District Court Invalidates New DOL and DHS H-1B Regulations

On December 1, 2020, the U.S. District Court for the Northern District of California granted a motion for summary judgment in favor of the plaintiffs that had requested to set aside two new regulations from the U.S. Department of Labor (DOL) and the U.S. Department of Homeland Security (DHS). The two rules, both published as interim final rules, changed the way Occupational Employment Statistics (OES) prevailing wages are calculated and changed the definition of a “specialty occupation”. As interim final rules, the DOL and the DHS bypassed the traditional, lengthier notice and comment rulemaking process under the Administrative Procedures Act (APA), with both agencies invoking the good cause exception and citing to the emergent circumstances created by the COVID-19 pandemic. In its order, the district court found that there was not sufficient cause for the agencies to forego the traditional notice and comment period prior to implementation of the two new rules.

Background

In October 2020, the U.S. Chamber of Commerce and other plaintiffs filed separate actions opposing both the DOL prevailing wage rule and the DHS specialty occupation rule. These cases were combined into one case, Chamber of Commerce of the United States of America v. United States Department of Homeland Security, 20-cv-07331-JSW.

The APA requires an agency to publish a notice of proposed rulemaking, justify the rule by reference to legal authority, describe the “subjects and issues involved” in the rule, and then allow interested parties a period of time to submit comments. After comments are made, the agency may publish a final rule explaining the action and its rational connection between the facts found and the choices made.

These steps may only be skipped if an agency, for good cause, finds that it is impracticable, unnecessary, or contrary to the public interest and the agency incorporates this finding and reasons in the rules issued.

The District Court’s Decision

The district court held that this standard should be narrowly construed and the good cause standard was not met by the DOL or the DHS, where both agencies argued that the COVID-19 pandemic and the related economic impacts on unemployment rates justified sidestepping the traditional notice and comment period of the APA. In reaching this conclusion, the court found that “[t]he evidence regarding unemployment rates most relevant to H-1B visa applications also does not show a ‘dire’ emergency,” and  that unemployment rates for workers with a bachelor’s degree were substantially lower than the general unemployment rates offered by the defending agencies.

The DOL rule, which went into effect on October 8, 2020, only two days after its publication, dramatically changed the way that OES wage levels were calculated for use with H-1B, H-1B1, and E-3 visa petitions, as well as PERM labor certification cases. Since the implementation of the DOL OES rule, many employers have faced challenges in moving forward with these cases where the OES wages have dramatically increased or useable wage data is no longer available.  Now that the rule has been set aside, the DOL would need to restore the prior system of determining prevailing wages.

The DHS rule, which was set to go into effect on December 7, 2020, amended the definition of a “specialty occupation” to clarify that it is no longer sufficient for employers to show that a degree is “normally,” “commonly,” or “usually” required in order to establish that a position is a specialty occupation. Rather, the new rule would have required that employers show that a degree is “always” required in order to qualify for H-1B status. The DHS rule also clarified that there must be a direct relationship between the required degree fields and the duties of the position, such that a position would not qualify as a specialty occupation if the position required only a general degree (such as a degree in business administration) without further specialization (such as a more narrow specialization in business analytics). Now that the rule has been set-aside, employers may continue to petition for H-1B positions which, “require[d] the attainment of a bachelor’s degree or higher in a specific specialty, or its equivalent, as a minimum for entry into the occupation in the United States” and use existing criteria to analyze H-1B eligibility.