The Department of Labor’s New H-1B Wage Hike Rule Faces Overwhelming Legal and Empirical Challenges

Written by Taher Kameli & Chathan Vemuri

The Trump Administration caused an uproar among employers when it implemented its Interim Final Rule on October 8th, 2020 substantially increasing the amount in wages to be paid to employees who held H-1B visas in an attempt to pressure employers to drop them in favor of a domestic American workforce.[1] In addition to boosting wages to pressure employers to look domestically for employees, it also changed the requirements for an H-1B visa by looking not simply for a college degree but specifically for degrees in “specialty occupations” that H-1B applicants apply for.[2] The Interim Final Rule even goes so far as to require some applicants to show how their education “provided ‘a. body of highly specialized knowledge’ for a potential job in the United States.”[3] Immigration lawyers predicted that the Interim Final Rule would be challenged in the courts right away due to how they were implemented in being published as a final rule without subjecting it to public notice and comment as required by the Administrative Procedures Act (APA).[4]

In the two weeks since the U.S. Department of Labor issued its Interim Final Rule (“Wage Hike Rule”), several legal challenges to this wage hike rule have come to the fore. On October 16, lawyers representing ITServe Alliance (an association of various American IT companies) and seven other IT companies filed the first lawsuit against Labor Department officials (including Secretary of Labor Eugene Scalia) challenging the wage hike rule for H-1B visa holders.[5] Arguing before the U.S. District Court for the District of New Jersey, lawyers for the Plaintiffs argued that the Department of Labor’s Rule violated the APA by failing to follow the notice and comment rulemaking procedures before making it final.[6] In addition to the APA challenge, counsel for the Plaintiffs argued that the Wage Hike Rule violated the Immigration and Nationality Act as the new wages were set under a new standard that conflicted with already governing statutory criteria for setting immigrant wages.[1]

Most importantly, however, the attorneys argued that the Wage Hike Rule was arbitrary and capricious as it was based on “outdated, incorrect, or limited empirical data, failed to consider readily available, relevant data and empirical studies, and engaged in reasoning that conflicts with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.”[2] Looking to the wage increases put forth by the Wage Hike Rule as researched by the National Foundation for American Policy (whose Executive Director, Stuart Anderson, is the writer of this piece from which this article gets its information on this case), one can see that the new Labor regulation increases entry-level wages in a variety of IT and science-related occupations which heavily rely on H-1B and other immigrant employees (Biochemistry and Biophysics, Chemical Engineering, Computer Hardware Engineering, Computer Information, and Research Science, Computer Network Architects, Computer Programmers, Computer Systems Analysts, Data Administrators, Electrical Engineers, Mechanical Engineers, Petroleum Engineers, and Software Developers)by up to 45%, depending on the skill level involved and the geographic location of the job in question.[3] As a result, the required minimum salary for workers at all four levels in these professions is heavily inflated.[4] By setting the Level 1 wage rate in these professions the way it does, Plaintiffs’ attorneys contend that the Department of Labor assumes that “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.”[5]

Summing up the analysis of the National Foundation for American Policy, Plaintiffs’ counsel showed that new wage rule substantially increased the requisite minimum salary “across all wage levels for H-1B visa holders and employment-based green card applicants.”[6] Petroleum engineers would have to be paid 99.5% more than the prevailing wage for such a position at the first level before the Wage Hike Rule went into action.[7] Other drastic increases also ranged from 35% for electrical engineers, computer network architects, computer systems analysts, mechanical engineers, and database administrators at all wage levels all the way to almost 50% increases computer hardware engineers.[8] Plaintiffs’ counsel attacked the Wage Hike Rule as inflating H-1B visa holders to the point of driving them out of the American workforce, forcing employers to pay well above market wages in order to employ H-1B visa holders and exceeding the Labor Department’s authority by forcing employers to pay salaries out of proportion to the market wages or the wages used by the Labor Department before the new Rule went into effect.[9] In effect, what a representative for the Plaintiffs described as the “haphazard and baseless rulemaking” of the Labor Department was predicted to “hurt thousands of small and medium IT businesses…that are at the forefront of rebuilding the economy.”[1]

