Tag Archive for: Artificial Wages

Cyrus Mehta

Trump’s Final Attacks on H-1B Visas and Legal Immigration: Reintroduction of the Wage Rule and Rule Requiring Client Companies to File H-1B Petitions 

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By Cyrus D. Mehta & Kaitlyn Box* 

Although President Trump is on his way out, his administration has promulgated two new rules that will have a devastating impact on the H-1B visa program and legal immigration.

Reissuance of DOL Wage Rule

 On January 12, 2021 the Department of Labor (DOL) published an advance copy of a final rule which changes the way in which prevailing wage levels will be computed for purposes of permanent labor certifications and Labor Condition Applications (LCAs). The final rule is expected to be published on January 14, 2021. The new rule will raise all four salary tiers, with the Level I wage, currently set at around the 17th percentile, eventually increasing to approximately the 35th percentile. However, the new rule acknowledges that an abrupt transition to the new wage levels could be disruptive to the economy and detrimental to U.S. employers, so the DOL will gradually introduce the new wages over a period of a year and a half, with the first increase set to take place on July 1, 2021. For H-1B workers who were the beneficiaries of approved I-140 petitions as of October 8, 2021, the phase-in period for the increased wages is extended over a three- and- a -half year period. See Stuart Anderson, DOL H-1B Visa Wage Rule: Donald Trump’s Bad Parting Gift To Immigrants, Forbes (Jan. 13, 2021), https://www.forbes.com/sites/stuartanderson/2021/01/13/dol-h-1b-visa-wage-rule-donald-trumps-bad-parting-gift-to-immigrants/ for a detailed summary of the phase-in.  

This rule was initially published with an effective date of October 8, 2020, but was struck down in the U.S. District Court for the District of Columbia last month on the ground that the COVID-19 pandemic did not give the DOL sufficient cause to publish the rule without a notice and comment period. Purdue University, et al., v. Scalia, et al., Civ. Actin No. 20-3006 (2020).  

Though the new wages themselves will be gradually phased in, the new rule will go into effect 60 days after publication, absent intervention from the Biden administration. Despite the phase in, the new wage levels will have no bearing to wages paid to US workers. They will not reflect prevailing or market wages and will be set at artificially high levels, thus rendering it difficult for an employer to either sponsor a new H-1B worker or retain an existing  H-1B worker at the time of renewal.  The American Immigration Lawyers’ Association (AILA) has reported that President-Elect Biden’s transition team will issue a memorandum on January 20, 2020 that will delay for 60 days the implementation of this and other last-minute regulations promulgated in the last days of the Trump presidency. 

Requirement to File H-1B Petitions by Employer and Third Party Client

On Friday, January 15, the Department of Homeland Security (DHS) quietly issued a new rule aimed at demolishing the H-1B visa program. The Department of Labor (DOL) also issued accompanying new guidance entitled “H-1B Program Bulletin Clarifying Filing Requirements for Labor Condition Applications by Secondary Employers at 20 C.F.R. §§ 655.715 and 655.730(a)”. The DHS rule is a limited version of a proposed rule published in October, the implementation of which was enjoined, and will take effect 180 days after publication in the Federal Register.  

The DHS rule changes and broadens the definition of the employer-employee relationship by incorporating common law elements into the definition of an employer. Historically, USCIS has been concerned with whether a petitioner who file an H-1B petition and then sends the beneficiary to a third-party worksite is the true employer of that beneficiary. The DHS rule, after taking into account comments made in response to the prior H-1B proposed rule, has now broadened the definition of the employer-employee relationship. 

However, the USCIS, by broadening the employer-employee definition, is now requiring the entities who use the services of the H-1B worker to also file H-1B petitions if they meet the broader definition of employer. The DOL’s corresponding guidance announced that it is reinterpreting its regulation to also require such “secondary employers” to file the LCA and H-1B petition. This departure completely contradicts USCIS’ concerns about whether the petitioner of an H-1B worker is a genuine employer or not by now rendering even the user of the H-1B worker’s services an employer.  

This outcome was never contemplated in the initial proposed H-1B rule which was blocked in court, and stake holders were not given an opportunity to comment on this aspect of the rule, which will create a radical paradigm shift. “Secondary employers” will have difficulty even complying with the rule since they do not pay the H-1B worker’s wages. The concept of secondary employment has existed in DOL regulations with respect to dependent employers and willful violators who needed to ascertain whether the assigning of an H-1B worker with a secondary employer would displace US workers. In 2000, the Fifth Circuit in Defensor v. Meissner also viewed a hospital that used the nurses of a staffing company as a secondary employer, but the Court developed this analytical framework of two employers to determine whether the hospital, as a secondary employer, required the nurses to have a bachelor’s degree or whether it was only the staffing company’s requirement. Defensor v. Meissner, 201 F. 3d 384 (5th Cir. 2000). However, those applications of “secondary employer” were limited to the dependent employer’s obligation to ensure there was no displacement of US workers when an H-1B worker was placed with a secondary employer, or in the case of Defensor v. Meissner, used to determine whether the position qualified for H-1B classification. The DOL uses this term in an unprecedented way, and this new interpretation will adversely impact the H-1B visa program – if not kill it completely.  

