New Rules Restricting H-1B Program and Hiking Prevailing Wages

The Trump Administration issued new directives to restrict the H-1B visa program and substantially increase the prevailing wages that employers must pay foreign workers.  

Two new Interim Final Rules (IFRs) affecting hiring of foreign workers were published on October 8, 2020:   

(1) “Strengthening the H-1B Nonimmigrant Visa Classification Program” rule by the DHS/USCIS will take effect 60 days after the date of publication, and

(2)   “Restructuring of H-1B/H-1B1/E-3 and PERM Wage Levels” rule by the DOL took effect immediately upon publication. 

Restrictions on H-1B Visa Program

The H-1B rule essentially attempts to regulate the same issues that were previously raised by USCIS in many Requests for Evidence and case decisions, some of them have already been decided by court decisions.  They include:

• The required degree must be in a specific specialty or specialization:  There must be a direct relationship between the subject area of the required degree and the duties of the position.  Accordingly, generalized or broad degree types such as engineering, liberal arts, business, etc., without further specialization are not sufficient to support an H-1B petition.

• The required degree in a specific specialty must "always", not "normally" or "usually",  be a minimum requirement for entry in the occupation in the United States.

• Third-party worksite is defined as "worksite, other than the beneficiary's residence in the United States, that is not owned or leased, and not operated, by the petitioner."  If an H-1B worker is placed to work at a third-party worksite, the H-1B petition can only be approved for a maximum of one year.

• Employer-employee relationship definition is defined to be the "conventional master-servant relationship as understood by common-law agency doctrine."  It restores the listing of factors to be considered from the January 2010 Neufeld Memo on Employer-Employee Relationship.  

• Employer may not only show that it has the right to control H-1B employees but also must actually exercise that right to control.  

• Employer will be required to provide contracts, work workers, letters, etc., from clients and third parties to prove any third-party worksite engagement. 

Substantial Increases in Foreign Worker Wages

The new rule by DOL substantially increases the wage requirements for H-1B and E-3 "specialty occupation" programs as well as permanent resident (green card) applications.  These wage requirements are governed by the "prevailing wages" set by the Labor Department based on their salary surveys in each employment location.  

Currently there are 4 levels of prevailing wages set by the DOL.  The new rule increases level 1 wage from 17th percentile to 45th percentile; level 2 wage from 34th percentile to 62nd percentile; level 3 wage from 50th percentile to 78th percentile; and level 4 wage from 67th percentile to 95th percentile.  

For example, the level 1 wage of a software developer in the New York and Newark metropolitan area has been increased from $78,811  to $116,251.  Such increases will be financially prohibitive for many employers. 

DOL has indicated that it will not reopen previously issued and approved prevailing wages in LCA or labor applications.  However, all new H-1B and EB-2 and EB-3 green card applications are already subject to the new wage increases. 

Conclusion

The review process of these regulations was shortened to almost non-existent with little or no time for public comments before implementation.  The IFR on prevailing rule took effect almost instantly upon publication.  Lawsuits will almost certainly be filed to enjoin the enforcement of these rules.  In the meantime, plans of many employers and foreign workers will surely be disrupted. Stay tuned for further development of these important issues.