The New H-1B Rules: What Employers Need to Know

Two recent fast-track regulations published in early October by the U.S. Departments of Labor (DOL) and Homeland Security (DHS) increase the difficulty and cost of qualifying for the H-1B visa program. While legal challenges have been launched, it is clear that H-1B employers are facing important changes in this critical program.

In early October, the U.S. Departments of Labor (DOL) and Homeland Security (DHS) published two fast-track regulations that increase the difficulty and cost of qualifying for the H-1B visa program. The DOL rule took effect on October 8 with only two days’ advance notice, and significantly increased H-1B minimum prevailing wage requirements. The DHS rule will tighten several key aspects of H-1B program criteria when it takes effect on December 7. Both rules impact new H-1B petitions as well as extensions and amendments; foreign nationals already in H-1B status are not grandfathered in to the old rules.

While several legal challenges have been launched against the new regulations, relief by a court is neither certain nor immediate. H-1B employers are facing important changes in this critical program, as detailed below.

Increase in prevailing wage minimums

Since October 8, the Department of Labor regulation has imposed higher minimum wages on the H-1B, E-3, and H-1B1 nonimmigrant categories, as well as on the PERM labor certification program.

The rule restructures the DOL prevailing wage system, resulting in significantly increased minimum wages at all four levels. For example, previously the Skill Level I (entry level) wage minimum was set at the 17th percentile of the average wage for a particular occupation in a specific location. Under the new rule, the Level I minimum is now at the 45th percentile – just under the Level III minimum (50th percentile) under the prior system. In some cases, this means employer salary obligations for particular positions have increased by 50 percent or more.

DOL prevailing wage levels: Prior and New

Notwithstanding these increases, employers will still be permitted to use alternative wage sources instead of DOL prevailing wage data; private wage sources are not subject to the DOL percentiles. However, alternative wage surveys are subject to other regulatory requirements, so employers who are new to their use should work closely with immigration counsel.

Narrowing the H-1B program

The Department of Homeland Security H-1B rule takes effect on December 7, and introduces a number of key changes to the program. Most notably, the rule:

• Tightens the definition of “specialty occupation” to require a more direct relationship between the degree requirement and H-1B job duties, and provide less flexibility in establishing that the degree is minimally required.
• Heightens the standard for whether an “employer-employee relationship” exists between the H-1B petitioner and beneficiary. The agency will still consider the petitioner’s “right to control” and ability to hire, fire, and pay the foreign national, but in the context of a more multi-factored analysis that includes the actual supervision exercised by the petitioner.
• Limits H-1B approval validity periods for third-party placement petitions to a maximum of one year at a time (from a current maximum of three years at a time).
• Strengthens DHS authority to conduct H-1B compliance site visits, including the authority to:
  • conduct visits before or after approval of an H-1B petition;
  • conduct visits at third-party worksites; and
  • deny or revoke an H-1B petition due to a petitioner’s or third-party worksite’s refusal to cooperate with a visit.
• Reimposes the requirement that petitioners placing H-1B workers at third-party worksites submit evidence of contracts, work orders and other similar documentation to establish the specialty occupation and employer-employee relationship.

What’s next

So far, three lawsuits against the DOL and DHS rules have been filed by U.S. trade associations, companies and universities. The suits allege that the agencies violated the law by fast-tracking the regulations and bypassing standard notice and public comment procedures without adequate justification. Two of the suits also challenge the new prevailing wage methodology and allege that DOL relied on faulty economic data.

The lawsuits initially seek preliminary injunctions that would prevent agency enforcement of the rules during litigation. Employers would be wise to manage expectations, though. It could take several weeks or more before a court rules on an injunction. If issued, relief could be limited to just organizations involved in the lawsuit, or to a specific geographic area. The government is also expected to appeal any unfavorable ruling to a higher court.

It is also worth noting that a new federal Administration in January may not necessarily turn the tide on H-1B program restrictions. If Joseph Biden is elected the next President of the United States, the DHS and DOL rules will be competing for attention among numerous Trump immigration policies being called for reversal. Business immigration has long held a complex position on both sides of the political aisle. In a Biden Administration, a rollback of tighter H-1B policies could be hoped for, but not counted on.

What employers can do now

Employers should continue working with immigration counsel to review how their workforce and operations might be impacted by the new prevailing wage and H-1B program changes. Adapting to the new frameworks will require strategy, planning, and expertise.

Organizations may also want to consider submitting formal comments to DHS on the adverse impact of its H-1B rule. The agency is accepting comments on the rule until December 7. This feedback will become a part of the public record, and could help educate courts in their review of the ongoing lawsuits.