A lawsuit has been filed against the new Department of Labor (DOL) H-1B wage rule, seeking a preliminary and permanent injunction. Many analysts, such as the National Foundation for American Policy and economic researchers, believe that the new H-1B wage rule acts as a deterrent to H-1B employers by significantly raising the minimum wage required to employ foreign workers. The analysts also explain why the new H-1B wage is more harmful than beneficial to the U.S. economy. This rule will also have a negative impact on international students who seek employment in the United States post-graduation.

The New H-1B Wage Rule

The new H-1B wage rule was announced by the DOL on October 8, 2020. The DOL did not allow a public comment period; the rule went into effect the same day it was announced. In it, the DOL has significantly altered the calculations of prevailing wage rates for the H-1B program. According to a Forbes article, the new rule has significantly increased the required minimum wage level, bringing the salaries of entry-level workers close to the mid-point of all wages for people who do the same job (see the chart for the average increase in the required minimum salary applicable under the new DOL wage rule by occupation).

The H-1B Rule Lawsuit

On October 16, 2020, Wasden Banias law firm filed a complaint in the U.S. District Court for the District of New Jersey on behalf of ITServe Alliance, Dots Technologies, Iflowsoft Solutions, Kolla Soft, NAM Infor, Precision Technologies, Smart Works, and Zenith Services.

“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,” the complaint read. “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 The Department of Labor’s new wage rule is also arbitrary and capricious because the agency relied on outdated, incorrect, or limited empirical data, failed to consider readily available, relevant data and empirical studies, and engaged in reasoning that conflicts with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 economy theory.”

Some of the arguments raised in the lawsuit are that the DOL violated the notice and comment process for rulemaking, failing to follow all the nine steps required in federal rulemaking; and the DOL raised the prevailing wage levels for H-1B workers, seeming to set the master’s degree as a benchmark for entry-level positions. This is against the Immigration and Nationality Act, where it is clear that a bachelor’s degree is the minimum qualifying entry level into an H-1B position. The lawsuit also raised an argument that the DOL action is random and not based on logic, as the DOL failed to consider operative data. It also alleged that the DOL failed to consider the growth that the H-1B worker brings to this country by creating jobs, wage growth, and investing in the infrastructure.

Prevailing Wage Determination

Employers seeking to employ foreign workers will have to pay them in accordance with the prevailing wage levels. This is a measure to ensure that foreign workers are paid salaries similar to those of U.S. workers in the area. The employers must go through a Labor Certification Process. An application is made to the DOL with the key details, such as the position, area, experience level, job description, and the pay that is offered. Approval of the LCA is the first step towards making the employment-based immigration application.

The new H-1B rule has increased the prevailing wage levels by almost 40% across the board. This, it is feared, will have a significant impact on IT outsourcing companies.

Impact of the New H-1B Rule on IT Companies

The IT companies voiced concerns that most of their contracts with clients are multi-year contracts. Their pricing is decided based on the wage rates to be paid to their H-1B employees. Random changes in the wage rate, without prior notice, will have a dramatic impact on the businesses. The IT businesses anticipate potential lay-offs and off-shoring of certain projects to locations outside the United States.

ITServe Alliance won a significant case earlier this year against the United States Citizenship and Immigration Services (USCIS). A lawsuit is anticipated challenging another new H-1B rule changing the definition of specialty occupation, one-year approvals for third party contractors, etc.