What You Need to Know About the H1B Wage Increase Lawsuit

The US Department of Labor (DOL) made big waves when it suddenly published a new H1B wage level interim final rule to the Federal Register on October 8th, 2020. This new H1B rule dramatically increased the H1B prevailing wage levels, having significant impacts on businesses throughout the US. 

As could be expected, this has now been followed by an H1B wage increase lawsuit. What is the lawsuit about, and what is it challenging exactly? Below you can find more detail. 

Why Was the H1B Prevailing Wage Level Raise?

You can read in detail about the H1B prevailing wage level raise here.

In short, the new rule comes as part of a larger effort by the government to limit the H1B program. According to the DOL, H1B workers earn lower wages than US workers. It argues this affects the wages of US workers. With the unemployment rising during the COVID-19 pandemic, it is taking drastic measures to protect the jobs of US workers.

Here is a table showing how the H1B prevailing wage levels have been increased:

How Did this Impact H1B Visa Holders?

Under the new rule, the H1B prevailing wage rates went up by almost 40% across the board.

The wage level changes have a considerable impact on H1B employers and can impact as many as 400 000 H1B employees. In fact, it could result in large-scale H1B lay-offs. We unpack this in more detail later. 

Why is ITServe Alliance Suing?

ITServe Alliance Inc. represents many IT Services, Consulting, and Staffing companies. They have chosen to launch an H1B wage increase lawsuit in New Jersey Court to challenge the wage level changes. 

The lawsuit is filed by ITServe Alliance and a host of other companies.

According to ITServe Alliance, many IT services contracts with clients are multi-year. The pricing used for those multi-year contracts is based on the wage assumptions of their current H1B employees. 

If the DOL increases the wage level randomly without giving these companies proper notice or an opportunity to be heard, it has a massive impact on their businesses. In short, these businesses will have to lay-off H1B workers and move jobs outside of the US. Not only is this bad for H1B employers and H1B workers, but it is also bad for the US economy. 

ITServe Alliance listed some of its members, and the real impact the H1B wage level increase had on them. Here are a few examples:

• Precisiolisted Technologies Corp wage rates will increase up to 50%
• Iflowsoft Solutions Inc wage rates will rise up to 24.5%
• Smart Work LLC wage rates will rise up to 49% or more
• Nam Info Inc. wage rates will increase up to 50% or more
• Kolla Soft Inc wage rates for computer-related occupations will increase up to 26% or more
• Dots Technologies Inc wage rates will rise up to 30 to 40%
• Zenith Services Inc’s wage rates will increase by up to 27% or more.

What is the Goal of the Lawsuit?

ITServe Alliance is asking the court to preliminary and permanently prevent the DOL from implementing the new regulation. Basically, it wants the new rule to be scrapped. 

If the DOL actually wants to increase the H1B prevailing wage, it wants the DOL to follow proper procedures and base its decisions on accurate information. 

What Are the Arguments of the Lawsuit?

On a high level, the H1B wage increase lawsuit argues the DOL’s decision was random. It lacked proper reasoning. It did not consider actual reports on H1B data, and it does not meet statute requirements. 

Drilling down into detail, ITServe Alliance has three main arguments:

1. The DOL violated the notice and comment process required for rule-making;
2. The DOL determined the new wage levels contrary to the H1B requirements set by Congress; and 
3. The actions taken by the DOL are random and not based on logic.

Violation of Notice and Comment Process 

ITServe Alliance argues the DOL dramatically changed the H1B wage levels without giving enough notice to affected parties. There is a proper 9-step rule-making process, which requires the public to have a chance to provide feedback and comment.

The DOL invoked the fast track process without actually following the correct regulatory process. The information the DOL presented, which justifies its need for urgency and using the fast-tracked process, is factually wrong, according to ITServe Alliance. The H1B wage increase lawsuit argues the DOL used outdated sources and data to calculate the new wage levels. There are many relevant reports and studies it did not properly consider when making the new rule.

H1B Statute of Degree Requirement

According to the DOL, the new Level 1 Prevailing Wage levels are upward from Master’s degree. It used Master’s degree as a benchmark for entry-level positions.

As per Congress’s statute, the H1B specialty occupation requirement only requires a bachelor’s degree as a minimum qualification to get an H1B visa. So, the fact that DOL set the wage level to the 45th percentile for Level 1 Wages is inconsistent with Congress’s statute and is based on the wrong assumptions. 

Random and not based on Logic

The legal term used is “arbitrary and capricious.” This just means the DOL’s action is totally random and isn’t based on proper or sound logic. 

The DOL said H1B workers are paid lower than US workers. This statement isn’t supported by data or reports. The DOL also didn’t consider any substantiated reports or studies which is based on real data. It falsely assumes H1B workers are paid less than US workers and that, as a result, employing H1B workers affects the wages of US workers. 

The DOL didn’t include or consider any of the studies that show H1B employment actually creates jobs and investment in R&D. It also didn’t consider any of the reports that show a lack of H1B workers can harm the economy and lead to more job losses, off-shoring of jobs and a decline of investments in the US.

Finally, the DOL states one of the main reasons for its fast-tracking the regulation is unemployment due to COVID-19. In reality, however, the unemployment rate in the computer and technology professions are actually low. 

Conclusion

Hopefully, the H1B wage increase lawsuit is successful and prevents the arbitrary H1B wage level increases from taking effect. If it doesn’t, it could be detrimental to the lives of thousands of H1B visa holders.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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