The Department of Homeland Security (DHS) H-1B Strengthening Rule and Department of Labor (DOL) Prevailing Wage Interim Final Rules will be published tomorrow, launching a 30-day comment period. Employers need to take immediate heed of these rules as they include significant changes and have different effective dates.

Department of Labor Interim Prevailing Wage Final Rule

The DOL interim final rule will take effect on Wednesday, Oct. 8. The rule will change the computation of prevailing wage levels, resulting in higher prevailing wages for all occupations for each Occupational Employment Service-based wage level.

This impacts employers who hire H-1B professional workers and sponsor them for employment-based green cards. The interim rule will significantly raise the salary levels for pay under the H-1B program and employment-based green cards, impacting every industry, but perhaps academia, public health care and research institutions most significantly, unless potentially shielded by a collective bargaining agreement.

How Does the DOL Interim Final Rule Impact Employers?

This will effectively increase the “required wage” associated with H-1B, H-1B1, and E-3 benefit requests, as the “required” wage is defined as the higher of the actual wage and the prevailing wage. Under the Immigration and Naturalization Act, employers must pay H-1B workers the greater of “the actual wage level paid by the employer to all other individuals with similar experience and qualifications for the specific employment in question,” or “the prevailing wage level for the occupational classification in the area of employment.”

By ensuring that H-1B workers are offered and paid wages that are no less than U.S. workers employed in similar occupations, the wage requirements are meant to guard against both wage suppression and the replacement of U.S. workers by lower-cost foreign labor.

DHS H-1B Strengthening Rule

The DHS rule will have a 60-day delayed effective date. According to the announcement on the DHS website, the rule will:

• Narrow the definition of “specialty occupation” as Congress intended by closing the overbroad definition that allowed companies to game the system;
• Require companies to make “real” offers to “real employees” by closing loopholes and preventing the displacement of the American worker; and,
• Enhance DHS ability to enforce compliance through worksite inspections and monitor compliance before, during and after an H1-B petition is approved.

How Will the DHS Rule Impact H-1B Work Visas and Employers?

The DHS H-1B Strengthening Rule will also publish on Oct. 8, 2020; but will take effect on Dec. 7, 2020. This rule revises the definition of specialty occupation, changes the “employer-employee” requirements, and increases vetting of H-1B users.

Why is the Government Changing these Rules?

According to the DHS and DOL websites and public announcements, the changes are intended to adjust the existing wage levels to ensure the levels reflect the wages paid to U.S. workers with comparable experience, education, and responsibility as similarly employed foreign workers.

What is the Real Impact to Employers who Rely on Their Highly Skilled H-1B Workforce?

Under current regulations, the job that the employer wishes to offer a foreign national under an H-1B status must require at least a Bachelor’s level degree or equivalent work experience in a specific field or fields to qualify as a “specialty occupation.”

According to the new rule, the definition of “specialty occupation” will be narrowed to only allow sponsorship for an H-1B employee who holds the degree that matches the job –- which will likely cause significant challenges in the high tech and IT industries, which rely heavily on the H-1B workforce. A software engineer or developer job, for example, often accepts degrees ranging from information technology to computer engineering or equivalent training based upon years of technical expertise acquired from working in the field for five or ten years.

The National Federation on American Policy, a non-partisan public policy research organization focusing on trade, immigration and related issues, has published a detailed analysis of the new H-1B wage rule, with specific examples of how it skews the prevailing wages in various professions.

The new H-1B Rule particularly targets IT employers who assign their employees to third-party client sites for the majority of their H-1B terms. The Rule is a direct response to the settlement in ITServe Alliance, Inc. v. Cissna, which was discussed in a prior post on the Harris Beach Immigration Blog. In ITServe, the court rejected USCIS’s interpretation of the employer-employee relationship for H-1B workers and its stringent itinerary rule for offsite employment. USCIS’s restrictive position has been a long-standing issue for consulting and staffing companies that employ H-1B workers.

The rule also seeks to limit the validity of an H-1B visa to one year for a worker placed at a third-party worksite and increase enforcement tools to police companies that do not abide by H-1B rules or cooperate with DHS site visits.

For nearly 10 years prior to the ITServe settlement, technology sector employers have had to navigate a complex maze of document requirements to comply with U.S. Citizenship and Immigration Services (USCIS) policy under what was known as the “Neufeld” memo, which was issued on January 8, 2010. In that memo, USCIS asserted the authority to deny H-1B petitions based on a potentially restrictive understanding of what constituted an “employer-employee” relationship, including when an H-1B visa holder performed work at a client’s location (third-party placement). The DHS Rule now seeks to incorporate these requirements into the H-1B regulations.

Additionally, the required wage increases take effect this week, which means that existing H-1B holders looking to renew their visas might not qualify unless their employers raise their salaries accordingly. This could cause a highly skilled and critical worker to lose his/her job in a struggling economy where the employers are already being squeezed by partial re-openings due to the pandemic and a flailing economy.