While this Friday night Trump rule in the waning days of a failed presidency has been designed to kill the India heritage IT industry, it will also hurt corporate America, which relies on this IT industry to keep humming away, creating jobs, and thus remaining competitive in the global economy. The change will also do significant harm to other sectors as well that involve third-party placements, including nursing, consulting, audit, engineering services among many others. 

However, the Biden administration may forestall the implementation of this rule after January 20th. The rule is likely to be politically unpalatable, even to Democrats who disfavor the H-1B visa program, given how overbroad and radical it is, as well as the deleterious impact it would have on the American economy and U.S. companies who use H-1B workers.  

The DHS circumvented the notice and comment process in promulgating this rule, alleging that the change in the employer definition would be inconsequential. Nothing could be further from the truth as the new rule requires the end client to also file an H-1B petition. To IT consulting companies, H-1B workers, and third parties who use the services of the workers, however, this rule would be catastrophic. By implementing an expanded definition of “employer”, the DHS and DOL will force third parties who do not pay an H-1B worker’s wage to file LCAs and H-1B petitions, interfering in contractual obligations and perhaps even forcing end clients to disclose confidential wage information. These secondary employers, according to a DOL Field Assistance Bulletin  that was issued upon the promulgation of the DHS rule, will need to comply with all the required wage and other obligations under the Labor Condition Application, along with maintaining their own pubic access file.  

This disconnect between the DHS statement and the rule’s true breadth could render  it even more vulnerable to the legal challenges that are sure to come.  For instance,  the Supreme Court in Kisor v. Wilkie, 139 S.Ct. 2400 (2019) recently held that  government agencies no longer get unbridled deference to interpret their  own regulations as they did under a previous holding, Auer v. Robbins, 519 US 452 (1997). While the need for a secondary employer to file an H-1B petition has been suggested in the preamble to the rule, it is not stated in the actual rule, which defines the employer in a broader sense but does not include any definition of “secondary employer”  or the need to file an H-1B petition. The DHS and DOL cannot now reinterpret the new definition of employer to require multiple H-1B petitions on behalf of the same H-1B worker when the new rule does not contain this requirement, and which has never been the authoritative position of the agency and has taken stakeholders by unfair surprise. There is a good argument to make to a court that this interpretation of the new rule ought to be held unreasonable under Kisor v. Wilkie. 

Even though Trump will exit on January 20, his attacks on legal immigration through last minute regulations such as the ones above will take time to challenge, unravel and rescind.

 *Kaitlyn Box graduated with a JD from Penn State Law in 2020, and works as a Law Clerk at Cyrus D. Mehta & Partners PLLC. 

 

Cyrus Mehta

Killing the H-1B Visa Also Kills the US Economy

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By Cyrus D. Mehta & Kaitlyn Box

Last week the Department of Labor (DOL) and the Department of Homeland Security (DHS) each issued new rules aimed at further attacking the H-1B visa program. The DOL rule, which was issued without affording the public an opportunity for notice and comment, significantly raises the minimum required wage that employers must pay to H-1B employees. The new rule could increase prevailing wages for some positions by as much as 40% or more.  The rule goes into effect immediately. The rule’s stated purpose is to ensure that U.S. workers are not forced out of their jobs by cheap foreign labor, but it advances no support for the outdated notion that H-1B workers are systematically underpaid. It was promulgated without any notice and comment as required under the Administrative Procedures Act. The DOL’s spurious justification for this unfair surprise was to prevent employers from rushing to filing Labor Condition Applications under the old wage rates that would have been valid for three years.

The rule, which was likely aimed at making H-1B employees too costly for U.S. employers to hire, poses several legal quandaries.  As pointed out by Stuart Anderson in a Forbes article, U.S. employers, for example, could be forced to pay H-1B employees significantly higher wages than their American counterparts, causing them to run afoul of equal pay laws that require employees who are in a protected class, including nationality, to be paid wages that are equivalent to those earned by employees who are not members of the protected class. Take, for example, New York’s New York State’s Pay Equity Law, which prohibits employers from paying an employee who is a member of one of the protected classes less than a worker without protected status for equal or substantially similar work. N.Y. Labor Law art. 6, § 194 (1) (2019). “Protected Class” is defined to include gender, race, creed, color, national origin, sexual orientation, gender identity or expression, military status, sex, disability, predisposing genetic characteristics, familial status, marital status, or domestic violence victim.

