In a much-anticipated decision, on December 1, 2020, the U.S. District Court for the Northern District of California ruled in favor of business and university plaintiffs (led by the U.S. Chamber of Commerce), setting aside two new interim final rules that would have instituted major changes to the H-1B program.¹  

The U.S. Department of Homeland Security (DHS) interim final rule, Strengthening the H-1B Nonimmigrant Visa Classification Program, which would have taken effect on December 7, 2020, sought to re-define much of the regulatory language governing the H-1B program by making substantive changes to the definition of an “employer” and “employer-employee relationship.” Notably, it would have added limitations on third-party site placement and other new criteria for proof of employment.  The U.S. Department of Labor (DOL) interim final rule, Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States, which took effect October 8, 2020, increased prevailing wage rates at all skill/experience levels. For example, the minimum for an entry level position was tripled, a sharp wage increase for employers employing foreign nationals in H-1B, EB-2, and EB-3 skilled worker classifications.

The plaintiffs’ suit alleged that the Trump administration had improperly bypassed the standard rule-making procedure (without allowing for a public notice-and-comment period), and had not demonstrated good cause to excuse the notice-and-comment requirement when it published the rule on an emergency basis (citing to the COVID-19 pandemic). The court similarly pointed to the lack of a rational connection between the facts of the COVID-19 pandemic and the decision to publish the rules on an emergency basis, pointing out the administration’s delay in publishing the new rules (from the unemployment height of the pandemic in April), the previous declaration of wanting to increase wages in years past, along with core economic and data showing low unemployment rates in computer-related occupations.

The court granted a partial motion for summary judgment in the plaintiffs’ favor on their first two claims for relief (alleging improper rulemaking), and “set[] aside the Rules on the basis that they were promulgated in violation of [the law].” U.S. District Judge Jeffrey S. White concluded, “Defendants failed to show there was good cause to dispense with the rational and thoughtful discourse that is provided by the APA’s [Administrative Procedure Act] notice and comment requirements.” This is a final judgment that entirely sets aside the two new DHS and DOL rules.

In the short term, the decision, which vacates the interim rules, means the DOL will likely return to the prevailing wage determinations that were in effect before the new wage rule was issued on October 8, 2020 (allowing employers to file petitions for workers guaranteeing salaries based on the previous, lower wage rates). As of December 2, 2020, the DOL had not yet issued any guidance or published amended wage rates on the Foreign Labor Certification Data Center. We are monitoring events to assess possibility of appeal and any potential motions to stay the effect of the order.