The Trump administration issued two important new regulations that target the foreign worker programs most commonly relied upon, further restricting US employers’ ability to employ high-skilled workers, driving more American businesses to leave the US, and detrimentally impacting American universities seeking to attract foreign students.
The Department of Labor (DOL) issued a new rule that fundamentally changes how prevailing wage levels are calculated, making it much more expensive to employ foreign workers. The Department of Homeland Security (DHS) issued a new rule that substantially limits qualifying specialty occupations, imposes new employer-employee relationship requirements and limits the ability of US employers to send employees to client locations. The DOL rule went into effect immediately and the DHS rule will take effect on December 7, 2020.
The DHS uses prevailing wage surveys to determine the salary employers in the US pay foreign workers in certain visa categories, including:
- H-1B specialty occupation workers;
- H-1B1 specialty occupation workers under free trade agreements for citizens of Chile and Singapore;
- E3 specialty occupation workers under the free trade agreement for citizens of Australia;
- H-2A seasonal agricultural workers;
- H-2B other seasonal workers;
- EB2 professionals with advanced degrees; and
- EB3 professionals, skilled workers and other workers in short supply.
The DOL wage levels are structured into four tiers. The DOL has long set the four tiers at the 17th, 34th, 50th, and 67th percentile of the DOL’s Occupational Employment Statistics (OES) wage distribution based on how the DOL determined American workers are normally compensated. Under the new rule, the DOL shifts the four tiers to the 45th, 62th, 78th, and 95th percentile. The explanation cited by the DOL makes it clear the change is based on the Trump administration’s radical new interpretation of the law and now states workers in entry level positions must actually be doing jobs that are more complex than American workers in entry-level positions.
The impact of this change will make it much more expensive to employ foreign workers. For example, under the old prevailing wage, $92,102 per year, qualified an entry-level software developer in Seattle, but the DOL change increases that salary requirement by 52 percent, to $139,880 per year. Note that the change does not impact already-approved employees, but will impact new petitions and petition extensions filed after the effective date.
The DHS rule introduced more restrictive definitions of “specialty occupation” and “employer-employee relationship” under the H-1B program, and reduces H-1B validity to one year from three years for work performed at client sites.
It has long been the law that a specialty occupation is one that normally requires a bachelor’s degree or equivalent as a minimum requirement. The new regulation mandates that the bachelor’s degree be more directly related to the specific occupation. As a result, a general degree requirement, such as engineering, business administration or liberal arts, will not be sufficient to justify a specialty occupation. This change is likely to hurt US employers recruiting MBA graduates and engineering graduates whose major field of study is not directly related regardless of actual coursework completed, just to give two examples.
The new rule also removes the terms “normally,” “common” and “usually” from the regulatory criteria. These words were used in the past to be consistent with DOL findings about what the majority of American employers required. Under the new rule, the DHS ignores long-held DOL findings about real world US employer practices and will force employers to show that the degree requirement is always the requirement for the occupation as a whole, the occupational requirement within the relevant industry, the petitioner’s particularized requirement, or that the position is so specialized, complex or unique that it is necessarily required to perform the duties of the specific position. Since the DOL does not publish such findings, it will be difficult for US employers to comply and more petitions are likely to be denied.
The new rule also broadly attacks H-1B visits to client sites by differentiating a “worksite” from a “third-party worksite.” Under the new rule, a third-party worksite is the physical location where the work is actually performed by the H-1B worker “other than the beneficiary’s residence in the United States” that is not owned, leased or operated by the petitioner. The US Citizenship and Immigration Services (USCIS) has long scrutinized whether a valid employer-employee relationship exists between the H-1B petitioner and the foreign worker in cases that involve a third-party worksite. Under the new rule, the standards do not change but the validity period will. The new rule results in only a maximum validity period of one year, compared to the current three-year validity period.
Both the DOL and DHS new rules seem motivated more by election politics than the best interests of the US. The new rules were published on October 8, 2020—just 26 days before the upcoming election. Bypassing the legal protections of the Administrative Procedures Act, the Trump administration treated both as interim final rules. By using interim final rules, the administration sought to bypass the normal notice and comment period required by law. The normal rulemaking process is designed to give the public a chance to review and submit comments and concerns regarding a proposed rule. Despite of having broad impact on tens of thousands employers throughout the country, the administration decided to issue interim final rules that only consider their comments after the fact.
The Trump administration has repeatedly explained that the changes to the H-1B programs will help protect American jobs. But the rules that the administration rolled out are likely to do the opposite. By making employment of foreign workers in the US prohibitively expensive, even more US companies will offshore jobs and the US economy will suffer from the loss of payroll and income taxes and day-to-day spending that these jobs contribute to our country today. It is difficult to justify, and the DOL has provided no evidence, that the old prevailing wage data was incorrect. According to the DOL, Level I wage rates are assigned to entry-level positions that require only a basic understanding of the occupation. Job offers for a research fellow, a worker in training or an internship would be given Level 1 wage. It is hard to imagine how an intern should be paid more salary than 44 percent of all workers in the occupation.
US employers are already suffering from the long shutdown of US consular posts during the pandemic and a presidential proclamation that banned the issuance of these visas until after December 31, 2020. Now US employers have to deal with two more restrictive regulations that make it exceedingly difficult as well as prohibitively expensive to employ high-skilled foreign workers in the US.
Because of the significance and broad impact of these rules, they have received much media attention. See Forbes, New York Times, and The Wall Street Journal.
Adding to the uncertainty, both regulations are likely to be challenged in court. The American Immigration Lawyers Association (AILA) is already calling for plaintiffs to challenge the new DOL rule on prevailing wages.
Contact your Dentons’ lawyer if you have any questions.
