On December 1, 2020, the United States District Court for the Northern District of California issued a decision that suspends the Department of Labor's prevailing wage increase that went into effect on October 8, 2020, and prevents the implementation of the Department of Homeland Security's proposed changes to the H-1B visa program, which were set to take effect on December 7, 2020. In the lawsuit called Chamber of Commerce of the U.S.A., et al. v. U.S. Dep't. of Homeland Security, et al., the decision sets aside the two H-1B related interim final rules that were published in October. The court based its decision on the agencies' failure to allow public comment before the rules became final, and found the failure to do so was not justified by the agencies' claim that it was to prevent public harm from the COVID-19 pandemic.
It is not yet known whether the government will accept the court's ruling or will appeal it. As of the morning of December 2, 2020, the DOL's online system for submitting Labor Condition Applications (the FLAG system) had not yet been updated to allow practitioners and employers to file LCAs using the old prevailing wage data. While the issue should be easily and quickly correctable, for the time being, employers are encouraged to only file LCAs for urgent cases, including but not limited to amendments reflecting material changes to the terms of employment and change of employer petitions, or to continue to use other published sources of wage data, such as private surveys. Petitions seeking regular extensions of H-1B status for employees may benefit from waiting for the DOL to properly comply with the court's decision.
In defense of the rules in question, DHS and DOL argued that the increases in wage levels and the H-1B program changes were issued without notice and comment to urgently protect American workers in a labor market ravaged by COVID-19. The court observed that the rules in question had been in discussion as early as 2017, and the problems stated were arguably in existence well before the pandemic. Because of this, the court deemed that the agencies were in control of the timing of the implementation of both rules. As both DOL and DHS had ample opportunity to begin the notice and comment period before the pandemic started, and chose not to do so, the delay could not be used to claim that the agencies now had good cause to circumvent legally required rulemaking procedures.
Additionally, the court examined statistical data proffered by both agencies that allegedly justified the rules based on the devastating effects of COVID-19 on rates of unemployment. However, the court found that the evidence did not support the agencies' assertions. While the overall unemployment numbers were undeniably higher as a result of the pandemic closures, the data for US worker peers of H-1B workers in the industries most affected by the implemented rules revealed ongoing job creation, significant job availability, and a shortage of qualified workers to fill their business needs. Thus, empirical data did not support the agencies' assertion that urgent action had to be taken without the required notice and comment period. As a result, the DOL will need to reinstate the wage system and levels that were in place prior to October 8, 2020, and the DHS and USCIS in particular will not be able to alter the H-1B system as quickly as the agencies hoped.
With respect to the proposed DHS rule, at least for the time being, the H-1B system as we know it survives. However, employers need to be mindful that reforms are still likely coming, if not under the current Administration, then under the incoming one. The injunction is indeed a victory for companies that are still experiencing a shortage of qualified workers. Yet, it was only granted on procedural grounds. The court specifically noted that it will not address the substantive claims asserted by both sides, thus leaving the door open for the upcoming administration to promulgate the rules properly, with notice and opportunity for the public to comment.
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