United States: Federal Court Rejects DOL's And DHS's Efforts To Fast-Track New Rules On Prevailing Wage And H-1B Requirements

Last week, a federal district court in California rejected the efforts of the U.S, Department of Labor (DOL) and the U.S. Department of Homeland Security (DHS) to expedite implementation of two new rules that would significantly change employment-based immigration. As we explained in our  October 2020 post, DOL published a new rule that changed how the agency would compute the prevailing wage applicable to certain permanent and temporary immigration classifications.  Under the new rule, the prevailing wage is much higher than under the established system.  Citing emergency conditions, DOL made the new rule effective at the time of publication – October 8, 2020.  On the same date, DHS published a new rule that amended key definitions and standards for the H-1B temporary classification.  Among other changes, the DHS rule limited the jobs that would qualify as "specialty occupations" for H-1B employment authorization.  The rule also created higher standards for placing an H-1B employee at third-party worksites, which is frequently done by staffing companies.  The DHS rule was set to become effective on December 7, 2020.  The court set aside both new rules because DOL and DHS did not give the public advance notice and an opportunity to comment.

Federal Rulemaking Procedures – Fast-Tracking Requires Emergency

When a federal agency creates a new rule, it must first publish the rule as "proposed" and allow time for the public to comment.  The agency then must consider the comments before finalizing and implementing the new rule.  This procedure is required unless there is an emergency.  Relying on the economic impact of the pandemic, DOL and DHS declared that there was an emergency justifying expedited implementation of the new rules.  Yet the emergency exception is very narrow.  The court determined that DOL and DHS could not rely on the exception here to avoid the traditional rulemaking procedures. 

What Rules Apply Now

DOL reverts to prior prevailing wage system

Following the court decision, DOL announced that it will revert to the prior system for calculating prevailing wage.  DOL already has reset the prevailing wage percentiles as highlighted below in yellow:

Beginning on December 9, 2020, DOL will accept Labor Condition Applications for H-1B cases using the reestablished prevailing wage system. 

As of December 15, 2020, DOL will begin issuing prevailing wage determinations using the reestablished system.  The DOL also will allow employers to ask for reconsideration of the high prevailing wage determinations issued during the short period that the new rule was in effect.  Under usual procedures, an employer must ask for reconsideration within 30 days after the DOL issues a prevailing wage determination.  DOL has temporarily extended this time period.  Employers have until January 4, 2021, to request reconsideration of determinations issued under the now-defunct new rule.

DHS confirms new rule will not become effective; existing rules and standards apply

On December 4, 2020, DHS announced that it will not implement the new H-1B rule.  Instead, DHS will continue to apply the existing rules and standards for H-1B cases.  This is good news for employers seeking H-1B authorization and particularly so for staffing companies.  Very few staffing companies could have met the higher standards set out in the new DHS rule.

The Future

Neither DOL nor DHS have stated whether they will appeal the court decision.  The agencies also have not stated whether they will initiate the longer, traditional rulemaking procedures to seek the significant changes in the prevailing wage system and H-1B requirements.

We will provide an update if there are further developments.

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