Show Me The Money: Why DOL Can No Longer Determine Prevailing Wages for H-2B - Is PERM Next?*

Gary Endelman

*Special thanks go out to Lee Beck and Angelo Paparelli for their generous and invaluable tutelage on the H-2B prevailing wage.

Those of you who took a badly needed break from the H-1B frenzy of last week might have spotted this golden nugget of foreign labor certification news on the DOL website :

Effective March 22, the Department is holding in abeyance most pending H-2B prevailing wage requests and those it received after March 22, while it considers appropriate action in response to the Court order entered March 21, 2013 in Comite de Apoyo a los Trabajadores Agricolas et al v. Solis, 2:09-cv-00240-LDD (E.D. Pa). That order granted a permanent injunction against the operation of the portion of the 2008 wage rule related to prevailing wage determinations and gave the Department 30 days to come into compliance with the Court order. The Department will, however, continue to process and issue final determinations on H-2B applications for temporary labor certification where the employer's wage offer is based upon a prevailing wage not enjoined by the court order: those utilizing applicable Collective Bargaining Agreements, acceptable private wage surveys or Service Contract Act or Davis Bacon Act wage determinations. The Department intends to promulgate a revised wage rule within 30 days of the date of the Court order. This will allow the Department to resume providing employers with both prevailing wage determinations and final determinations on their H-2B applications for temporary labor certification. . Not all was lost. DOL would still determine the prevailing wage if based on a collective bargaining agreement, an acceptable private survey, the Service-Contract Act or the Davis- Bacon Act. Only the 4-tiered OES model was off limits. The full text of the court’s ruling is here.

Two days after this posting, the 11th Circuit Court of Appeals enjoined the DOL from regulating the H-2B program at all on the grounds that it lacked any authority, whether express or implied, to do so, in Bayou Lawn and Landscape Services v. Solis. . Now, DOL was out of the H-2B business altogether. Only the DHS could make the rules and they could not delegate any of their authority to the DOL. The next day, USCIS called a temporary halt to the H-2B program pending promulgation of a new DOL prevailing wage rule. Supposedly, everything will start up again in 30 days but, since the 11th Circuit did not see how DOL could regulate the H-2B to any degree, it is hard to see how any new rule that does emerge can possibly pass constitutional muster.

Now these cases dealt with HH-2B temporary labor certifications and most of us do not do a whole lot of these so maybe such news flash did not cause you to sit up and talk notice. But, this should. The wage methodology used for H-2B is also used for PERM cases. Therefore, if, as DOL itself admits, it cannot use the current OES wage system to make a prevailing wage determination for H-2B purposes, should it be able to do so in response to a PERM-linked prevailing wage request? Since the PERM cannot be filed without such a determination by DOL, where does this leave us? Is there a legally sufficient rationale for invalidating the skills-based OES four tiered wage structure when it comes to H2B but allowing it for a PERM ? If the notice and comment rulemaking requirements of the Administrative Procedures Act are not being followed in an H-2B case, why is the same determination consistent with the APA in the PERM context?

Now where did this multi-tiered wage model come from? A brief history lesson might help clarify things.:

In 2004, meanwhile, Congress passed the H-1B Visa Reform Act, which states that, when DOL sets prevailing wage rates using government survey data, it must calculate “at least 4 levels of wages commensurate with experience, education, and the level of supervision.” 8 U.S.C. §1182(p)(4). When the survey has only two levels, the additional two levels are to “be created by dividing by 3 the difference between the two levels [in the data], adding the quotient thus obtained to the first level, and subtracting that quotient from the second level.” Id. The following year, DOL issued a Prevailing Wage Determination Policy Guidance for permanent and temporary non-agricultural labor programs. See A 68-105. In that guidanceletter, DOL stated that the new version of § 656.40 would govern the H-2B program as well as the permanent and H-1B programs. See A 70. The guidance letter also applied the four-level system enunciated in 8 U.S.C. § 1182(p)(4) to all three programs. See A 68. It is undisputed that this guidance letter was issued without notice and comment. . For those who like their DOL wage guidance straight up, here is the full-text version:

Now the problem is that this four-tiered skill level approach to prevailing wage was created by DOL out of thin air without any anchor to statute or regulation. After all, the H-1B Visa Reform Act of 2004 had nothing to do with labor certification, whether temporary or permanent and DOL never published in the Federal Register its new wage determination standards so that the rest of us could be let in on the secret. DOL was simply legislating on its own and that got Judge Louis H. Pollak of the Eastern District of Pennsylvania hot under the collar:

In the absence of any valid regulatory language authorizing the use of skills levels in determining the prevailing wage rate- the four-tier structure of skill levels set out in the guidance letters- which is entirely untethered from any other statutory or regulatory provisions, and which affirmative ly creates the wages paid to H-2B workers- constitutes a legislative rule which must be subjected to notice and comment. It has not been so subjected and it is therefore invalid…DOL has never explained its reasoning for using skill levels as part of the H-2B prevailing wage determinations.Comite De Apoyo a Los Trabajadores Agricolas v. Solis, No. 09-2040, 200 WL 3431761 ( E.D. Pa. Aug. 30, 2010).

So how, you might wonder, did DOL react to this judicial spanking? Well they tried to comply and came to the independent conclusion that the 2008 Wage Rule skill-level methodology had to be scrapped because it did not result in “ the appropriate wage necessary to ensure that U.S.workers are not adversely affected by the employment of H-2B workers.” Wage Methodology for the Temporary Non-Agricultural Employment of H-2B Program, 75 Fed. Reg. 61578-01, 61578 (October 5, 2010). What is most fascinating, perhaps, is that, when the DOL actually announced a modified prevailing wage regulation in January 2011, it did so using the rationale that the 2008 wage rule actually lowered the wages of similarly situated US workers:

Specifically, a review of the Department’s records for the issuance of prevailing wages in calendar year 2010 indicates that almost 75 percent of jobs are classified at a Level I wage…The four-tier structure artificially lowers that wage to a point that it no longer represents a market-based wage for that occupation. The H-2B, along with the domestic workers recruited against the application, who are being paid a significantly lower wage than two-thirds of those in that area of employment cannot help but have a depressive effect on the wages of those around him. An employer paying U.S. workers as well as H-2B workers has no incentive to pay the US workers any higher compensation. The local competitors, by extension, have no incentive to pay a higher compensation. Therefore, it follows t hat if the employer must nly offer and pay Level I wages, wages below what the average similarly employed worker, is paid, those wages will make the U.S. workers less likely to accept those job opportunities or will require them to accept the job at a wage rate less than the market has determined is prevailing for the job. The net result is an adverse effect on the worker’s income…. Continuing the current calculation methodology …does not provide adequate protections to US and H-2B workers. ( Wage Methodology for the Temporary Non-agricultural Employment of H-2B Program, 76 Fed. Reg. 3452, 3471, 3477 (Jan. 11, 2011).

As the learned Lee Beck reminds me, the Bush Administration’s 2008 rules were attacked by labor because they depressed the wages of American workers while the Obama 2011 rules were attacked by business because they had the opposite effect. ... My friend and teacher Angelo Paparelli places DOL’s H-2B wage problems in their proper context in a magnificently insightful blog. He notes correctly that few wept over the fate of the 2011 rule’s still-birth. The reasons are not hard to find if you look for them. First, the 2011 rule required an employer to pay the highest wage of any of the three possible sources: a collective bargaining agreement; the Davis-Bacon Act/ Service Contract Act or the OES survey. This was a major change from the 2008 rule. So, if you were hiring an ordinary entry-level landscaper in Billings, Montana, chance were fairly good that you would get a Level 1 wage in 2008 where differences in skill level were factored in. However, the DOL rejected the 4 tiered skill-based approach in the 2011 rule in response to Judge Pollak’s tongue lashing that no articulable rationale for such an approach had ever been adopted after APA notice and comment rulemaking. Consequently, since there might be a Service Contract Act wage finding for landscapers in Billings, you would be compelled to pay that rate, which would undoubtedly be much higher, maybe almost double, even if you had no federal contracts. Astonished landscapers were looking at wage increases that could and did exceed 100%! One more thing made the 2011 rule difficult to swallow. Under the 2008 rule, an entry-level job got you a Level 1 wage. In 2011, because DOL did away with the 4-tiered skill level approach, this same job would be classified between Levels 2 and 3, probably closer to the latter. So, our friendly landscaper could wind up with a Level 3 wage even higher than the Service Contract Act pay scale! As Angelo cogently observes, the 2011 wage rule was so bad that Democrats in Congress led the charge to bury it. Now that’s bad.