This was not the only lawsuit to challenge the Trump-led Department of Labor’s extreme Wage Hike Rule. On October 19th, Memphis based immigration attorney Greg Siskind filed a lawsuit against the Labor Department officials in the U.S. District Court of D.C., representing employers including not just IT companies but also “[ten] universities, physician and dentist groups…a community health clinic, a nursing home chain and a logistics/warehousing company.”[2] In addition to the usual rationale citing violations of the APA, Mr. Suskind also challenged the empirical assumptions behind the new Rule, similar to the study relied on above.[3] Contrary to the Labor and Homeland Security Departments claims of increasing unemployment justifying the new rule, the occupations where the majority of H-1B workers are employed, have had the lowest unemployment rates of 3.5% as of September 2020.[4]

While the data alone is a devastating indictment of the Wage Hike Rule, a potentially bigger concern is what it will do to the U.S. economy. There is a real fear that hundreds of thousands of jobs will be driven abroad due to the Labor Department’s harsh measures in discouraging H-1B visa employment, hurting small and medium IT businesses, and harming the US economy, and inhibiting economic growth in the midst of a pandemic.[5] Furthermore, it is not clear that the justification for this Wage Hike Rule is valid given that there is an insufficient number of American workers with the requisite skills to fill these jobs affected by the Wage Hike Rule.[6] Implementing the Wage Hike Rule would have a negligible impact on increasing domestic American jobs.[7]

So far, two lawsuits have been filed against Labor Department officials concerning the Wage Hike Rule, and another is expected to be filed soon in North Carolina.[8] This new Rule has demonstrated a stark challenge to and disregard of existing legal precedent and statutory authority on the part of the Trump Administration with regards to immigration and labor law. How these legal challenges would play out is anyone’s guess. Yet it is clear that the Wage Hike Rule and the fallout from it are emblematic of the controversial attitude the Trump Administration has taken to existing US law and policy, however, thin its justifications maybe for its policy changes.

Please contact the Law Offices of Kameli & Associates at info@kameli.com or please call us at +1 (312)-233-1000 if you have any questions concerning what the H-1B Interim Final Rule stipulates and what it might entail for workers using an H-1B visa.

 

[1] Id.

[2] Swathi Moorthy, Second Lawsuit Challenging New H-1B Rules to Be Filed in US Court Today, Money Control (Oct. 19, 2020, 12:44 PM IST) available at https://www.moneycontrol.com/news/business/second-lawsuit-challenging-new-h-1b-rules-to-be-filed-in-us-court-today-5981071.html

[3] Id.

[4] Id.

[5] Priyanka Sangani, Lawsuit Challenging H-1B Wage Increase Filed in the US, The Economic Times (last upd. Oct. 19, 2020, 9:34 AM IST) available at https://economictimes.indiatimes.com/nri/visa-and-immigration/lawsuit-challenging-h-1b-wage-increase-filed-in-the-us/articleshow/78715971.cms

 

[6] Trump Administration to Impose New Rules Targeting H-1B Visas, The Hill (Oct. 6, 2020, 12:39 PM EDT) available at https://thehill.com/homenews/administration/519811-trump-administration-to-impose-new-rules-targeting-h-1b-visas

[7] Id.

[8] Swathi Moorthy, Second Lawsuit Challenging New H-1B Rules to Be Filed in US Court Today, Money Control (Oct. 19, 2020, 12:44 PM IST) available at https://www.moneycontrol.com/news/business/second-lawsuit-challenging-new-h-1b-rules-to-be-filed-in-us-court-today-5981071.html

[1] Id.

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[1] Zolan Kanno-Youngs and Miriam Jordan, Trump Moves to Tighten Visa Access for High-Skilled Foreign Workers, N.Y. Times (Oct. 6, 2020) available at https://www.nytimes.com/2020/10/06/us/politics/h1b-visas-foreign-workers-trump.html

[2] Id.

[3] Id.

[4] Nick Miroff, Trump Administration Says It Will Further Tighten Rules for Foreign Workers Using H-1B Visas, Wash. Post (Oct. 6, 2020, 4:55 PM) available at https://www.washingtonpost.com/immigration/trump-tightens-h1b-visas/2020/10/06/0035905e-0805-11eb-991c-be6ead8c4018_story.html

[5] Stuart Anderson, New Lawsuit and Glaring Problems Threaten DOL H-1B Visa Rule, Forbes (Oct. 19, 2020, 12:09 AM EDT) available at https://www.forbes.com/sites/stuartanderson/2020/10/19/new-lawsuit-and-glaring-problems-threaten-dol-h-1b-visa-rule/#1ae112845be5

[6] Id.