A new lawsuit and economic research have exposed problems with the Department of Labor’s (DOL) new H-1B wage rule. The lawsuit seeks a preliminary and permanent injunction against the new rule, which analysts have concluded was designed to price out of the U.S. labor market H-1B visa holders and employment-based immigrants by raising the required minimum wage to employ them. The research explains why the rule is likely unlawful, harmful to the U.S. economy and will make it difficult for international students to be employed in the United States after graduation.
“On October 8, 2020, without providing prior notice and without affording plaintiffs or the general public an opportunity to comment, the Department of Labor dramatically altered the manner in which it calculates prevailing wage rates for the H-1B program,” according to a complaint filed on October 16, 2020, by the Wasden Banias law firm on behalf of ITServe Alliance, Dots Technologies, Iflowsoft Solutions, Kolla Soft, NAM Info, Precision Technologies, Smart Works and Zenith Services in the U.S. District Court for the District of New Jersey.
“Plaintiffs bring this civil action challenging the Department of Labor’s decision to set dramatically higher wage rates without following the notice and comment rulemaking procedures required under the Administrative Procedure Act,” reads the complaint. “Plaintiffs also challenge the agency’s new wage rates as a violation of the Immigration and Nationality Act, as amended, because the new wage rates are set under a novel standard that conflicts with the governing statutory criteria. The Department of Labor’s new wage rule is also arbitrary and capricious because the agency relied on outdated, incorrect, or limited empirical data, failed to consider readily available, relevant data and empirical studies, and engaged in reasoning that conflicts with basic economic theory.”
Based on a law passed by Congress in 2004, DOL determines the prevailing wage by gathering data from the government’s Occupational Employment Statistics (OES) wage survey and using a mathematical formula to create four levels of wages for each occupation. DOL has data for all the people who do a job in an area, some are brand new and some have decades of experience. William Stock of Klasko Immigration Law Partners points out that in the new DOL regulation by setting Level 1 at 45%, the Department of Labor is saying the brand new workers must earn close to the mid-point of all wages for people who do the same job in an area. This change by DOL results in inflating the required minimum salary for all workers at all four levels.
The plaintiffs cited research from the National Foundation for American Policy (NFAP) on the low unemployment rate in computer occupations and the inflated wages required for employers to pay under the DOL rule. “The new prevailing wage methodology increases prevailing wage rates for some computer-related occupations by as much as 45%, depending upon skill level and geographic location of employment. Exhibit H.”
The plaintiffs point out, “DOL based the new level 1 prevailing wage rate upward adjustment on the assumption that the wages paid to individuals with a master’s degree represent the entry level wages for H-1B workers . . . despite the statute’s defining specialty occupation as an occupation requiring a bachelor’s degree as the minimum qualification for entry into the position.”
The National Foundation for American Policy analysis cited by the plaintiffs explained the DOL H-1B wage rule’s flaws. The analysis drew upon private wage surveys to compare market wages to the newly-required DOL wages. NFAP downloaded the entire DOL wage library used to determine prevailing wage rates as of June 30, 2020, to compare those wages to the new required minimum wages for every occupation and geographic area after the DOL rule went into effect.
The analysis found:
– “The new wage rule increases the required minimum salary by a substantial margin across all wage levels for H-1B visa holders and employment-based green card applicants. For all occupations and geographic locations, the new minimum salary that employers are required to pay when compared with the system in place prior to the new DOL wage rule is, on average, 39% higher for Level 1 positions, 41% higher for Level 2, 43% higher for Level 3 and 45% higher for Level 4.
– “NFAP examined the impact of the new wage rule on 12 occupations common to H-1B visa holders, based on the U.S. Citizenship and Immigration Services (USCIS) H-1B ‘characteristics report’ for FY 2019.
– “Under the new rule, DOL mandates an employer pay a petroleum engineer 99.5% more than the prevailing wage in existence at Level 1 only shortly before the DOL wage rule took effect.
– “Computer research scientists, depending on the level, would need to be paid from 42% to 49% more under the new DOL wage system, an increase in the required annual salary of $36,000 to $55,000.
– “On average, employers would need to increase annual salaries by nearly 50% at Level 1 for computer hardware engineers, over 40% for computer programmers and chemical engineers at all wage levels and more than 35% for electrical engineers, computer network architects, computer systems analysts, mechanical engineers and database administrators at all wage levels. On average, employers would be required to pay software developers at least 45% higher annual salaries under the new DOL wage rule.
– “One can find among the data required annual salary increases of more than 100%, or even 200%, for common occupations . . . . A pediatrician in Wichita, Kansas at Level 1 must be paid 177% more a year under the new DOL wage rule.
– “Under the new DOL mandated minimum salary, an employer in the San Jose, California area would pay an electrical engineer at Level 4 nearly $85,000 (or 53%) above the market wage, as indicated by a private wage survey.
– “The annual salary required by DOL under the new rule for a computer programmer in the Chicago area would be nearly 63% higher or approximately $86,000 a year more than the market wage at Level 4.
– “Under the new DOL rule, an employer would need to pay a financial analyst in New York more than three times the market wage ($208,000 vs. the market wage of $66,428), according to a private wage survey.
– “In the Los Angeles area, under the new DOL wage rule, companies employing H-1B visa holders as software developers (system) would be required to pay 62% more than the market wage at Level 1.”
“The new DOL wage rule appears designed to inflate the salaries of H-1B visa holders and employment-based immigrants to price their services out of the U.S. labor market,” the NFAP analysis concludes. “The Department of Labor has created a new wage system that compels employers to pay well above market wages if they wish to employ a foreign-born professional in H-1B status or sponsor an individual for permanent residence. By all appearances, the Department of Labor has exceeded its authority by making employers pay salaries that bear little resemblance to market wages or even the wages under the system the Department of Labor operated before publishing its new wage rule.”
Judges in several jurisdictions will see challenges to both the DOL wage rule and a Department of Homeland Security H-1B rule. “This haphazard and baseless rulemaking will hurt thousands of small and medium IT (information technology) businesses. Instead of helping with job creation and economic growth in the middle of pandemic and recession, these agencies are hurting the small businesses that are at the forefront of rebuilding the economy,” said a spokesperson for the ITServe Alliance, which won a significant case earlier this year against U.S. Citizenship and Immigration Services.
The ITServe Alliance-Wasden Banias lawsuit will not be the last to challenge the Trump administration’s new rules to restrict companies and high-skilled foreign nationals.