rule as an interim final rule with an immediate effective date in October of last year. The rule was challenged in court and, because DOL failed to meet the standard for implementing the regulation as an interim final rule with the required notice and comment period, multiple federal courts enjoined the rule.   

The newly published final rule will become effective March 15, 2021, unless it is suspended by the Biden Administration, which the new Administration may do for a period of up to 60 days.  Unlike the initial interim final rule published in October, the final rule provides for a phased in approach for those going through the permanent residency process. 
  
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 17^th percentile, and the highest has been roughly equivalent to the 67^th 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.  Although the DOL made small modifications in the final rule to lower the increases, the final rule still results in a Level 1 wage that is roughly equal to the 35^th percentile, a Level 2 wage roughly equal to the 53^rd percentile, a level 3 wage roughly equal to the 72^nd percentile and a Level 4 wage roughly equal to the 90^th percentile.   

The practical impact is that an H-1B worker in a job requiring five years of experience generally must be paid higher than 90% of workers in the same or similar occupation in the geographic area.  

The methodology for determining which wage level applies will not change.  Accordingly, in most cases, the 90^th 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 new regulation will almost certainly be challenged in federal court but may not be enjoined before it becomes effective even if a court ultimately finds that the rule is unlawful.   

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.