By promulgating this latest rule, the DOL could also be forcing employers to violate its own rules regarding the payment of wages to H-1B workers. Under 20 CFR § 656.731(a), employers must pay H-1B workers the higher of the prevailing or the actual wage. The actual wage is the wage paid to all other individuals with similar experience and qualifications for the specific employment in question. An employer could be forced to pay new hires significantly higher wages than those paid to existing H-1B workers holding the same position, resulting in the existing employees being paid less than the actual wage in violation of 20 CFR § 656.731(a). Employers could raise wages across the board to avoid this situation, but increasing wages substantially and with little warning is unlikely to be feasible for most, and could ultimately result in layoffs and damage to the U.S. economy.

The DHS rule, which goes into effect on December 7, 2020, makes it more difficult yet for U.S. employers to win H-1B approvals by imposing language requiring a direct relationship between the specialized degree and the occupation. Under the new rule, a position does not qualify as a “specialty occupation” unless:

“(1) A U.S. baccalaureate or higher degree in a directly related specific specialty, or its equivalent, is the minimum requirement for entry into the particular occupation in which the beneficiary will be employed;

(2) A U.S. baccalaureate or higher degree in a directly related specific specialty, or its equivalent, is the minimum requirement for entry into parallel positions at similar organizations in the employer’s United States industry;

(3) The employer has an established practice of requiring a U.S. baccalaureate or higher degree in a directly related specific specialty, or its equivalent, for the position. The petitioner must also establish that the proffered position requires such a directly related specialty degree, or its equivalent, to perform its duties; or

(4) The specific duties of the proffered position are so specialized, complex, or unique that they can only be performed by an individual with a U.S. baccalaureate or higher degree in a directly related specific specialty, or its equivalent.”

(emphasis added)

Among the DHS rule’s most significant changes is the reduction of the H-1B visa validity period from the current three years to just one year when the H-1B worker will work at a third-party worksite. Additionally, the rule inserts the requirement that only positions requiring education or experience in a “directly related specific specialty” will qualify as specialty occupations, greatly limiting the number of individuals who can successfully qualify for an H-1B visa. Employees in IT-related fields, who often hold general degrees in engineering or computer science, are likely to have particular difficulty meeting this new requirement.

The rule also imposes burdens on employers who send H-1B workers to third-party worksites, apparently reviving some of the onerous requirements struck down in IT Serve Alliance v. Cissna. In assessing whether an employer-employee relationship exists, the new rule encourages closer scrutiny as to whether the requisite level of employee supervision exists when the employee is stationed at a third-party worksite. Additionally, employers who employ H-1B workers at third-party worksites must submit additional evidence such as “contracts, work orders, or other similar corroborating evidence showing that the beneficiary will perform services in a specialty occupation at the third-party worksite(s), and that the petitioner will have an employer-employee relationship with the beneficiary”.

These new rules pose the potential for serious harm to both H-1B workers and the U.S. companies who employ them. Employers must file an extension for an H-1B worker whose status is expiring, but if they are not able to pay the employee the new, artificially inflated wages imposed by the DOL rule, the request for an extension may not be filed. Limitations in OES data have resulted in wages for some positions being entirely unavailable. For example, no wage data has been listed for a Software Developer, Systems in San Francisco since the new rule was promulgated on October 8, 2020. The default wage for Software Developer, Systems is $208,000. Similarly, little wage data is listed for physicians so they too must be paid the $208,000 default wage. Employers are forced to either pay the default wage, an exorbitant salary for many positions, or wait until wage data is available, potentially risking an untimely filing of the employee’s H-1B extension. If an extension is not filed, the H-1B employee would then be forced to rapidly depart the United States in the midst of a pandemic. Employers, particularly those in IT-related fields who employ numerous H-1B workers, who are unable to pay the new, substantially higher wages could be forced to lay off workers, or move their operations overseas. Foreign students graduating from US schools will not be hired by US employers if the entry level wage is ridiculously high. This will result in foreign students paying tuition fees to universities in other countries if their career prospects in the US will be diminished by these rules.  Nonprofits and startups will also find it impossible to pay these artificially inflated wages, which have no bearing whatsoever on the prevailing market wage.

Although litigation may soon challenge the new rules, putting U.S. employers in this difficult position for the time being does not bode well for the American economy’s chances of recovering from the effects of COVID-19. Forcing U.S. companies to reduce their workforce or move overseas to keep costs down also threatens the employment prospects of American workers who look to these same companies for jobs – ironic, as this is the very group whose interests the new rules are aimed at protecting.  Aspiring immigrants desire to come to America to succeed, and this in turn also benefits the US economy as they innovate and start or lead great companies. This is America’s secret sauce.  Nobody is denying that some aspects of the H-1B visa program should not be reformed, such as providing more job mobility to H-1B workers and providing them with a faster path to the green card, but these two new rules poison the secret sauce that keeps America so successful.

 

Kaitlyn Box graduated with a JD from Penn State Law in 2020, and works as a Law Clerk at Cyrus D. Mehta & Partners PLLC.