WHAT’S HAPPENING
The Department of Labor (DOL) has published its Final Rule increasing H-1B and PERM wage minimums, which it previously published as an Interim Final Rule (IFR) on October 8, 2020, and which was subsequently vacated by a U.S. District Court on December 1, 2020. The Final Rule revises numerous aspects of the initial IRF, including adjusting the new wage minimums to levels slightly lower than the initial IFR. In addition, the Final Rule has a transition period for when the new wage requirements will be phased on as well as include special adjustments for certain H-1B workers who are the beneficiaries of approved I-140 petitions.
WHAT YOU NEED TO KNOW
Below are the main elements of the revised Final Rule:
Wages for H-1B, E-3, H-1B1, and PERM Programs Restructured
Like the IFR the Final Rule increases prevailing wage minimums but to levels lower than in the IFR. The new wage minimums are as follows:
Level 1 Wages: will increase from the 17th to the 35th percentile (previously 45th percentile)
Level 2 Wages: will increase from the 34th to the 53rd percentile (previously 62nd percentile)
Level 3 Wages: will increase from the 50th to the 72nd percentile (previously 78th percentile)
Level 4 Wages: will increase from the 67th to the 90th percentile (previously 95th percentile)
Phase-In Period for Increased Wages
While initial wage increases are set to begin on July 1, 2021, the Final Rule contains a multi-year transition period in order to give employers time to meet the wage increases, such that the new wages will not be fully in effect until July 1, 2024. The rule also contains special adjustments for H-1B workers who, as of October 8, 2020, were the beneficiaries of an I-140 petition or eligible for a post-sixth year H-1B extension. These special adjustments will be made available for the next 3.5 years.
The general 18 month phase-in period outlined in the Final Rule provides a relatively complex calculation for determining phase-in wage levels and we provide a general summary of the calculations below:
Phase 1: Rule Effective Date - 06/30/2021 - LCAs filed and PWDs issued during this timeframe are to remain subject to current wage levels.
Phase 2: 07/01/2021 - 06/30/2022 - The new wage levels will take effect but are adjusted downward to approximately 90% of final wage levels.
Phase 3: 07/01/2022 onwards - The new wage levels are to take effect with no adjustments.
The Final Rule also outlines a separate phase-in period for LCAs and PWDs filed on behalf of H-1B workers who, as of October 8, 2020 (the original effective date of the IFR), are the beneficiary of an approved I-140 Petition or eligible for a post six-year H-1B extension. This separate phase-in period is as follows:
Phase 1: Rule Effective Date - 06/30/2021 - LCAs filed and PWDs issued during this timeframe are to remain subject to current wage levels.
Phase 2: 07/01/2021 - 06/30/2022 - The new wage levels will take effect but are adjusted downward to approximately 85% of final wage levels.
Phase 3: 07/01/2022 - 06/30/2023 - Wage levels will be adjusted downward to approximately 90% of final wage levels.
Phase 4: 07/01/2023 - 06/30/2024 : Wage levels will be adjusted downward to approximately 95% of final wage levels.
WHAT TO KEEP IN MIND
The Final Rule is set to take effect 60 days from publication on March 15, 2021. However, on January 20, 2021, the Biden Administration issued an order to all Federal agencies to “consider” postponing the effective dates for regulations that have been published but not yet taken effect for 60 days from tha date of the memorandum, as such it’s possible the effective date of the regulation could be pushed back by an additional week to March 21, 2021, to allow the Biden Administration additional time to review the rule before deciding whether to rescind the rule or allow it to take effect, noting that the Administration has expressed support for increasing prevailing wages. It is also possible that the Final Rule could be challenged in Federal Court.
D&S will continue to monitor the situation and provide updates as they become available.