New H-1B USCIS/DOL Rules to Increase Prevailing Wages, Tighten Specialty Occupation Definition and Make Third-Party Placements More Difficult

In a coordinated effort, both DHS/USCIS and DOL have just released two new rules which seek to introduce substantial changes to the H-1B program. DOL seeks to increase the prevailing wage levels by a substantial margin with immediate effective date of October 8, 2020. DHS/USCIS seeks to change the definition of specialty occupation and employer-employee relationship and to make third-party placements more difficult and expensive to employers; with effective date of early December 2020.

Update: on December 1, 2020 a US Court blocked the implementation of these rules – see details.

DOL Increases Prevailing Wage Substantially With Immediate Effect

In an interim final rule (IFR) amending the regulations governing permanent labor certifications and Labor Condition Applications, DOL is making changes to how they calculateof prevailing wage levels. The IFR will be published in the Federal Register on October 8, 2020 and will be effective on that date. Comments will be accepted for 30 days after publication in the Federal Register.

Specifically, the IFR will change the calculation of prevailing wage levels, resulting in higher prevailing wages for all occupations for each OES-based wage level.

• Level I Wage: 45th percentile (from 17th percentile)
• Level II Wage: 62nd percentile (from 34th percentile)
• Level III Wage: 78th percentile (from 50th percentile)
• Level IV Wage: 95th percentile (from 67th percentile)

The new recalculated actual wages will be released on October 8, 2020; however, it is obvious that the recalculation will result in a significantly higher wage levels across all wage levels and what has currently been a Wage Level III salary may end up being a Wage Level I salary under the new levels. This will mean that many H-1B positions will likely have to be reclassified as a lower wage level which may, in turn, cause specialty occupation or Wage Level I issues.

Similarly, for PERM/Labor Certification and I-140 cases, the new prevailing wage levels will cause the offered wage to be considerably higher and while the “green card” offered wage does not have to be paid until a future date, it may cause issues with employers deciding not to pursue a case or inability of the employer to pay such green card offered wages in the future.

The IFR will apply to ETA-9141 prevailing wage determinations and ETA-9035 Labor Condition Application (LCA). Pending LCAs filed prior to October 8, 2020 claiming OES wage data will be issued using the current wage levels while pending prevailing wage requests will be issued using the new wage data.

USCIS Seeks to Change H-1B Regulations on Specialty Occupation, Employer-Employee Relationship and Third-Party Worksite Placement

At the same time, DHS/USCIS have also released an Interim Final Rule which is going to go into effect on December 7, 2020 and which seeks to create significant roadblocks to H-1B employers and, especially, to employers who rely on placing H-1B workers at third-party worksites.

Much of this rule is directed to “restoring” the changes caused by the IT Serve vs. USCIS litigation and the subsequent settlement which blocked USCIS from relying on certain criteria with respect to third-party placement H-1B petitions.

Changes to Specialty Occupation Definition and Criteria

Specifically, USCIS is changing the regulation of “special occupation” to require the position to have a direct connection between the required degree and the duties of the position with the further clarification that a generalized degree (for example, “business administration” or general “engineering”) without further specialization may not be sufficient. USCIS clarifies that the requirement does not have to be a singular degree.

USCIS also removes the language stating that the field of study must be “normal” requirement – the new regulation will require that a bachelor’s degree in a specific field must ALWAYS be required to meet the specialty occupation criteria.

USCIS also clarifies that in order to meet the specialty occupation standard, it has to meet at least one, but possibly more, of the specialty occupation criteria in 8 CFR 214.2(h)(4)(iii)(A). This is a significant change from the current practice which requires meeting only one of the criteria.

USCIS is also specifically cautioning that under the new regulations some positions who have long qualified for H-1B may no longer be eligible and that prior H-1B approvals do not guarantee that subsequent H-1Bs will be granted.

“Worksite” and “Third-Party Worksite” Definitions and One-Year H-1B Term Limit

USCIS will add these definitions, which are used in the new employer-employee relationship part of the regulations but also will limit the validity of such H-1B petition approvals to one year. This is a significant change and direct response to the IT Serve litigation and settlement.

Employer-employee Relationship and Non-Speculative Work

The new rules will add language that will make it clear that an H-1B employer must have clear employer-employee relationship, especially when it comes to third-party worksite placements and that it must also have non-speculative work available as of the requested start date.

The employer-employee definition is being revised somewhat to emphasize certain factors which are not necessarily new in the H-1B context (especially when dealing with RFEs) but which seem to focus more on supervision, provision of tools of work, who benefits from the work of the H-1B workers and similar. The right to control is now being deemed one of the factors in the employer-employee relationship determination and not a sole determinative factor.

USCIS also issues guidance on the factors to look at when the beneficiary has ownership interest in the sponsoring employer.

While this change may not represent a major change in current USCIS practice, it may result in higher scrutiny and, possibly, more denials.

Evidence Requirement to Confirm Placement and Available Work

USCIS is now clearly requiring contracts, work orders, or detailed letter to corroborate third-party placement. This has been the de facto practice for third-party placements for many years now; USCIS now essentially makes it a part of the formal rules.

The contracts should include the master services agreement and the accompanying work orders (or equivalent) legally-binding documents. Detailed client letters and additional project documentation may also be submitted; however, it appears that USCIS will place more heavy reliance on the contract and work orders under this set of regulations.

Maximum H-1B Validity Period for Third-Party Placements

As noted above, USCIS will also limit the validity of third-party worksite placement H-1Bs to one year. Essentially, if an LCA indicates that the at least one of the worksites is a third-party worksite, the employer will not be able to request a term of more than one year on the I-129 petition.

Itinerary Requirements

USCIS is confirming that it will NOT require itineraries for H-1B petitions (this is direct result of the IT Serve litigation and this provision remains).

Conclusion

Both the DOL and DHS/USCIS Interim Final Rules (IFR) create major challenges for all H-1B employers but more so for employers who place workers at third-party worksites. The required H-1B salaries will be higher, the level of scrutiny by USCIS on third-party petitions will increase and the cost to such employers will rise (partially due to the more complex filing and partially due to having to file extension every year).

We anticipate that these IFRs will be challenged in court and we will continue monitoring and providing updates on this topic. In the meantime, we urge H-1B employers, especially those with third-party placements, to consider filing early extensions, amendments or a combination of both before the December 7, 2020 effective date of the new rule.

Our office will continue monitoring related developments and provide updates.    Please do not hesitate to contact us if we can be of any help in preparing or otherwise assisting with H-1B petitions.    Also, please feel free to subscribe to our free weekly newsletter to obtain developments on this and related topics