Federal Court Blocks Trump’s New Prevailing Wage Rule & H-1B Rule!

On December 1, 2020, the U.S. District Court for the Northern District of California set aside two H-1B rules that would have significantly changed the processing of H-1B applications.  The court has found that the Department of Homeland Security (DHS) and the Department of Labor (DOL) interim final rules that altered the H-1B process and significantly increased Prevailing Wage Levels were both “promulgated in violation of 5 U.S.C section 553(b)” in bypassing the formal rulemaking process.

The DOL rule was published on October 8, 2020 and took effect immediately upon publication. The DOL rule significantly raised wage minimums for H-1B, E-3, and H-1B1 nonimmigrant cases and the PERM labor certification program. The DHS rule was set to go into effect on December 7, 2020, altering the regulatory definition of and standards for a “specialty occupation,” revising the definition of “United States employer,” and reducing the validity period for third-party placement petitions from the current three years to just one year.

The Trump Administration relied on the COVID-19 pandemic to invoke the good cause exception to bypass the formal rulemaking process for both rules. Therefore, both rules were subsequently challenged in court. The U.S District court for the Northern District of California has found that the government agencies failed to show good cause for excusing the notice and comments requirement mandated by the Administrative Procedure Act (APA). The court mentioned that Defendants must “overcome a high bar” to show good cause exists for dispensing with notice and comment. “Good cause” usually is invoked in the event of emergencies, where “delay would do real harm to life, property, or public safety.”

Plaintiffs argued that Defendants had unduly delayed in taking action and forfeited the ability to rely on the good cause exception. “Good cause cannot arise as a result of the agency’s own delay.” Although both agencies cited to “skyrocketing” and “widespread” unemployment rates as a basis to find “immediate” action was necessary, they did not do so for over six months. The court also found DOL’s argument that it could not foresee the potential consequences of the pandemic’s impact on domestic unemployment particularly implausible. The court noted that while the COVID-19 pandemic is an event beyond Defendants’ control, yet it was within Defendants’ control to take action earlier than they did. Therefore, the court found that by failing to act earlier, Defendants had forfeited the right to rely on the good cause exception.

The court’s ruling is effective immediately and we expect that the DOL will update the OFLC database to reflect the pre-October 8, 2020 wage levels. It is unclear at this time whether the summary judgment will be appealed by the DHS/DOL, which could affect implementation of the court’s decision. It is also unknown how the DOL will handle the prevailing wage determinations issued since October 8, 2020 under the new rule. If you have any additional questions, please contact an attorney at Minsky, McCormick & Hallagan, P.C.