Wages are a key part of the H-1B Petition for a Nonimmigrant Worker. Prevailing wages – wages normal to an industry, position, and seniority level in each county – ensure that companies cannot hire foreign workers to avoid paying higher wages. Normally, wages are reflective of the average wage paid to a citizen employee in a similar position. However, because the Department of Labor (DOL) sets these wage levels, they are occasionally not reflective of the actual normal wage for the position.
This is exactly what happened on October 13th, 2020, when DOL issued the Occupational Employee Statistics (OES) Prevailing Wage Data for the upcoming H-1B CAP season, which is when employers await selection to file their petitions for H-1B workers each year. Employers, much to their surprise, found that despite minimal increases in average wages levels, prevailing wages issued by DOL jumped up by thousands of dollars per domestic workers, from the 17th to the 45th for an entry-level position. In practical terms this means, for example, in the Computer Applications category in California, wage went from $70,720 per worker on H-1B to a minimum wage of $110,000 per entry-level H-1B worker. This was true across the country in a multitude of job positions. A Web Developer in Texas went from costing a company a minimum of $46,384 per year for an entry-level position to $62,649 for the same position. This trend is also applicable to higher-level positions, with wages increasing anywhere from 30-50%.
The increase in wage level priced many employers out of H-1B workers altogether, especially in technology-related fields. The employers who were able to offer H-1B petitions despite the wage increases did so at a significant cost. There are 85,000 new H-1B positions added each year (0.05% of the US workforce) in addition to the 580,000 workers on H-1B visas currently. It is impossible to have concrete numbers on how many companies and workers were affected, given that in The United States Center for Immigration Services, several employers volunteered data on how much more they would have to pay to retain their H-1B workers: Amazon would need to pay about $15,298 more per person, resulting in a total of $55,087,386; Deloitte would need to pay about $15,148 more per person, resulting in a total of $116,663,553; Qualcomm Technologies would need to pay about $19,090 more per person, resulting in a total of $568,415,350, and the list continues. If this wage level remained, 70% of all H-1B employers would be affected, for a total cost of over 7 billion dollars.
The wage increases were not the only new restrictions issued to further restrict the H-1B process. The Department of Homeland Security’s USCIS narrowed the degrees acceptable for H-1B positions. Prior to this change, a degree equivalent to a U.S. Bachelor’s Degree in a field related to the position offered was required to obtain a visa. However, now the degree must be directly applicable to the job duties, not just related. Words like “usually” or “normally” required are thrown to the wayside, emphasizing strict enforcement of the rule. For example, this change requires a mechanical engineer to have a mechanical engineering degree, not just an engineering degree.
However, the Interim Final Ruling (IFR) announced by the Department of Labor about the wage increase was struck down by a preliminary injunction in New Jersey and a federal court order in California. The courts ruled that the administration did not offer the standard 30-day waiting period required by the Administrative Procedure ACT before putting the rule into effect. Because of the lack of due process, DOL was forced to revert to their previous wage levels, effective December 4, 2020.
While employers enjoyed hearing they would not have to pay the higher wages, the DOL IFR continued to adversely affect employers who had already filed Labor Condition Applications (LCAs) using the higher wage data. An LCA is an application, filed with the DOL before an H-1B petition can be filed, that provides the government with information about the place of employment, job title, and duties, and proposed wage. An LCA must be submitted for approval, and, if approved by the DOL, posted at the employee’s intended worksite for 10 days to inform other employees of the wage and job duties of the prospective H-1B employee. Due to the time it takes for the DOL to process, review, and issue a decision on an LCA, most employers need to submit an LCA several months before they file the actual H-1B petition. For employers who filed an LCA with the higher wage level and want to change it to reflect the reverted lower wages, they would need to resubmit an LCA, wait for a decision, and repost the new LCA for 10 days. This is time-consuming and can severely delay the process of submitting the actual H-1B petition, but the only alternative is to continue to pay the unrealistic higher wage.
Overall, while the courts managed to protect employers’ interests by requiring the Department of Labor to reconsider prevailing wages, employers will continue to feel the effects of the Interim final Ruling for months to come. The stringent qualifications for H-1B visas remain in effect, meaning that it may be more difficult for individuals with general degrees like business administration or engineering with no specialty to obtain a visa. In January 2021, the Department of Labor issued a final ruling on Prevailing wages, striking the middle ground between previous prevailing wages and the excessive minimums published in the interim final ruling. Prevailing wages were raised from the minimum being in the 17th percentile to the 35th percentile for entry-level workers. While this increase still going to be an added expense for H-1B employers, these changes will not go into effect until 2022, giving employers adequate time to plan. As the 2021 H-1B season approaches, employers may need to adapt to ensure they have followed all the new guidelines.