Executive Summary: On December 5, 2014, a panel of the U.S. Court of Appeals for the Third Circuit issued an opinion vacating the Department of Labor (DOL) regulation and related guidance memorandum authorizing DOL, at the request of the employer, to substitute wages cited in a skill-based private survey for the Occupational Employment Statistics (OES) area prevailing rate in adjudicating H-2B Temporary Employment Certifications.  Comite de Apoyo a las Trabajadores Agricolas v. Perez, Case No. 14-3557, Opinion (3rd Cir., Dec. 5, 2014).

Background Information:  Employers that sponsor H-2B temporary non-agricultural workers for seasonal, low-skilled work are subject to the Temporary Employment Certification (TEC) regulations administered by the DOL's Employment and Training Administration Office of Foreign Labor Certification. The tortured history of administrative rulemaking and litigation predating the Third Circuit's December 5, 2014 opinion began in 2008, when the Bush Administration DOL promulgated a new wage regulation for use in H-2B TEC application proceedings.  The new rule defined the H-2B prevailing wage as "the arithmetic mean" of the wages of similarly employed workers at the same skill level in the area of intended employment and recognized  four distinct skill levels – from the entry level to advanced.  The 2008 rule also permitted DOL to accept as valid a prevailing wage rate reported in a private survey in lieu of the OES mean prevailing rate, at an employer's request.  The 2008 rule was applied in revised agency guidance to adjudicators published in November 2009.

Organizations representing U.S. and H-2B workers sued DOL under the Administrative Procedure Act (APA) asserting that the 2008 rule recognized artificial skill distinctions for low-skilled occupations that allowed foreign workers to take jobs away from U.S. workers at below average wages.  In August 2010, a federal district court ruled in the plaintiffs' favor and invalidated the 2008 wage rule based on DOL's failure to comply with APA procedural requirements.  The court nevertheless permitted the rule to remain in place pending DOL promulgation of a replacement rule.

In 2010, the Obama Administration DOL published a notice of proposed rulemaking reversing the Bush Administration wage rule on the ground that the 2008 skill level methodology failed to ensure that U.S. workers are not adversely affected by the employment of H-2B workers as required by law. Following notice and comment, DOL published a revised H-2B prevailing wage rule in January 2011 prohibiting the use of private wage surveys except where (1) an otherwise applicable OES survey did not provide any data for an occupation in a specific geographical location; or (2) the OES survey did not accurately represent the relevant job classification.  Although employer organizations were unsuccessful in challenging the 2011 wage rule in court, Congress intervened and imposed a series of budget riders foreclosing implementation.  As a result, DOL continued to follow the 2008 skill-level definition of prevailing wage in evaluating H-2B labor certificates and in permitting private skill-level wage surveys to be used upon employer request.

In 2012, the employee organizations returned to court to challenge DOL's continuing application of the skill-level definition and succeeded in obtaining a court order in March 2013 compelling DOL to publish a new wage methodology rule eliminating the use of skill levels from the definition of prevailing wage.  However, in 2012, employer organizations successfully sued DOL in U.S. district court in Florida to enjoin implementation of a comprehensive revision of the H-2B rule purporting to grant DOL authority to investigate and sanction employers for alleged violations of newly created TEC attestation requirements.  The court held that Congress granted the Secretary of Homeland Security exclusive H-2B rulemaking and enforcement authority, rendering the DOL 2012 rule ultra vires – a ruling soundly approved by the U.S. Court of Appeals for the Eleventh Circuit on review of DOL's appeal.  

DOL chose to comply with the March 2013 court order – and to avoid violating the Florida district court injunction – by joining with the Department of Homeland Security in promulgating an emergency Interim Final Rule (IFR) in April 2013 without notice and comment.  The IFR called for the immediate implementation of a new methodology for calculating H-2B area prevailing wages based on the arithmetic mean but continued to permit approval of skill-level private wage surveys as a permissible alternative.  In addition, the IFR purported to invalidate the wage minimums contained in previously approved, unexpired TEC's and to substitute higher wage guarantees to existing workers upon written notice to the affected employers.  In response to appeals filed by adversely affected employers, the DOL Board of Alien Labor Certification Appeals (BALCA) unanimously ruled that the Secretary's attempt to invalidate previously approved TEC wages was unlawful under existing regulations.  In subsequent court proceedings responding to a new lawsuit filed by employee organizations challenging DOL's continuing approval of the use of skill-level private wage surveys under the IFR, DOL contended that the BALCA ruling was erroneous.  Nevertheless, the Secretary issued an order staying enforcement action against employers who failed to comply with amended wage orders.

In May 2014, the Labor Secretary published a notice of intent to finalize the 2011 wage regulation, pending the availability of Congressional funding.  The notice stated that the Department would continue to approve skill-level prevailing wages based on private wage surveys in the interim.  The employee organizations returned to court seeking an injunction to prohibit DOL from continuing to permit H-2B employers to rely on private surveys rather than the OES mean prevailing wage in TEC applications.  The district court dismissed the plaintiffs' complaint without prejudice in July 2014, holding that the complaint was not ripe for review, laying the groundwork for the appeal that resulted in the Third Circuit's December 5, 2014 ruling. Therein, a unanimous panel of the Third Circuit reversed the district court on the ripeness issue based on ample proof of concrete injury to workers represented by the plaintiff organizations. These findings purportedly derived from DOL disclosures indicating that following implementation of the April 2013 IFR, DOL had approved employer requests to substitute lower wages cited in skill-level private wage surveys in 1,559 cases for the OES H-2B rates based on the arithmetic mean wage for the occupation. The court went on to vacate DOL regulations and guidance authorizing continued use of the skill-based private wage surveys, except under the conditions specified in the 2011 wage rule.

The Impact of the Court's Decision on H-2B Employers 

On December 9, 2014, DOL published a notice that it is no longer issuing prevailing wage determinations based on employer provided surveys in H-2B cases based on the Third Circuit's December 5, 2014 opinion.  The notice further states that employers who wish to utilize a Service Contract Act or Davis Bacon Act wage determination or a wage based on a Collective Bargaining Agreement may request redetermination of an OES prevailing wage under 20 CFR § 655.10(g).  Finally, the notice states that employers whose prevailing wage determination was based on an employer provided wage survey, but whose H-2B TEC applications have not yet resulted in a final determination, will be notified of their new wage obligation along with their certification letters.  In taking these actions by executive fiat – without complying with even the APA emergency rule making procedures as proposed in the Third Circuit decision – DOL has opened itself up to new charges of illegal conduct.  In addition, the new Congress may impose new budgetary restrictions preventing DOL from implementing the new procedures, all of which is likely to result in great uncertainty for H-2B employers in the immediate future.