Overview of DOL Regulation Hiking Prevailing Wages

Today, Thursday, October 8, 2020, the U.S. Department of Labor (DOL) published an interim final rule, entitled “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States,” that changes how prevailing wages are calculated. This applies to foreign national workers in H1B, H1B1, and E-3 status. It also applies to prevailing wage determinations issued by the DOL for PERM labor certifications. The rule goes into effect immediately, however, we expect several organizations to challenge the rule, so federal courts likely will intervene and block the rule from being enforced, at least temporarily.

Basic Overview of Required Wage for H1B, H1B1, and E-3 Workers

A company that employs an H1B worker must pay the worker the “required wage,” defined as the higher of either the actual wage or the prevailing wage. These rules also apply to H1B1 and E-3 workers. The actual wage reflects what a company pays similarly situated employees in a specific geographic area. The prevailing wage is determined based on a review of the job description, area of intended employment, and minimum hiring requirements for the position.

Typically, the prevailing wage is determined by the Foreign Labor Certification Data Center. Once the actual wage and prevailing wage are verified, the employer must then pay the H1B worker the higher of the two wages.

New Rule Significantly Changes Wage Levels

All occupations list a level 1 wage for an entry-level position, and generally go up to wage level 4 (“fully competent”). Since 2005, wage levels 1 through 4 have been set, respectively, at approximately the 17th percentile, the 34th percentile, the 50th percentile, and the 67th percentile of the wage distribution for the occupation in the area where the individual will be working.

The new rule from the DOL dramatically shifts these figures, respectively, to 45th, 62nd, 78th, and 95th percentiles. On the surface, this may seem like welcome news for H1B workers, or those hoping to move to H1B status (or H1B1 or E-3) in the future. It seems clear, however, that the goal of the rule is not to raise the salaries of H1B workers, but rather to discourage employers from employing workers in H1B status. The rule seems to especially target employers seeking to fill entry-level positions. Presumably, many employers will balk at the idea of paying a wage in the 45th percentile for a position that requires a related degree but little-to-no relevant work experience.

FAQs on Implementation

The DOL has posted a short list of FAQs that address how the rule is being implemented for cases that have not yet been approved. For H1B, H1B1, and E-3 cases, if an ETA form 9035/9035E labor condition application (LCA) was properly submitted to the DOL prior to October 8th, 2020, it will be processed under the prior rules. Similarly, if the LCA has been issued, but the corresponding H1B/H1B1/E-3 has not yet been filed, the new rule would not impact the employer’s ability to use that prior LCA.

For PERM labor certification cases, if an ETA form 9141 application for prevailing wage determination (PWD) was issued prior to October 8th, the new regulation does not impact the validity of that PWD. However, if the ETA form 9141 is still pending as of October 8th, it will be processed based on the new regulation.

Conclusion

Although the rule is effective immediately, the DOL will accept public comments on the interim final rule until November 9, 2020. The rule is expected to be challenged in federal court, and many expect that an injunction will be issued in the relatively near future to block its enforcement. However, it remains to be seen how federal judges will respond to lawsuits on this new methodology for the DOL to determine prevailing wages. Watch MurthyDotCom for updated information, as it becomes available.

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