October 8, 2020Client Alert

New H-1B Regulations Tighten Requirements and Increase Prevailing Wages

The Department of Homeland Security (DHS) announced new rules for H-1B employers this week, including a significant increase in Department of Labor (DOL) prevailing wages used in H-1B, E-3, and PERM cases. The new prevailing wages begin today, October 8, 2020. The interim final rule on H-1B program changes will go into effect on December 6, 2020.

Prevailing Wage Changes

H-1B, E-3 and PERM filings require employers to pay the prevailing wage to the sponsored worker. The prevailing wage is based on the DOL’s OES wage data, gleaned from surveys of the range of salaries paid for the occupation in geographic area of employment. These wages are broken down into four levels, from entry-level wages (Level I) to senior-level wages (Level IV). The new prevailing wage rule increases the prevailing wage for all occupations by increasing the minimum wage for each OES-based wage level. For example, Level I prevailing wages now reflect the 45th percentile in market wages compared with the 17th percentile used in previous OES wage data. The Level IV wage is now based on the 95th percentile of market wages, a significant increase from the 67th percentile previously used for Level IV.

The new prevailing wage rule will not affect approved E-3 or H-1B cases, or PERM cases where the Prevailing Wage has already been issued. The wage rule will apply to new E-3 and H-1B filings, as well as to pending and future Prevailing Wage Determinations issued for PERM cases. Employers should expect higher prevailing wage requirements for future filings, including H-1B and E-3 extension filings.

H-1B Program Changes

The Department of Homeland Security rule implements a more restrictive definition of “specialty occupation.” For example, it emphasizes that the role must require a specific degree type, not a broad range of degree fields. The new rule changes who may qualify for H-1B status, stressing that the worker must have a bachelor’s degree or equivalent in a “directly related specific specialty.” The rule also allows for increased enforcement of H-1B rules, including site visits and compliance checks before, during, and after H-1B approval.

Staffing agencies and other “3rd party placement” employers face even higher standards. Under the new rule, when an H-1B worker is placed offsite, the employer must provide additional evidence of the employer/employee relationship, a detailed itinerary, and evidence such as contracts or work orders confirming that the worker will perform “specialty occupation” work. The rules also limit the maximum validity period for a 3rd party placed H-1B worker to one year instead of the typical three-year period.

Both the DOL and DHS rules are interim final rules, issued without the normal public comment and rulemaking process, making them more susceptible to court challenges. We will continue to monitor the status of these new rules as well as the impact they have on future H-1B, E-3 and PERM adjudications.

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