In a significant decision likely to have a major impact on H-2B employers, the Department of Labor’s (DOL) Board of Alien Labor Certification (BALCA) has rejected the DOL’s attempt to apply supplemental prevailing wage determinations (PWDs) retroactively upon employers who use H-2B temporary foreign labor.  The action came in an Appeals Board Decision rendered on December 3.

The Immigration Act permits H-2B foreign workers to enter into the United States on a temporary basis to perform temporary, nonagricultural services or labor when recruitment efforts have failed to identify ready, willing, and able United States citizens or other work-authorized foreign nationals.  The process of applying for the opportunity to petition for the admission of these workers begins with an employer’s request for a prevailing wage determination from the Department of Labor.

Back in 2005, the Department of Labor issued guidance applying a 4-tier skills-based methodology to calculate prevailing wage rates in permanent labor certification and H-1b/H-2b contexts.  The Department adopted the methodology and promulgated regulations in 2008.

In 2009, a group of plaintiffs filed an action against DOL in the US District Court for the Eastern District of Pennsylvania.  The plaintiffs challenged the tier system methodology under the Administrative Procedure Act.  In August 30, 2010, the Court agreed with the plaintiffs, and found that the DOL failed to articulate a satisfactory explanation to support the use of skill levels in determining prevailing wage rates for positions to be filled by H-2B workers.  The Court ordered DOL to promulgate a replacement rule.  Even though DOL published a new final H-2B Wage Rule on January 19, 2011 (now known as the 2011 Wage Rule), its implementation has been held up due to delays by Congressional “appropriations concerns” denying DOL funding. Therefore, the 2011 Wage Rule never went into effect.  So, DOL continued to rely on its 2008 methodology.  Again, that reliance was challenged, and again the Court agreed with the plaintiffs.  In its order issued in March 2013 (Comite de Apoyo a los Trabajadores Agricolas v. Solis, No. 09-240 (E.D. Penn. Mar. 21, 2013), the Court deleted reference to the 4-tier skill level and concluded that the 2008 Wage Rule “…artificially lower wages to a point that they no longer represent market-based wages for the occupation” and “have a depressive effect on the wages of United States workers…”  As a result, DOL in conjunction with the Department of Homeland Security promulgated an “interim immediately effective regulation” guiding the agency to a conclusion that it would issue decisions at a median tier—thus resulting in what most employers would likely identify as an inflated wage.

Most distressing, the interim regulation applied the “new” supplemental wage determinations retroactively.

Employers using temporary foreign workers were faced with the prospect that they not only would need to pay what in their opinion was an “inflated” wage, but grapple with the  recommendation from DOL that they also provide “back pay” at the same higher rate.  Clearly, for employers relying upon large numbers of temporary workers, as in the food processing, landscaping, and resort hospitality industries, labor costs would be significantly increased.  Most—if not all of the participating employers—might have reconsidered participating in the program and elected NOT to participate had they known of the “new” wage.

BALCA’s decision this week clarifies that the supplemental wage determinations would NOT apply—either moving forward or in the past.  BALCA concluded that the DOL’s H-2b regulations do not require an employer to increase the wage it offers and pays its H-2b workers more than was previously approved.  BALCA ruled that “Because the Department’s regulations do not require an employer to comply with a prevailing wage determination issued after the Department has approved and granted the employer’s Application for Temporary Employment Certification (ETA Form 9142), we VACATE the supplemental PWDs and the increased wage obligations that they purport to impose.”  In the instant case, DOL had issued the employer a supplemental PWD increasing the applicable wage for housekeepers from $9.91 per hour to $13.00 per hour.  BALCA ruled that the employer may ignore the supplemental PWD and continue to pay its temporary workers the $9.91 rate assessed in the initial PWD.

Clients interested in temporary foreign employees or who have been audited by DOL for backwages based on the inflated supplemental PWDs should contact their JL immigration attorneys for advice.