Overview of DOL Rule that Hikes Prevailing Wages

The U.S. Department of Labor (DOL) has republished the rule that dramatically increases the salary requirements for H1B and PERM labor filings. The DOL initially published this regulation as an interim final rule (IFR), which was in effect from October 8, 2020, until it was blocked by a federal court on December 1, 2020. It has now been published as a final rule.

The final rule is similar, but not identical to the IFR. The rule is technically scheduled to be in effect from March 15, 2021, but will not actually alter any prevailing wages before July 1, 2021. Many businesses are alarmed by such dramatic increases in the wages to sponsor technology and other professionals for the H1B or PERM process.

Overview of Increase in Prevailing Wages

All occupations list a level 1 wage for an entry-level position, and generally go up to wage level 4 (“fully competent”). 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 IFR, which was blocked by the courts, shifted these figures, respectively, to 45th, 62nd, 78th, and 95th percentiles. The final rule will change the wage level figures to 35th, 53rd, 72nd, and 90th percentiles.

While these rates are not quite as severe as those listed in the IFR, the final rule still represents a substantial increase in prevailing wages for H1B, H1B1, and E-3 workers, along with the foreign workers sponsored via the PERM labor certification process.

Wage Increases will be Phased In

Unlike the IFR, the final rule will phase in these wage rate hikes. From July 1, 2021, through June 30, 2022, most of the prevailing wages will be increased to 90 percent of the final wage level. On July 1, 2022, the full prevailing wage levels will become fully effective.

The wage increases will be phased in more gradually for foreign nationals who have either an approved I-140 or who are eligible to extend H1B status beyond six years based on a pending or approved labor certification or I-140 petition. For the first year, the prevailing wage will be set at 85 percent of the final wage rates. This will be increased by five percent each year, until the full wage rate is reached on July 1, 2024.

Conclusion

As noted above, while this final rule goes into effect on March 15, 2021, the phased increase in prevailing wages does not begin until July 1, 2021. Since it has been published as a final rule, the incoming Biden Administration likely would need to go through the formal rulemaking process if it wishes to undo this rule. If there are other court challenges and a federal judge rules in favor of those challenging the final rule, then that could delay its implementation. Finally, Congress could take action with a simple majority to block the rule to prevent it from being implemented.

Copyright © 2021, MURTHY LAW FIRM. All Rights Reserved