On December 1, 2020, U.S. Federal Court for the Northern District of California in Chamber of Commerce of the United States of America V. U.S. Department of Homeland Security struck down the Department of Labor (DOL) rule that profoundly changed how it calculated H-1B and PERM Labor Certification wages.

On October 8, 2020, the DOL implemented the new rule without any prior notice and changed the way it calculated the prevailing wage. In implementing this new rule, the DOL asserted that the current wages were artificially low, and U.S. employers hired and trained foreign workers at lower wages than what the U.S. workers were paid. So, to remedy this alleged problem, the DOL adjusted the prevailing wage percentiles at all wage levels.

As an example, Level I wage for a new college graduate Software Engineer with no experience increased from $78, 125 to $116,481. Further, to avoid providing notice of the new rule, the DOL invoked a “good cause exception” to the notice and comment requirement under the Federal Administrative Procedures Act. The DOL further claimed that widespread unemployment resulting from the Coronavirus required an immediate action to prevent foreign workers from taking American jobs.

The Judge struck down this new rule and thus prevented the DOL from implementing it.  Based on the evidence presented, the Judge concluded that the DOL and Department of Homeland Security (DHS) have not shown good cause to excuse the notice and comment requirement under the Administrative Procedures Act.  The Court’s decision goes on to say that though the DOL and DHS used the words “skyrocketing” and “widespread” unemployment and insisted on taking “immediate action”, they had in fact taken no action for more than six months since such unemployment rates started.  

More importantly, the Judge pointed out that the evidence regarding unemployment rates most relevant to H-1B occupations does not show a “dire” emergency.  The Court’s opinion correctly pointed out that H-1B visas require a “bachelor’s degree… or higher, and in September 2020, the unemployment rate for workers with a bachelor’s degree was 4.8%.”

DHS and DOL made changes to the wage policy without any consultation with interested parties such as US employers, institutions of higher learning, policymakers, and immigration attorneys.  They did not want to give any notice to the U.S. employers and employees who have been relying on the government issued wages for many years. For many US employers who are struggling to fill professional jobs, the new wages would have been untenable.  The Court rightly reiterated “this lack of predictability necessary for basic business governance and planning also is contrary to the stated purpose of promoting American business in order to provide employment opportunities for United States citizens”.

With the new rule struck down, we are expecting clarification from the DOL as to how quickly they will transition back to the July 1, 2020 wage data for the H-1B cases, and also whether the DOL will reissue Prevailing Wage Determinations that were issued between October 8 and December 1, 2020.  We hope better sense prevails and DOL will affirmatively go back and reissue these determinations based on the July 1, 2020 data.

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