As many of you know, the H1B Prevailing Wage levels were dramatically increased for H1B workers in recent wage protections regulation that was published in federal register. There was a lawsuit filed today on the new regulation. In this article we will discuss the background on why and details of the lawsuit that we have as of now.
If you are not familiar with the H1B and PERM wage level changes, read all the details and impact at article : New H1B, PERM prevailing wage levels, huge impact
Background – Why Lawsuit Filed
H1B employers are supposed to pay as per the prevailing wage levels for H1B workers similar to US workers in an area. The wages paid to H1B workers are submitted as part of H1B Labor Condition Application (LCA). Recently, as per the new regulation, the H1B prevailing wage rates went up by close to 40% across the board. The prevailing wage level changes went up like in below table.
|Prevailing Wage Level||H1B LCA, PERM Wage levels Before||New H1B LCA, PERM Wage levels with Regulation|
|Wage Level I||17th percentile||45th percentile|
|Wage Level II||34th percentile||62nd percentile|
|Wage Level III||50th percentile||78th percentile|
|Wage Level IV||67th percentile||95th percentile|
This wage level changes has a significant impact for many of the H1B employers, it can impact up to 400K H1B employees based on as per FY2019 stats published on H1BGrader. See below screenshot.
This wage level changes has significant impact on the IT outsourcing companies. ITServe Alliance Inc, that represents majority of the IT Services, Staffing and Consulting Companies has filed lawsuit in New Jersey Court today Oct 16, 2020 challenging the wage level changes. Earlier this year, they won against USCIS on the H1B Employer Employee Relationship, Itinerary Case that ended up in settlement with USCIS scraping some of the decade old policies. Also, there are few other associations planning to file lawsuits on these changes.
Now that you have some background on why, let’s dive into the details.
H1B, PERM Wage Levels Lawsuit Details – Who, Where, What
Below are the details of the Lawsuit filed in the H1B Wage Levels Change Case
- Case Name, Title : It is tracked under case name “ITSERVE ALLIANCE, INC. et al v. SCALIA et al” with case number “CASE #: 3:20-cv-14604”.
- Case Location : The lawsuit is filed in US District Court in the District of New Jersey.
- Lawsuit Represented by : The case is represented by Wasden Banias Law firm, who have a reputation for winning high profile cases.
- Case Filed by : The lawsuit is filed by ITServe Alliance and all the below companies. You can click on them to view the H1B LCAs filed by them to get an idea.
Below are the high level court case details as they appear on Court Cases Website for your reference.
Impact of the New Wage Levels on ITServe’s Companies
The lawsuit goes into detail on the impact to ITServe’s members. They say that many of the IT Services contracts with clients or customers are multi-year and the pricing used for that is based on the wage assumptions of current H1B workers. If DOL randomly does wage level changes, without giving proper notice and option to hear from us, it will impact our businesses. We will be forced to do layoffs, move jobs to outside of US and it will have negative impact on the economy. Below are the list of companies and the impact due to wage level changes.
- Precision Technologies Corp wage rates for computer related occupations will increase up to 50%
- Iflowsoft Solutions Inc wage rates for computer related occupations will increase up to 24.5%
- Smart Work LLC wage rates for computer related occupations will increase up to 49% or more
- Nam Info Inc. wage rates for computer related occupations will increase up to 50% or more
- Kolla Soft Inc wage rates for computer related occupations will increase up to 26% or more
- Dots Technologies Inc Soft Inc wage rates for computer related occupations will increase up to 30 to 40%
- Zenith Services Inc wage rates for computer related occupations will increase up to 27% or more.
- They give general reference to the Software Developer Entry Level H1B Wage raised from 79K to 116K in Newark. Check Comparison of H1B Wage Levels in Newark for Software Developers. See below screenshot from H1BGrader website that compares both.
- You can also browse H1B Prevailing Wages in Newark for all Occupations
Check below screenshot from the court case document that talks about the harm to ITServe members.
You may watch the below YouTube Video as well on this topic.
Key Argument Points raised in the Lawsuit
The plaintiffs(ITServe & Others) broadly put in their arguments under the below three areas (called as counts in legal term). Below are the details and key points from those three areas.
Count 1 – Violation of Notice and Comment Process for Rulemaking
US Dept of Labor(DOL) did not give enough notice for plaintiffs and changed the H1B, PERM Wage Levels dramatically.
- DOL did not follow the proper rule making process without giving chance for public to give feedback, supporting data in comments. It hurts ITServe’s members a lot.
- DOL does not give proper justification for invoking the fast track process without following the proper regulatory process. DOL did not follow all the required 9 Steps for Federal Rulemaking.
- All the information presented in the rule justifying the need for urgency are factually wrong. DOL used outdated and incorrect data for computing the new wage levels. They do not consider many relevant reports and studies and put up the new wage rules that are against basic economic theory.
Count 2 – DOL Action against H1B Statute of Degree requirement
DOL based their new wage levels against the H1B requirements set in statute by congress
- DOL says that the new Level 1 Prevailing Wage levels are upward from Masters degree and used Master’s degree as benchmark for entry level positions for H1B.
- As per statute, in the definition of H1B specialty occupation, there is only requirement for bachelor’s degree as minimum qualifying for entry into a H1B position.
- DOL setting the wage levels to 45th percentile for Level 1 Wages is based on wrong assumption and inconsistent with the statute set by congress.
Count 3 – DOL Action is Random and not based on Logic
DOL action is totally random and not based on sound logic or justification. In legal terms, they call DOL action as “arbitrary and capricious”.
- DOL reasoning to change wage levels saying that H1B workers are paid lower than US workers is not supported by any data or reports
- DOL did not consider any verified/reputed reports or studies based on real data and falsely assumes that H1B workers are paid less than US workers, employing H1B workers affects wages of US workers.
- DOL did not consider any studies that show H1B workers employment creates jobs, wage growth, and investment in R&D.
- DOL did not consider any reports that say lack of H1B workers has harmful effect on economy and can lead to job los, off-shoring of jobs, decline of investments in US.
- Though DOL says that the reason for skipping regulatory process is unemployment in US due to COVID-19, the unemployment rate in computer and technology professions is relatively low.
You can check the copy of the case document at the end of article.
Decision requested to Court in Lawsuit
ITServe is asking the court for giving preliminary injunction and also permanently stop DOL from implementing the New Wage Levels Rule. The reason they say is many things done by DOL in the interim final rule of H1B Wage Levels in unlawful, not meeting the statute requirements, and it was done randomly without proper reasoning and not considering real reports on H1B Data.
The argument points raised in the lawsuit are really strong and DOL may have a hard time justifying the reason for implementing the rule without proper comment. The harm to many business is also something court would weigh in heavily for making the decision. As per Wasden & Banias law firm, “the regulation that was published in federal register without proper rulemaking process has many procedural defects and confident that they would get injunction for the same”. They are also planning for a lawsuit to challenge the New H1B Rule with Definition change, 1 year approvals, others.
What do you think of the lawsuit ? Do you think Court will give injunction order to halt this rule ? Share your thoughts in comments.