On October 4, 2010, the Employment and Training Administration, U.S. Department of Labor (“DOL”), issued a proposed rule that would require employers to pay H-2B andAmerican workers recruited in connection with an H-2B job application a “wage that meetsor exceeds the highest of: the prevailing wage, the federal minimum wage, the state minimumwage or the local minimum wage.” The proposed rule was published on October 5, 2010, in the Federal Register. Interested parties have 30 days to comment.

The H-2B program allows for the admission of 66,000 skilled or unskilled temporary guest workers annually when qualified American workers are not available and the employment offoreign workers will not adversely affect the wages and working conditions of similarly employed Americans. The proposed rule was promulgated in response to the federal districtcourt decision in Comite de Apoyo a los Trabajadores Agricolas v. Solis, Civil Action No.09-240 (E.D. Pa. Aug. 31, 2010), which held that the 2008 H-2B wage regulations issued bythe DOL violated the Administrative Procedure Act.

In its preamble to this proposed regulation, the DOL indicated that it has grown increasinglyconcerned that the current method for calculating permissible H-2B wages does not adequately reflect the wages necessary to ensure that American workers are not adversely affected by the employment of H-2B workers. Under the DOL’s proposed rule, the prevailing wage for H-2B workers would be based on the highest of three measures:

  1. Wages established under a collective bargaining agreement;
  2. A wage rate established under the Davis-Bacon Act or the Service Contract Act for the occupation in the area of intended employment; or
  3. The mean wage rate established by the Occupational Employment Statisticswage survey for that occupation in the area of intended employment.

The DOL added that the inclusion of Davis-Bacon Act or Service Contract Act wages wouldprotect U.S. worker wages by ensuring the prevailing wage determinations reflect the “highest wage from the most accurate and diverse pool of government wage data availablewith respect to a job classification and the area of intended employment.” Additionally, the DOL indicated that the proposed rule would eliminate the current four-tier wage structure and the use of private wage surveys, which the DOL feels often are “not relevant to the unskilled positions generally involved in the H-2B program.”

Fifth Circuit Rules that Hotel Workers on H-2B Visas Are Not Entitled to Recoup Visa Expenses Under FLSA

On October 1, 2010, the U.S. Court of Appeals for the Fifth Circuit decided Castellanos-Contreras v. Decatur Hotels LLC, No. 07-30942 (5th Cir. Oct. 1, 2010) (en banc). In an 8-6 decision, the Fifth Circuit held that foreigners working as temporary guestworkers at New Orleans hotels under the H-2B program are covered by the Fair Labor Standards Act (“FLSA”), but that the FLSA does not require these employers to reimburse the workers for recruitment, visa, and travel expenses in determining whether the employee is receiving the FLSA-mandated minimum wage.

In reaching this conclusion, the Fifth Circuit declined to enforce retroactively a 2009 DOLinterpretive bulletin that indicated that the FLSA covers visa and travel expenses. The Fifth Circuit noted that the DOL bulletin was issued in 2009, long after the events in question occurred in 2005-2006, and found that it had to follow the general rule not to apply changes in the law retroactively. In the Fifth Circuit’s decision, Judge Catharina Hayes wrote,“Whatever deference may be due to the [DOL]'s informally promulgated bulletin in the future, it does not itself in any way purport to apply retroactively. Accordingly, we decline to apply it to the situation here.”

The Castellanos-Contreras case arose from an FLSA collective action filed by H-2B workers hired by Decatur Hotels in New Orleans in 2005 after Hurricane Katrina. The H-2B workers 'hourly pay rates exceeded the federal minimum wage. The workers argued, however, that the money they paid to obtain employment in the United States, including visa, transportation, and recruitment costs, must be reduced from their pay when calculating whether Decatur was actually paying them the minimum wage required by the FLSA. If this were not done, the workers argued, it would have the effect of cutting their wages to less than the FLSA mandated minimum wage for the relevant pay periods.

The DOL’s proposed rule on calculating wages for the H-2B guest worker program, coupled with the Fifth Circuit’s decision in Castellanos-Contreras, should serve to remind employers in industries that use temporary or seasonal H-2B guest workers, such as the recreational, construction, and hospitality industries, that they must be careful about the wages they pay to avoid what are clearly renewed efforts by the DOL to regulate wages and working conditions in this area.