The Department of Labor Cancels Wage Levels Change Rule for H1B

As the Trump administration wraps things up, the H1B Wage Levels Increase Rule has come under fire. 

On October 8, 2020, the U.S. Department of Labor pushed the Wage Level Increase Rule through with immediate effect. The Trump administration claimed they abandoned the required notice-and-comment period as the rule was a response to the unemployment caused by COVID-19. However, there is widespread speculation that COVID-19 was only used as an excuse. The reality is that the rule would significantly affect the H1B visa program and employment-based green cards.  

At its core, the rule is a way to increase the minimum wage required to be paid to H1B workers. This sounds great, but it could have some undesired consequences that would affect foreign workers’ ability to qualify for an H1B visa or even get offered a job at all.

Fortunately, the courts have ruled against the new Wage Level Increase Rule.

Below we take a closer look at the H1B Wage Levels Increase Rule, and why it was canceled. We’ll also explain how this could affect your H1B visa now, and in the future.

What did the H1B Wage Levels Increase Rule Say?

In essence, the Wage Levels Increase Rule said that wage levels for all H1B workers have to be increased. To understand what this means in practice, you need to understand how the minimum wage for foreign workers is calculated. 

The Department of Labor collects survey data from employers and uses this data to determine the average prevailing wages. Prevailing wages depend on a bunch of factors that impact the average wage of a worker. This includes the occupation, skill level required for the job, and geographic area worked in. The minimum wage required to be paid to a foreign worker is then calculated using percentiles of the average prevailing wage. The H1B Wage Levels Increase Rule tried to change these percentiles. 

Before October 2020, an entry-level foreign worker had to be paid a minimum wage in the 17th percentile of average wages in that specific occupation. If the Wage Level Increase Rule were implemented, that same worker would have to be paid a minimum wage in the 45th percentile. Foreign workers across all skills levels and occupations would have to be paid significantly higher wages than before.

This could sound like good news, but the reality is the increase would price foreign workers out of the market. Foreign workers will need to be paid higher wages than the industry standard to remain eligible for H1B visas. In many states, labor laws would require employers to raise all the other employees’ salaries. This may not be financially feasible for employers. As a result, hiring a foreign worker would just become too expensive for U.S. employers. If the rule is enacted, it would make it harder for immigrants to get an H1B visa.

Why Did the Department of Labor Cancel the Rule?

On December 3, 2020, the Department of Labor canceled the H1B Wage Levels Increase Rule. This decision followed the three court cases that were launched against the Department of Labor. Two of these court cases decided against the rule. 

The courts found the Department of Labor did not give all relevant stakeholders the required 60 days’ notice period for comments and objections to be raised. By making the Wage Level Increase Rule effective immediately, the Department of Labor violated the required process to enact a new law. There are certain exceptions that could allow a new rule or law to be effective without the required commentary period being followed. However, the courts found the reasoning, in this case, wasn’t sufficient. 

The courts found it “significant” that the Department of Labor tried to get the Wage Levels Increase Rule pushed through as though it was a response to COVID-19. But there was no intention for the rule to be a “temporary solution” to COVID-19 related unemployment. The court also noted that the unemployment rate for skilled workers with bachelor’s degrees (as is required for H1B workers) wasn’t really that low. 

It is important to note the court ordered the rule to be canceled based on an error in the process. The Department of Labor did not give enough time for notice-and-comment. The court did not make any comment on the content of the rule. This means if the Department of Labor fixes the error in the process, they could enact the exact same rule again, regardless of the possible negative consequences.

What Does This Mean for H1B Visa Holders?

In the short term, things are returning back to the way they were before the rule was enacted. Since the new Wage Levels Increase Rule has been canceled, the previous Occupational Employment Statistics (OES) Survey Wage Data, as in effect of October 7, 2020, will be used for prevailing wage determinations. The Department of Labor will be using the old wage levels to assess H1B visa eligibility.

Due to the administrative chaos caused by canceling the law, you should keep the following in mind: 

• The National Prevailing Wage Centre is temporarily pausing the processing of Prevailing Wage Determination Applications (PWD). PWD Applications will start to be processed on December 15th, 2020. 
• If you are an H1B visa holder and you’ve already filed PWD according to the new (now canceled) rule, you can request for your application to be reviewed. The deadline for the PWD application review is January 4, 2021.

What Happens Next?

In the long term, we don’t know what the Wage Level Increase Rules will mean for H1B visa holders. The court cases dismissed the rule on the basis that the Department of Labor did not follow the required notice and comment period. This means to re-enact the rule, the Department of Labor would have to publish it again, allow for notice and comment for 60 days, analyze the comments, and finalize the rule. 

There are less than 60 days left before Inauguration Day, so it is unlikely that the Trump administration will be able to get the rule pushed through following the proper procedures. But the Trump administration could appeal the court’s decision. In the meantime, the rule remains canceled.

Conclusion

For now, the Wage Level Increase Rule has been canceled. It seems unlikely that the rule will be re-published before Inauguration Day. It’s clear some careful thinking will have to be applied regarding wage levels for H1B visa holders. 

On the one hand, H1B workers must be paid a living wage. One way of doing that is to increase the minimum wage. On the other hand, increasing the minimum wage requirements to the extent that U.S. employers cannot afford to employ foreign workers will have catastrophic consequences. Let’s hope the Biden administration has w

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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