United States: H-1B and PERM Programs

In brief

On October 6, 2020, the Department of Labor (DOL) and Department of Homeland Security (DHS) announced new interim final rules (IFRs) that have left employers reeling in the wake of their effect on foreign national employees on H-1B visas or in the permanent residence process. The DOL IFR took effect on October 8, 2020. The DHS IFR will take effect on December 7, 2020.  Both rules will significantly impact employers’ ability to hire and retain foreign national talent. While litigation that could suspend the rules seems imminent, employers are left to navigate the IFRs on the unsteady ground created by COVID-19-related H-1B and PERM compliance challenges.


How will the DOL rule affect my company?

The new DOL rule will likely mean that sponsoring companies will have to pay significantly higher wages for certain nonimmigrant petitions (H-1B, H-1B1, and E-3) and PERMs.

The IFR raises the percentages used to determine the wage levels applicable to the Labor Condition Application (LCA) and the Application for Prevailing Wage Determination.  The changes will result in wage raises for each category (Level I-IV) of approximately 28 percentiles (i.e., from the 17th to the 45th percentile for Level I and from the 67th to the 95th percentile for Level IV) of the relevant OES wage distribution. The charts below outline the approximate changes that will result from this rule:

Wage Level Previous Percentile New Percentile
Level I 17th Percentile 45th Percentile
Level II 34th Percentile 62nd Percentile
Level III 50th Percentile 78th Percentile
Level IV 67th Percentile 95th Percentile

 

Example of Prevailing Wage Distributions for a Software Developer in Chicago Prior to Effective Date of DOL Rule Example of Prevailing Wage Distributions for a Software Developer in Chicago After Effective Date of DOL Rule

You selected the All Industries database for 7/1/2020 - 10/7/2020. Your research returned the following: Print Format

Area Code: 16980

Area Title: Chicago-Naperville-Elgin, IL-IN-WI

OES/SOC Code: 15-1132

OES/SOC Title: Software Developers, Applications

GeoLevel: 1

Level 1 Wage: $34.17 hour - $71,074 year

Level 2 Wage: $42.23 hour - $87,838 year

Level 3 Wage: $50.30 hour - $104,624 year

Level 4 Wage: $58.36 hour - $121,389 year

Mean Wage (H-2B): $50.30 hour - $104,624 year

You selected the All Industries database for 10/8/2020 - 6/30/2020. Your research returned the following: Print Format

Area Code: 16980

Area Title: Chicago-Naperville-Elgin, IL-IN-WI

OES/SOC Code: 15-1132

OES/SOC Title: Software Developers, Applications

GeoLevel: 1

Level 1 Wage: $44.49 hour - $92,539 year

Level 2 Wage: $56.58 hour - $117,686 year

Level 3 Wage: $68.68 hour - $142,854 year

Level 4 Wage: $80.77 hour - $168,002 year

Mean Wage (H-2B): $50.30 hour - $104,624 year

 

The changes listed above will have a significant impact on PERM applications.  Prevailing Wage Determination wage levels are determined by the DOL based on an analysis of the degree, training, and experience requirements of the proffered position.  Employers should therefore expect higher wages to be issued by the DOL in response to Applications for Prevailing Wage Determinations. Employers may have more flexibility in the H-1B, H-1B1, and E-3 context, but should still expect to pay higher wages.

The rule does not apply to any previously-approved/certified Prevailing Wage Determinations, Permanent Labor Certification Applications, or LCAs.

How will the DHS rule affect my company?

