With the consent of the U.S. Department of Labor, a federal judge in San Francisco has vacated final regulations issued by the Trump Administration that would have significantly increased the “prevailing wage” that would apply to H-1B and green card workers. This means that the “old” prevailing wage regulations will remain in force until further notice. However, at some point the Biden Administration may issue proposed regulations with some adaptations.

Background

Payment of the Department of Labor “prevailing wage” is a requirement for employers who sponsor H-1B workers and those who sponsor workers for the green card through the PERM labor certification process. The prevailing wage rates generally are based on the Department of Labor’s Occupational Employment Statistics data.

On October 8, 2020, the Trump Administration issued an immediately effective Interim Final Rule that significantly increased the OES prevailing wages.

This increase in the prevailing wages was part of President Trump’s effort under his Buy American and Hire American Executive Order. Among other things, the intent of the Executive Order was to encourage employers to hire American workers by making it more expensive to hire foreign workers. The prevailing wage under the Trump regulations ranged from 30 percent to 60 percent higher than the prior rates, depending on the occupation title and wage level. The dramatic increases raised concerns that many employers would refuse or be unable to pay these wages and, as a result, forgo sponsoring foreign workers for H-1B visas or green cards.

Shortly after the Interim Final Rule was issued, a group of plaintiffs led by the U.S. Chamber of Commerce filed suit in San Francisco to block the rule. On December 1, 2020, U.S. District Court Judge Jeffrey White granted partial summary judgment to the Chamber of Commerce group and vacated the Interim Final Rule. As a result, the “old” prevailing wage rule has been back in effect since December 1, 2020.

The Trump Administration then issued somewhat scaled-down final regulations on January 14, 2021, to take effect on March 15, 2021. President Biden took office a week after the final regulations were issued, on January 20, 2021.

Developments under the Biden Administration

The Biden Administration has postponed the effective date of the final regulations on two occasions, and the most recent effective date was November 14, 2022, with corresponding transition dates for implementation of the wage increases.

Meanwhile, on June 9, the Department of Labor filed a motion in the San Francisco lawsuit to have the final regulations remanded to the agency, saying that it had “identified a number of substantive and procedural concerns that warrant further consideration” and needed “the opportunity to fully assess these issues and determine what further action is appropriate.” The plaintiffs agreed to the remand, provided that the final regulations were also vacated, and the DOL agreed. Accordingly, Judge White vacated the final regulations with the consent of the DOL.

On June 29, the Department of Labor’s Office of Foreign Labor Certification announced on its website that the Trump regulations had been vacated and that it would continue following the prior regulations:

OFLC Announces Updates to Implementation of the Final Rule Affecting Wages for H-1B and PERM Workers; District Court’s Order Vacating Final Rule

On June 23, 2021, the U.S. District Court for the Northern District of California issued an order in Chamber of Commerce, et al. v. DHS, et al., No. 20-cv-7331, vacating the Final Rule, Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States, 86 FR 3608 (Jan. 14, 2021), and remanding the matter back to the U.S. Department of Labor (the Department).

The Department published the Final Rule on January 14, 2021, following district court orders that set aside an October 8, 2020 Interim Final Rule (IFR) (85 FR 63872). The Final Rule amended the Department’s regulations governing the prevailing wages for employment opportunities that U.S. employers seek to fill with foreign workers on a permanent or temporary basis under the PERM, H-1B, H-1B1, or E-3 visa programs. The Department has twice delayed the effective date of the Final Rule (86 FR 13995; 86 FR 26164). In light of these delays and now the June 23, 2021 order vacating the Final Rule, the operative version of the regulations at 20 CFR 656.40 and 20 CFR 655.731 continues to be the version in place on October 7, 2020, prior to the publication of the IFR.

In other words, the “old” prevailing wage rules remain in effect, at least for the time being.

What’s next?

It is anticipated that the Biden Administration will continue to review the methodology of how prevailing rates and levels are determined. The Department of Labor will need to go through the formal rulemaking process before any changes to the “new-old” regulations can be implemented.