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An appeals court vacated federal guidance that allowed employers to use privately funded surveys to set the prevailing wages for foreign workers brought into the U.S. under the H-2B visa program.
The U.S. Court of Appeals for the Third Circuit ruled Dec. 5, 2014, that Department of Labor (DOL) regulations authorizing employers to use employer-provided wage surveys for prevailing wage determinations (PWDs) for H-2B workers was “arbitrary and capricious.”
The DOL consequently announced that, effective Dec. 8, 2014, it will no longer issue H-2B PWDs based on employer-provided wage surveys. Employers will now have to use the DOL’s default Occupational Employment Statistics (OES) prevailing rate. Employers with PWDs based on an employer-provided wage survey that are still waiting on a final approval for an H-2B worker will be notified of their new wage obligation.
Employers that sponsor H-2B temporary nonagricultural workers for seasonal, low-skilled work are subject to regulations administered by the DOL’s Office of Foreign Labor Certification. The DOL has sought to avoid causing adverse effects on U.S. workers’ wages and working conditions from the admission of foreign workers by requiring H-2B employers to offer and pay at least the prevailing wage to foreign and U.S. workers. To facilitate compliance, the DOL offers guidance on how to determine the prevailing wage.
The long-running and litigious battle over wage determinations in the H-2B program began in 2008, when the George W. Bush administration issued a new wage regulation defining the H-2B prevailing wage as “the arithmetic mean” of the wages of similarly employed workers at the same skill level in the area of intended employment, and recognized four distinct skill levels from entry level to advanced. The 2008 rule also permitted the DOL to accept a prevailing wage rate reported in a private survey in lieu of the OES prevailing rate, at an employer’s request.
Critics of the rule said the use of “skill level” prevailing wages made no sense in the context of low-skilled H-2B jobs and that their adoption resulted in wage depression. The use of private employer surveys was also criticized for undercutting wages.
Worker advocacy organizations sued the DOL, asserting that the 2008 rule recognized artificial skill distinctions that allowed employers to bring foreign workers into the country for employment at wages substantially below the average wage for an occupation, to the detriment of U.S. workers. In August 2010, a federal district court invalidated the 2008 wage rule but permitted it to remain in place pending a replacement rule.
The DOL published a revised rule in January 2011 prohibiting the use of private wage surveys except in certain circumstances, but that rule never went into effect. In 2013 an interim final rule was issued that eliminated the four-tier methodology under the OES but said nothing about private surveys.
Worker advocates returned to court seeking an injunction to prohibit the DOL from continuing to permit H-2B employers to rely on private surveys. The district court dismissed the plaintiffs’ complaint in July 2014, laying the groundwork for the appeal that resulted in the Third Circuit’s ruling.
The appeals court found that the DOL’s “continued approval of skill-level wages submitted based on employer wage surveys is not only adversely affecting the wages of similarly employed United States workers, but the H-2B program as now administered is leading to unjustified disparities between employers who submit private wage surveys and otherwise similarly situated employers who do not submit surveys and who therefore must pay the OES prevailing wage.”
The court characterized the DOL practice as one that “creates a system that permits employers who can afford private surveys to bring H-2B workers into the country for employment at lower wages than employers who cannot afford such surveys and who therefore must offer the higher OES prevailing wage.”
The court said that there was no “rational justification” for the DOL policy, “as it leads to similarly situated workers in the same market in the same season bringing home widely disparate paychecks.”
“We direct that private surveys no longer be used in determining the mean rate of wage for occupations except where an otherwise applicable OES survey does not provide any data for an occupation in a specific geographical location, or where the OES survey does not accurately represent the relevant job classification,” the court said.
Bad News for Employers
“The DOL announcement is devastating news to employers that utilize H-2B temporary foreign workers to meet their seasonal labor shortage needs, as DOL’s default OES-based wage determinations set the mandatory minimum wage prohibitively high,” said Otieno B. Ombok, a shareholder in the White Plains, N.Y., office of Jackson Lewis.
OES-based determinations can be as much as $4-$5 an hour higher than the market wages reflected in private wage surveys, he said. “Because the DOL’s wages do not appear to reflect accurately the actual industry or market wage, H-2B employers, particularly in the landscaping and seafarming industries, have been relying on private surveys to establish a fair prevailing wage for their seasonal workers. This decision essentially nullifies this practice, creating a significant wage differential that ultimately will make many contract bids unprofitable.”
Roy Maurer is an online editor/manager for SHRM.
Follow him @SHRMRoy
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