Rulemaking Redux: DOL Issues Updated Final Rule Adjusting Wage-Level Calculations for H-1B, H-1B1, and E-3 Visa and PERM Cases

On January 12, 2021, the U.S. Department of Labor (DOL) announced an updated final rule designed to increase prevailing wages required for certain visa processes. The updated rule, entitled “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States,” is the DOL’s second attempt in recent months to revise how the existing four-tiered wage structure of the Occupational Employment Statistics (OES) wage survey is calculated for purposes of determining prevailing wages. If the rule goes into effect, it will significantly increase prevailing wages in all four wage levels of the OES survey and across all occupations, affecting H-1B, H-1B1, and E-3 temporary work visas, as well as permanent labor certification program (PERM) applications.

Background

An employer seeking to hire foreign workers in H-1B, H-1B1, or E-3 visa status, or to sponsor a foreign worker for PERM labor certification, must commit to paying a foreign worker in one of these classifications the prevailing wage for the specific occupation, level, and metropolitan statistical area in which the worker will be employed. As part of the H-1B, H-1B1, and E-3 visa process, an employer must obtain a certified labor condition application (LCA) from the DOL. The LCA must contain the employer’s attestation that it will pay the foreign national beneficiary the higher of either the actual wage level paid to all other similarly situated employees, “or the prevailing wage level for the occupational classification in the area of intended employment.” Likewise, an employer sponsoring a foreign worker for a PERM labor certification application (the first step in most employment-based green card processes), is required to obtain a prevailing wage determination (PWD) for the job opportunity from the DOL’s Office of Foreign Labor Certification’s National Prevailing Wage Center.

On October 8, 2020, the DOL published the initial iteration of this rule as an interim final rule, also titled “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States.” This interim final rule went into effect immediately without a notice period. The original version of the rule similarly updated the methodology through which the OES wage survey’s wage leveling was calculated, substantially raising the prevailing wages in all four wage levels across all occupations as well.

However, in issuing an interim final rule, the DOL bypassed the traditional, lengthier notice and comment rulemaking process under the Administrative Procedure Act (APA) by invoking the good cause exemption and citing emergent circumstances created by the COVID-19 pandemic, allowing the rule to take immediate effect. In December 2020, three separate federal district judges set aside this interim final rule, finding that there was not sufficient cause for the agency to forego the traditional notice and comment period prior to implementation of the rule. The new updated final rule announced on January 12, 2021, attempts to sidestep this issue by setting the effective date of the rule for 60 days from the date of publication of the final rule in the Federal Register, as well as by utilizing a phased rollout of the new leveling criteria.

Changes to the OES Wage Distribution per the Final Rule

The OES survey’s current four-tiered wage structure is based on calculations that approximate the following percentiles of the entire OES wage distribution.

OES wage level	Percentile of the OES wage distribution
Level 1	17th percentile
Level 2	34th percentile
Level 3	50th percentile
Level 4	67th percentile

OES Wage Level 1 is generally seen as representative of an entry-level position within the occupation. Thus, an employer would be required to pay an entry-level foreign national worker in one of the required classifications at or above the 17th percentile of the OES wage data. Each wage level thereafter corresponds with a progressive advancement through an occupation. OES Wage Level 4 is generally considered a seasoned professional in the occupation.

The new rule intends to raise each level in the following manner.

OES wage level	Current OES wage distribution	Updated final rule OES wage distribution
Level 1	17th percentile	35th percentile
Level 2	34th percentile	53rd percentile
Level 3	50th percentile	72nd percentile
Level 4	67th percentile	90th percentile

Under the new paradigm created in the updated rule, an employer would be required to pay an entry-level worker at or above the significantly higher 35th percentile of the OES wage data. Similarly, the seasoned professional’s prevailing wage, previously set to the 67th percentile, would now be set at the 90th percentile.

Although there is a significant jump from the current OES wage leveling percentiles to those of the updated rule, the previous interim final rule had an even larger gap, reaching the 45th, 62nd, 78th, and 95th percentiles for Levels 1, 2, 3, and 4, respectively.

Rollout of the New Wage Distributions

As noted above, one of the key complaints with the previous iteration of the DOL’s OES wage rule was that the interim final rule was effective immediately after being published in the Federal Register, bypassing a required notice and comment period. The updated rule, on the other hand, is expected to be published in the Federal Register on January 14, 2020, and is set to become effective 60 days after publication. Additionally, the DOL intends to roll out the new wage distributions in stages, allowing for a slower ramp-up to the increased prevailing wage leveling.

Prior to July 2021, filed LCAs and issued PWDs will remain at the current wage level distribution percentiles. Starting on July 1, 2021, the new wage distribution percentiles will go into effect on a staggered basis following two phased rollouts. Both rollouts will raise the wages incrementally over several years, until the new leveling percentiles are met.

The following is the general rollout of the new wages levels, applicable to most cases:

• Starting on July 1, 2021 through June 30, 2022: Levels 1 and 4 will be set at 90 percent of the updated target leveling percentiles.
• Starting in July 1, 2022: The new wage distribution percentiles will go into full effect as described above.

However, for H-1B workers who, as of October 8, 2020, were the beneficiaries of approved I-140 petitions or were otherwise eligible for extensions beyond the sixth year of H-1B status, the new rule staggers the rollout further:

• Starting July 1, 2021 through June 30, 2022: Levels 1 and 4 will be set at 85 percent of the new leveling percentiles.
• Starting July 1, 2022 through June 30, 2023: Levels 1 and 4 will be set at 90 percent of the new leveling percentiles.
• Starting July 1, 2023 through June 30, 2024: Levels 1 and 4 will be set at 95 percent of the new leveling percentiles.

By July 1, 2024, all LCAs and PWDs will be subject to the new leveling.

Next Steps

In revising the previous interim final rule, which was struck down in federal court, the DOL took steps to address many concerns levied against the initial iteration of the interim final rule. However, similar to the prior rule, it is likely that this rule will face similar challenges in federal court. Further, President-elect Joe Biden’s transition team has indicated that his administration will issue a memorandum on January 20, 2021, delaying implementation of “midnight regulations” to assess their implementation.

Ogletree Deakins’ Immigration Practice Group will continue to monitor developments with respect to these and other policy changes and will post updates on the firm’s Immigration blog as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.