Client Alert: Department of Labor to Publish Final H-1B and PERM Wage Rule

On January 12, 2021, the Department of Labor (DOL) provided an advanced copy of final rulemaking changes to the prevailing wage system for the employment-based green card process and the H-1B nonimmigrant visa. DOL expects to publish the final rule this week to replace a prior interim rule on wages that was struck down by a court in December.

How Were Prevailing Wages Calculated Before?

The Immigration and Nationality Act requires that employers wishing to sponsor foreign nationals for the H-1B visa classification or a green card must offer those foreign nationals a salary meeting the “prevailing wage,” that is, the average rate of wages paid to similarly qualified US workers in the location where the H-1B- or green card-sponsored employee will work. Employers may demonstrate the prevailing wage in several ways, such as a union contract or a published wage survey, but in the absence of such an employer-provided wage, the Department of Labor uses its own wage data to set the prevailing wage.

Beginning in 1998, the Department of Labor used data from its Occupational Employment Statistics (OES) wage survey to calculate the prevailing wage that must be offered to an H-1B worker or in a green card petition. Their methodology provided a typical entry-level wage around the 17^th percentile of all wages in an occupation; the most experienced level in the wage survey was around the 67^th percentile. Under the interim rule, entry-level workers were to be offered wages at the 45^th percentile of all workers, while experienced workers were to be offered up to the 95^th percentile. This change greatly increased the minimum salary that must be offered to an H-1B or green card-sponsored worker.

How Does the Final Rule Affect Prevailing Wages?

The final rule makes several changes to the interim final rule. The most significant is that the minimum salary that must be offered to an entry-level worker is now the 35^th percentile of all wages and the highest level for experienced workers in the 90^th percentile. The final rule also provides a much more gradual transition period than the interim final rule, which was immediately effective upon publication. The final rule does not begin to go into effect until July 1, 2021, and then provides a three-year transition period before fully taking effect.

The DOL claims that entry-level wages under the final rule in many occupations of H-1B workers will be between five and thirty percent lower than wage calculations under the interim final rule; it also states that “default” wages of $208,000 for many occupations in rural areas (caused by data limitations in the OES wage survey) will no longer be provided and that a mean wage for workers of all levels will be used instead. Because the DOL has not made a database of wage calculations using the new methodology available yet, we cannot yet predict what wage determinations will likely be under the new rule.

Before the rule goes into effect, it is likely to be challenged by the same parties and before the same judges who enjoined the Department of Labor’s Interim Final Rule, which may limit its impact.

We will keep you posted on further developments with this rule as they become available.

For more information on this rule and its effect on the 2021 H-1B Lottery, please join us for our annual H-1B cap season webinar on January 27.

The material contained in this alert does not constitute direct legal advice and is for informational purposes only.  An attorney-client relationship is not presumed or intended by receipt or review of this presentation.  The information provided should never replace informed counsel when specific immigration-related guidance is needed.