On October 6, 2020, the U.S. Department of Labor (DOL) announced that it will be publishing an Interim Final Rule (IFR) on October 8, 2020 which will impact the prevailing wage levels used in H-1B, PERM, and other programs.

What is an IFR?

The contents of proposed regulations can be shared with the public as a “proposed rule” allowing for a notice and comment period. Where the government deems that it has good cause to skip the notice and comment period, it will issue an IFR that takes effect immediately.

What will this IFR do?

It will change the definition of the four levels of the prevailing wage requirement.

What’s a “prevailing wage?”

When an employer seeks to hire a foreign national in the U.S., employment-sponsored options often require the employer to pay the individual the higher of either the “prevailing wage” or the actual wage. The actual wage is what the employer pays similarly situated U.S. workers, while the “prevailing wage” is a figure determined by the DOL. This requirement is present for the popular H-1B visa program, as well as the H-1B1 for Singaporeans and Chileans and E-3 for Australians, all of which require the individual to be offered and qualify for a “specialty occupation.” Likewise, employers sponsoring an individual for legal permanent residency (commonly known as a “green card”) through a labor market test route (referred to as the PERM process) must advertise and offer the position at or above the prevailing wage. Prevailing wages take into consideration the occupation, the job location, the job responsibilities, and the job requirements. There are four wage levels within each occupation, with each correlating to different levels of responsibilities and requirements of an occupation.

Why is the DOL changing the wage levels?

According to the IFR that the DOL is publishing, it reports that the current wage levels are too low and are not accomplishing the reason why the Immigration and Nationality Act (INA) requires prevailing wages in the first place, i.e., “to protect U.S. workers’ wages and eliminate any economic incentive or advantage in hiring foreign workers.” The DOL bases its conclusion on a number of factors, including the fact that large companies are paying higher salaries than the prevailing wages and the high number of Americans who study in the STEM field but end up not working in those fields. While larger companies are paying higher wages, DOL is concerned that other employers are using prevailing wage standards to keep salaries low or to choose foreign workers over U.S. workers.

How do the changed wage levels compare to the current system?

While DOL is not going to change the source of its wage data, it will set the different levels at different percentiles. There are four wage levels. Prior to October 8, 2020, Level 1 is set at the 17th percentile, while the new system will have it set at the 45th percentile. Level 2 is set at the 34th percentile and will be increased to the 62nd. Level 3 is set at the 50th and will be increased to the 78th. Level 4 is set at the 67th and will be increased to the 95th. For example, a school hiring an entry level high school teacher in Boston would have a prevailing wage that is $24,090 higher per year; for an architect, it would be $27,685 higher; and for a software engineer, it would be $36,234 higher.

When do these take effect?

These changes take effect immediately on October 8, 2020. The changes do not impact cases that have prevailing wage determinations already issued by the DOL nor cases where the Labor Condition Application that carries a prevailing wage attestation has already been certified. These will impact new cases moving forward.

What to expect next?

As you can imagine, there will be challenges over the process and over the substance of the changes. Additionally, please note that the U.S. Department of Homeland Security has issued their own IFR making changes to the H-1B program itself. Stay tuned for news on those rules.

The above has been provided for informational purposes only. Contact your Clark Lau LLC attorney to see how this applies to your situation.