H-1B Specialty Occupation Under Attack Again by DHS and New Increases to Prevailing Wage Levels by the DOL

In June, President Trump issued a proclamation that suspended the issuance of certain nonimmigrant visas and required the Secretaries of Labor and Homeland Security to provide recommendations on measures to protect the U.S. workforce amid the COVID-19 pandemic. We previously provided an alert regarding that Presidential Proclamation here. The Department of Labor (DOL) and the Department of Homeland Security (DHS) have now provided their recommendations, and significant reforms are now being implemented.

Specifically, there are two relevant interim final rules that will impact how H-1B nonimmigrant “specialty occupation” visa petitions are adjudicated. The first rule is being implemented by the DHS (under which U.S. Citizenship and Immigration Services operates), titled “Strengthening the H-1B Nonimmigrant Visa Classification Program,” and the second rule is being implemented by the DOL titled “Restructuring of H-1B/H-1B1/E-3 and PERM Wage Levels.” Below is a summary of the key issues for these rules:
 

• Tightening of H-1B Specialty Occupation Criteria
  • Under the new interim final rule from DHS, the definition of “specialty occupation” will be narrowed, and jobs where a generalized bachelor’s degree equips the candidate for the duties of the position will no longer be considered a specialty occupation position eligible for an H-1B visa. For example, if the requirements for the proposed position are a bachelor’s degree in business administration or other general area of study, it is likely that the H-1B petition will be denied unless further specialization is required. In essence, if multiple disciplines of education are permitted for entry into the position, then the government likely will take the position that it is not a “specialty occupation.”
  • In addition, the new interim final rule eliminates the option that permitted employers to establish that the degree requirement is “common in the industry” and, therefore, consistent with industry standards. Now, under the new rule, employers will need to establish that the required degree is the minimum requirement for entry into the same or similar positions at similar organizations.
     
• Limitation on Third-Party Placements
  • Under the interim final rule, DHS will now distinguish a “worksite” from a “third-party worksite.” Where the H-1B beneficiary will be placed at a third-party worksite or worksites, the regulation reinstates and codifies a requirement that the H-1B petitioner submit evidence such as Master Service Agreements, contracts, work orders, or other similar evidence to establish that the petitioner will have an employer-employee relationship with the beneficiary, and that the beneficiary will perform services in a specialty occupation at the third-party worksite(s). The rule also reinstates a requirement to provide an itinerary for H-1B employees who will work at multiple worksites.
  • The new rule will also limit the H-1B approval validity period for third-party placement petitions to a maximum of one year (from a current maximum of three years).
     
• Increase in Prevailing Wage Levels
  • As H-1B employers most likely are already aware, the law historically has required that H-1B employers pay H-1B employees the greater of (i) the actual wage that is paid to other workers in the offered position who possess similar qualifications at the particular worksite, and (ii) the prevailing wage of the position that was calculated by the DOL based on a survey of salaries of employees performing similar jobs within the geographic area of the worksite.
  • Effective October 8, 2020, under the new DOL rule, the required wage level for entry-level workers will rise to the 45th percentile of their profession’s distribution, up from the current requirement of the 17th percentile. The requirement for the highest-skilled workers would rise to the 95th percentile, up from the 67th percentile. See chart below.

• Because these required wage increases take effect immediately, existing H-1B employees looking to extend their H-1B status may not qualify for the extension unless their salaries meet the new prevailing wage levels. That being said, H-1B employers will need to consult with counsel to determine the new required wages and implications for any H-1B petitions filed on or after October 8, 2020. It is likely that many H-1B employees will require a significant wage increase when their H-1B extensions become effective.
• For illustration purposes, for a Software Developer, Level 2, in Richmond, VA, the prevailing wage is now $54.48 per hour or $113,318/year. Prior to October 8, 2020, the prevailing wage for the same Software Developer, Level 2, in Richmond, VA, was $42.30 per hour or $87,984/year. Therefore, employers would now be required to increase the wages for those Software Developers who were meeting the previous prevailing wage by $25,334 in order to meet the new prevailing wage for any new H-1B petitions or H-1B extensions filed on or after October 8, 2020. Below is a comparison of the new and prior wage levels for a Software Developer in Richmond, Virginia.
   

• The DOL wage regulation will take effect as follows:
  • Labor Condition Applications filed on or after October 8, 2020 will be subject to the new and higher wage minimums. LCAs filed and pending before October 8, 2020 will benefit from the old prevailing wage structure.
  • This rule will also have a significant impact on employers who wish to sponsor their employees for a green card. As part of the green card process (PERM), employers must first obtain a prevailing wage determination from the DOL which, until October 8, 2020, was not based on the significantly higher wages as discussed above. The employer will be required to pay the employee at least the prevailing wage once the employee obtains his or her green card. Prevailing wage determinations issued on or after October 8, 2020 are subject to the new wage structure. Determinations issued before October 8, 2020 were based on the old prevailing wage structure. Prevailing wage determination requests pending on October 8, 2020 are subject to the new regulation.

• Timeline for Implementation of Rules
  • The DOL rule is effective October 8, 2020.
  • The DHS rule was published on October 8, 2020 and will go into effect in 60 days.
     

Both rules will have a significant impact on employers who sponsor H-1B workers and sponsor employment-based green cards due to the new wage levels, limiting H-1B approvals for third-party placements to one year, imposing additional costs associated with extensions on a yearly basis for those H-1B employees assigned to third-party sites, requiring the candidate’s degree to be directly related to the position, and bringing added scrutiny in adjudicating H-1B petitions. We also anticipate that the percentage of H-1B cases that receive a Request for Evidence from USCIS will continue to increase and will remain at record highs.

We expect that there will be litigation challenging the legality of these interim final rules. Williams Mullen is closely monitoring the situation and will provide updates as further information becomes available.

Employers should consult immigration counsel to identify H-1B employees who may be affected by these new rules and develop a strategy to prepare for their future H-1B petitions or green card sponsorships.