It should not surprise anyone that the 2011 wage rule has never been implemented. , Congress got into the Act on November 18, 2011 and, as a rider to the omnibus appropriations bill, inserted language barring DOL from spending any funds to implement the 2011 wage rule and instructed DOL to continue using the 2008 version that had so upset Judge Pollak until January 1, 2012.. H.R.Rep. No. 112-284(2011)(Conf. Rep). Since then , Congress has twice denied funding for DOL enforcement of the 2011 rule; most recently, on March 26th, President Obama renewed this ongoing restriction when he signed the 2013 appropriations bill for the federal government. Other than directing the DOL to continue applying the same 4-tier wage methodology that the Pennsylvania district court already enjoined, Congress has not done anything to address the impasse. Is anyone surprised? So, almost 30 months after Judge Pollak enjoined its operation, and over 2 years since DOL itself admitted in print that the 2008 Wage Rule lowered the wages of both H-2B and US workers, the DOL has continued to use it as the basis for telling both H-2B and PERM employers what they have to pay. Until this past March 21, when Judge Legrome Davis permanently enjoined it and gave DOL 30 days to comply. Comite de Apoyo a los Trabajadores Agricolas v. Solis, No. 09-240 ( E.D. Mar.21, 2013). .

The DOL violated the Administrative Procedure Act by adopting the OES system without providing stakeholders with the opportunity of notice and comment. Remember what BALCA said about attempts by DOL to make law through promulgating FAQs. In Matter of Health America, 06-PER -1 (BALCA July 16, 2006), the Board of Alien Labor Certification Appeals chastised the Certifying Officer’s reliance on FAQ No. 5:

Whether FAQ No.5 provides persuasive authority depends on the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements and all those factors which give it power to persuade... We find that FAQ No.5 imposes substantive rules not found in the PERM regulations, nor supported by PERM's regulatory history, nor consistent with notions of fundamental fairness and procedural due process ." Cannot the very same things be said with regard to the decision to abandon SWA wage surveys and use OES? We think they can and, for this reason, the decision to change the way wage surveys were conducted for LC purposes without notice and comment is an APA violation and unlawful.

What most attorneys practicing today do not realize is that the OES has only been applied to labor certification since General Administrative Letter 2-98 on October 31,1997. Before then, the state workforce authorities ( SWA of blessed memory) conducted a customized wage survey for each employer. OES was never meant to apply to labor certification and always took incentive compensation into account because, for most wage settings, this is accepted as part of what workers really got paid. Since September 1999, the Standard Occupational Classification (SOC) has been used by the OES program to classify occupational wage information.

The SOC provides a common language for categorizing occupations. It also serves as the framework for information being gathered through the Department of Labor's Occupational Information Network (O*NET). The O*NET provides the general public information on skills, abilities, knowledge, tasks, work activities, and the specific vocational preparation levels associated with occupations. Wage data from the OES survey and occupational information in O*NET are both classified by the SOC, reducing the need to use crosswalks to connect wages to occupational requirements. O*NET is based on the SOC system. It is the compressed nature of this system in its occupational categorization that often produces distorted wage surveys..

The OES is not neutral. From the time of GAL 2-98 to today, those who seek to choke off employment migration to this country have consistently sought to expand its reach and impose ever more onerous conditions so that employers who had the temerity to file an application would think twice. Moreover, when one thinks of OES, it should be in concert with the replacement of the DOT by O*NET with a dramatic collapsing of occupational categories and a downgrading of SVP quotients for many technical and scientific occupations that are the frequent subjects of labor certification. The end result of all this is artificially inflated wage determinations that must be paid by employers for less experience. Moreover, the OES accepts discretionary compensation which employers cannot count so that the inflationary character of occupational compression is severely reinforced. .