Employers are required to show that an H-1B position meets the definition of Specialty Occupation. The recent DHS rule that takes effect in December further restricts that definition. Employers may be hard-pressed to secure H-1Bs, either initial or extensions, for entry-level roles. Those placed at third-party worksites are at heightened risk for potential RFEs. Employers will also be required to submit extensive information and corroborating documentation in order to satisfy the new requirements found in these regulatory changes. The DHS IFR largely bears out what employers sponsoring H-1B workers have seen in practice, with an increase in Requests for Evidence and denials from USCIS. Still, this rule has increased the anxiety of foreign nationals on H-1B visas and many remain uncertain of future authorization to stay in the United States.  Specifically, the new DHS rule makes significant changes to the following:

Definition and Scope of "Specialty Occupation"

  • Requires a direct relationship between the degrees required for the position and the duties of the position itself, per the definition of "Specialty Occupation" found in the regulations.
  • Definitively states that a position will not qualify as a "Specialty Occupation" if a "general degree" is sufficient to qualify for the position.
  • Definitively states that if "disparate" degrees are listed within the degree requirement, the petitioner will need to establish how each degree relates to the position.
  • Necessitates the sponsoring company to show that a bachelor's degree in a specific specialty is always a requirement for the occupation as a whole, is always a requirement within the relevant industry, is always a requirement within the petitioning company, or the degree is required because the position is so specialized, complex, or unique that it is required to perform the duties of the position. This previous regulatory language used the words "normally", "common", and "usually".

Definition and Scope of Employer-Employee Relationship

  • Mandates that the sponsoring company must have non-speculative employment for the beneficiary at the time of filing.  This means that a bona fide job offer must exist and that actual work will be available as of the requested start date. The new regulation authorizes the United States Citizenship and Immigration Services ("USCIS") to request copies of contracts, work orders, or other similar corroborating evidence for both in-house and third-party placements to show that non-speculative employment exists.
  • Provides a more extensive definition of Employer and Employer-Employee Relationship, and lists several non-exhaustive factors to be considered as part of a "totality of circumstances" test to determine whether a valid Employer-Employee relationship exists.

Third-Party Placement Rules

  • Sets a one-year maximum validity period for all H-1B petitions in which the beneficiary will be working a third-party worksite. This is significantly shorter than the three-year maximum an H-1B petition can be approved for under current regulations.
  • Defines a third-party worksite as "a worksite, other than the beneficiary's residence in the United States, that is not owned or leased, and not operated, by the petitioner."
  • Requires sponsoring companies to submit evidence such as contracts, work orders, or other similar evidence (such as a detailed letter from an authorized official at the third-party worksite) to establish that the beneficiary will perform services in a Specialty Occupation at the third-party worksite(s) and that the sponsoring company will have an Employer-Employee relationship with the beneficiary.

Other Changes to the H-1B Regulatory Scheme

  • Codifies that USCIS may conduct on-site visits both before and after the approval of an H-1B petition. The regulation also expands the scope of inspection to include the sponsoring company's headquarters, satellite location(s), or the location where the beneficiary works, including their residence or third-party worksites. If the USCIS is unable to verify compliance, the regulation provides the agency sufficient authority to issue a denial or revocation of any H-1B petition for H-1B workers performing services at that site. 
  • Requires the USCIS to issue a brief explanation when an H-1B nonimmigrant petition is approved but with a shorter validity date than the one requested.
  • Eliminates the general itinerary requirement for H-1B petitions, except for H-1B petitions filed by agents.

What actions should my company take?

  • Communicate with your foreign national employees. Anxiety amongst foreign nationals is already high as a result of COVID-19 travel restrictions and recent immigration announcements. Consider holding a Town Hall to discuss immigration updates and provide a forum for your employees to ask questions.
  • Communicate with managers and talent acquisition personnel to make them aware of the rule changes that may arise in discussions with candidates. 
  • For your employees in the US with nonimmigrant work authorization that will expire within the next six months, consider filing extension petitions with the USCIS as soon as possible.
  • For future H-1B filings, ensure that sufficient detail and corroborating documentation is provided in the initial filing to potentially avoid Requests for Additional Evidence.

As mentioned, given the swift and unconventional passage of both IFRs, without a proper notice and comment period, we expect both rules to be challenged in court. We encourage our clients to stay in close contact with us as the situation remains fluid.

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