Effective June 30, 2021, the US Department of Labor will determine the prevailing wage for permanent labor certifications and labor condition applications based on a new formula for computing prevailing wage levels, resulting in higher prevailing wage levels for all occupations in the Occupation Employment Statistics wage database.
On January 13, 2021, the US Department of Labor (DOL) announced that it will publish a final rule that adopts with changes the Interim Final Rule (IFR) that DOL published on October 8, 2020. The new Final Rule revises the methodology that DOL uses to determine prevailing wage levels for the H-1B, H-1B1, E-3, and permanent labor certification application (PERM) programs. The current four-tier wage structure remains; however, the Final Rule revises upward the wage calculation associated with each level.
DOL’s initial effort to revise the wage calculation methodology through the IFR published October 8, 2020 failed to survive legal challenge. Multiple courts ordered that DOL halt implementation of the IFR so that it could resolve various legal and procedural deficiencies in the interim rule. With publication of this Final Rule, DOL maintains that the revisions in the new rule address those earlier deficiencies. The new Final Rule takes effect March 15, 2021, and includes a phase-in process described below that begins June 30, 2021.
The following table illustrates the upward shift in wage levels for all occupations in the DOL’s Occupation Employment Statistics (OES) wage database:
|
OES Wage Level |
Current Percentile |
IFR Percentile |
Final Rule Percentile |
|
Level I |
17th percentile |
45th percentile |
35th percentile |
|
Level II |
34th percentile |
62nd percentile |
53rd percentile |
|
Level III |
50th percentile |
78th percentile |
72nd percentile |
|
Level IV |
67th percentile |
95th percentile |
90th percentile |
DOL’s taxonomy for the four wage levels is Level I “entry level,” Level II “qualified,” Level III “experienced,” and Level IV “fully competent.” Accordingly, the 35th percentile will be the entry-level wage under the four-tier wage structure. For a typical professional-level position (O*Net Job Zone 4), entry level is for positions that require no more than a bachelor’s degree plus two years of experience. DOL’s existing formula for computing the appropriate wage level for a professional position increases the wage level by one step for each additional year of experience that an employer requires beyond two years. Thus, a professional position that requires a bachelor’s degree plus five years of experience (a midlevel professional role for many employers) will now require a salary at no less than the 90th percentile.
The wage changes will impact the H-1B visa, the H-1B1 visa for professionals from Chile and Singapore, and the E-3 visa for professionals from Australia, all of which require a certified labor condition application (LCA). PERM prevailing wage determinations will also conform to the new formula.
DOL plans to implement the new prevailing wage levels on a phased-in basis. The wage level computations in the Final Rule will apply to applications and requests that are pending on or during the relevant transition period, including the following:
DOL will not apply the new regulations to any previously approved PWDs, PERMs, or LCAs, either through reopening, through issuing supplemental PWDs, or through notices of suspension, invalidation, or revocation.
Although the Final Rule takes effect on March 15, 2021, the new wage calculations will phase-in through July 1, 2022. The transition for most situations will include two steps concluding on July 1, 2022; however, for situations involving H-1B job opportunities where the beneficiary qualifies for post-6th year H-1B extensions under the American Competitiveness in the Twenty–first Century Act of 2000 (AC21), there will be a four-step transition concluding on July 1, 2024.
Under the default two-step transition:
For the longer AC-21 transition:
The regulation does not change existing regulations regarding the use of employer-provided alternative wage surveys. During the brief period that the IFR was in force, the NPWC continued to accept employer-provided wage surveys. Our expectation is that under the new Final Rule, DOL will accept alternative wage surveys that comport with existing regulations in the same fashion that it accepted them prior to this new rule.
The revised Final Regulation stands a much better chance of implementation than did the Interim Final Rule that preceded it. The Final Rule makes an effort to address many of the deficiencies that led multiple courts to halt implementation of the IFR. It is too early to know whether there will be additional legal challenges to the Final Rule and, if there are, whether they will succeed.
The incoming Biden administration’s plans with respect to the Final Rule are not publicly known. New DOL leadership will need to decide whether to (a) implement the Final Rule as drafted; (b) take formal steps to revoke the Final Rule (as a Final Rule, there is a required regulatory process for revocation); (c) implement the Final Rule as drafted and amend it through additional regulation; and (d) defend any legal challenge to the Final Rule. Given the many issues that the incoming DOL leadership will face, it is not clear that there is political interest in impeding implementation of the new regulation. Moreover, the incoming Biden administration may view the Final Rule as acceptable or even desirable, in which case it might defend the regulation against legal challenge. Accordingly, employers should plan for the Final Rule to take effect as intended. We will publish additional alerts as events warrant.
If you have any questions or would like more information on the issues discussed in this alert, please contact any of the following Morgan Lewis lawyers:
Washington, DC
Shannon A. Donnelly
Eleanor Pelta
Eric S. Bord
Miami
Laura C. Garvin