So, now that DOL has been forced by judicial edict to create a prevailing wage methodology that complies with the Administrative Procedures Act, what should it contain? Cyrus Mehta and I have proposed three possible ways to ameliorate the OES problem, first urged by AILA in March 2001. In each case, the effect would be to ameliorate the artificial wage inflation now resulting from the allowance of incentive compensation and once again, as before the application of OES to immigration, restore the primary of market driven forces as the ultimate arbiter of salaries(a) Back out all non-guaranteed calculations from the OES averages; (b) allow employers to include these same items in their wage offers for labor certification purposes; or (c) return to the pre-PERM era and allow variance in wage offers to bridge the gap between what OES defines as prevailing wage and what the employer can guarantee as base salary.

While waiting for divine guidance, what can we say about the OES and PERM in light of the H-2B wage imbroglio? First, the use of a 4-tiered wage methodology for PERM is specifically endorsed by INA 212(p)(4). While there is no express limitation in its application, this subsection must be understood and interpreted in the wider context of INA 212(p) itself which does apply to H-1B and PERM but not to the H-2B. Beyond that, while not quite as explicit, 20 CFR 656.40(b)(2) does speak of the arithmetic mean through the OES survey as the proper tool for sorting out the prevailing wage. Finally, it is worth commenting on the relevance of Durable Manufacturing Company v. DOL, 2008 WL 4785964, 2008 U.S. Dist. LEXIS 89885 (N.D.Ill.2008) where a federal district court in Illinois held- in a challenge to the 180 days time limit circumscribing the validity of a PERM labor certification- that the DOL has inherent authority to promulgate regulations under INA 212(a)(5). While the court in Durable Manufacturing did not opine on who had the ultimate burden of proof in the labor market test, it cited Production Tool Corporation v. ETA, 688 F.2d 1161(7th Cir. 1982) which upheld the validity of the regulations requiring the employer to advertise the position for the proposition that the DOL had broad authority to interpret and administer the PERM program

It is unlikely that the H-2B wage troubles will spill over into the PERM arena. Unlike the H-2B, where both business and labor fiercely opposed it though for decidedly different reasons, no one wants PERM to die. No one will gain by its demise nor be hurt by its continuation. The wage methodology is the same but the politics are completely dissimilar. Beyond that, the statutory authority of the DOL over the permanent labor certification stands in marked contrast to the absence of such authority to regulate the H-2B program. Yet, the command and control mentality of the DOL which allows, indeed nurtures, even promotes, the economic illiteracy of the OES wage survey cannot help but continue to destabilize the PERM wage levels precisely as happened with the H-2B determinations. It is simply a matter of time.

About The Author

Gary Endelman is a Senior Counsel at FosterQuan, Houston, TX. His practice includes I-9 compliance and audits, E-Verify compliance, immigration issues related to mergers and acquisitions, employment-based nonimmigrant visas, B-1 OCS, permanent residence petitions for ability, outstanding researchers, PERM labor certification; naturalization, derivation and transmission of U.S. citizenship. Mr. Endelman graduated with a B.A. in History from the University of Virginia, a Ph.D. in United States History from the University of Delaware, and a J.D. from the University of Houston. From 1985 to 1995, he worked at one of the largest immigration firms in the country. From 1995 to 2011, he worked as the in-house immigration counsel for BP America Inc., a multinational energy company ranked as one of the top 5 largest companies in the world. Mr. Endelman is board certified in Immigration and Nationality Law by the State Bar of Texas, Board of Legal Specialization and Chair of the Examinations Committee in Immigration and Nationality Law for the Texas Board of Legal Specialization. He is a frequent national speaker and writer on immigration related topics including several columns and blogs on immigration law. He served as a senior editor of the national conference handbook published by AILA for ten years. In July 2005, Mr. Endelman testified before the United States Senate Judiciary Committee on comprehensive immigration reform. Please contact Gary Endelman at The views expressed by Mr. Endelman in this article are his personally and not those of FosterQuan, LLP.

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