DOL Final Rule Will Increase Prevailing Wages

January 12, 2021

The U.S. Department of Labor (DOL) has announced a final rule, “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States,” to amend existing regulations governing permanent labor certifications and labor condition applications (LCA).  The final rule will change how prevailing wage levels are calculated, resulting in higher prevailing wages for all occupations and all wage levels in the Occupational Employment Statistics (OES) wage survey administered by the Bureau of Labor Statistics. The final rule also provides for a transition period from the current wage methodology for employers to adapt to the new wage rates.

Under the new regulation, DOL is revising and increasing the percentiles corresponding to each prevailing wage level:

o   Level I Wage: 35th percentile of the OES wage distribution (from 17th percentile).

o   Level II Wage: 53rd percentile of the OES wage distribution (from 34th percentile).

o   Level III Wage: 72nd percentile of the OES wage distribution (from 50th percentile).

o   Level IV Wage: 90th percentile of the OES wage distribution (from 67th percentile).

The regulation also provides for two different transition periods before the new wage levels take effect:

o   For job opportunities that will be filled by a worker who, as of October 8, 2020, is the beneficiary of an approved Form I-140 (Immigrant Petition for an Alien Worker) in the EB-1, EB-2, or EB-3 classification, or is eligible for an extension of H-1B status under sections 106(a) and (b) of the American Competitiveness in the Twenty–First Century Act of 2000 (AC21), the transition will occur in four steps that conclude on July 1, 2024. For eligible beneficiaries, the current wage levels will remain in effect for new prevailing wage determinations (PWDs) and LCAs through June 30, 2021. From July 1, 2021 through June 30, 2022 the prevailing wage will be set at 85 percent of the final wage level; from July 1, 2022 through June 30, 2023 the prevailing wage will be set at 90 percent of the final wage level; from July 1, 2023 through June 30, 2024 the prevailing wage will be 95 percent of the final wage levels; and from July 1, 2024 onwards the prevailing wage will be the same as the final wage levels.

o   For PWDs and LCAs for H-1B, H-1B1 and E-3 beneficiaries who do not qualify for the longer transition period (above), the transition will occur in two steps. For the two-step transition, the current wage levels will remain in effect through June 30, 2021. From July 1, 2021 through June 30, 2022, the prevailing wage will be set at 90 percent of the final wage level. Finally, as of July 1, 2022 the prevailing wage will be the same as the final wage levels.

Background. An earlier Interim Final Rule (IFR) raising prevailing wage rates was initially published and effective on October 8, 2020. This IFR was struck down following a court challenge on December 1, 2020, alongside a DHS interim final rule that amended requirements for H-1B classification.

When does the final rule take effect? This rule is expected to be published on Thursday, January 14, 2021, and is supposed to take effect 60 days from the date of publication. However, the effective date of the final rule will likely be further extended as the President-Elect’s transition team has indicated that the Biden Administration will issue a memorandum on January 20, 2021, delaying implementation of “midnight regulations” (i.e., those issued since the election but not yet effective) for 60 days.  It is also expected that groups that previously challenged this regulation will again litigate the legality  of the revised final rule.  

How does this impact employers? Employers that rely on LCAs or prevailing wage determinations (PWD) using the OES survey will see an increase to the wages associated with each of the four wage levels.  Although the rule permits the use of alternative wage surveys, the final rule likely increases the “required wage” associated with H-1B, H-1B1, and E-3 benefit requests using the OES wage survey. The “required wage" is defined as the higher of the actual wage and the prevailing wage.  The final rule will result in higher wages associated with employment-based immigrant visa petitions that rely on PWDs.

This information is distributed for informational purposes only. For further questions, please contact a G&A professional for assistance.

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