5 Citations
Prevailing wages are meant to protect employees’ rights to fair wages.
However, most of these regulations are set for U.S. citizens. Absent prevailing wage and other laws like them, U.S. citizens may suffer reduced job opportunities due to employers’ tendency to favor lower-wage immigrant employees.
H-1B prevailing wages were enacted to ensure immigrants across the U.S. are entitled to fair wages, preserving a more level playing field between citizens and non-citizen workers.
This article will cover H-1B prevailing wage laws, detailing what they are, how they’re determined, and various strategies for employers and employees to navigate the prevailing wage requirements.
Understanding these laws is vital to ensuring the fair treatment of employees, maintaining ongoing business compliance, and avoiding potential fines and litigation.
Understanding H-1B Prevailing Wage
According to the Immigration and Nationality Act, hiring foreign workers should not adversely affect U.S. citizens’ wages and working conditions in similar positions.
To this effect, regulations set forth by The U.S. Department of Labor (DOL) stipulate all wages offered to foreign workers must align with the prevailing wage rate for the occupational classification in the workers’ area of employment.
H-1B visas are provided to nonimmigrant workers as a temporary work visa. This is part of the H-1B nonimmigrant program, which allows employers to temporarily hire nonimmigrants admitted under H-1B visas to fully specialized jobs not filled by U.S. workers.
The Immigration and Nationality Act requires employers to pay H-1B workers more than the actual wage or the prevailing wage to protect U.S. workers’ employment opportunities and eliminate any economic incentive to hire temporary foreign workers.
As such, H-1B prevailing wage requirements protect nonimmigrant and U.S. workers against exploitation.
Essentially, it ensures U.S. workers don’t lack job opportunities due to a preference for foreign workers. Nonimmigrant employees are also guaranteed a fair wage comparable to U.S. employees working in a similar position.
For instance, if a U.S. engineering company needs more specialized staff for a project, it may request H-1B visas for specialized workers from other countries.
Once these visas are granted, the company should pay its nonimmigrant employees a wage rate higher than its actual wage rate for the position or the prevailing wage rate set forth by federal regulations.
Legal Framework Establishing the Prevailing Wage Requirements
Any employer seeking to hire H-1 B nonimmigrant employees in a specialty must attest that they will pay the H-1B nonimmigrant the required wage rate on form ETA 9035 or 9035E.
Upon signing the form, the employer attests that they will pay the nonimmigrant worker a wage greater than the actual or prevailing wage. The employer is also required to offer additional benefits that they would offer U.S. workers employed in the same capacity.
In this case, the actual wage is the wage rate paid by the employer to other employees with similar qualifications and experience as a nonimmigrant.
When determining the actual wage rate, employers may consider several factors, including qualifications, experience, education, specialized knowledge, job responsibility, and other legitimate business factors.
Similarly, the prevailing wage should be determined at the time of applying.
Employers are not required to use any specific methodology for determining the prevailing wage rate. Rather, they can utilize information obtained from an independent, authoritative source, the Office of Foreign Labor Certification (OFLC), or other legitimate sources of wage data.
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How Is the H-1B Prevailing Wage Determined?
The U.S. Department of Labor sets prevailing wages for H-1B workers. It achieves this primarily through the Labor Condition Application (LCA) process, a key component of the H-1B visa program.
For instance, before an employer can file an H-1B visa petition for a foreign worker, they must obtain a certified Labor Condition Application (LCA) form from the Department of Labor. They must also determine the prevailing wages for the offered position based on wage data provided by the DOL’s Occupational Employment Statistics (OES) program or other acceptable sources of wage data.
The Department of Labor is also responsible for reviewing LCAs provided by employers seeking to hire H-1B workers through the Wage and Hour Division (WHD).
In addition to reviewing LCAs, the DOL is tasked with conducting random audits and investigating complaints to ensure that employers comply with prevailing wage requirements for H-1B employees.
Determining H-1B Prevailing Wages
DOL guidelines for H-1B prevailing wage levels are typically based on occupation and region. They must reflect the average wage paid to similarly employed workers in the intended area of employment.
The H-1B wage is divided into four levels based on skills, knowledge, and experience required to perform required duties in a specific job.
The prevailing wage differs at each level based on the job’s specifications. For instance, level 1 is designated for entry-level jobs and pays lower than level 4, reserved for highly qualified professional roles.
Here’s a more detailed explanation of the four wage levels for H-1B workers:
Level 1: The H-1B prevailing wage level is reserved for occupations only requiring basic operational understanding. The minimum educational qualification required for level 1 employees is a bachelor’s degree or lower, with at least 0-1 years of experience.
For instance, recent college or university graduates are typically categorized as level 1 employees. As such, they’re entitled to the lowest set level of prevailing wages. They’re also critically picked and only employed when U.S. workers are scarce for entry-level jobs.
Level 2: Level 2 H-1B candidates’ prevailing wage expectations are significantly higher than level 1 employees. For instance, level 2 employees must also have at least 2 years of experience in the particular field.
Junior executive positions are the most common jobs qualifying for this level. A master’s degree can also qualify for level 2 prevailing wages.
Level 3: Level 3 prevailing wages are typically reserved for more experienced and polished employees. These individuals should have a deep understanding of their job and be able to guide others.
Most level 3 prevailing wage qualifying jobs are high-level management positions. Individuals with a bachelor’s degree and at least 3 years of experience may also qualify for this level.
Level 4: Qualifications for level 4 prevailing wages are limited to top-level job responsibilities requiring experience, expertise, and higher educational qualifications. Most qualifying jobs under this category are top management or leadership positions.
Factors Influencing the Determination of Prevailing Wages
Several factors come into play when determining H-1B prevailing wage rates.
Once an employer finalizes all job duties and requirements, they must submit a prevailing wage request (PWR) to the Department of Labor’s National Prevailing Wage Center (NPWC). This is a request for them to work out the offered position’s prevailing wage.
It may take approximately 60 calendar days after submission for the NPWC to issue a prevailing wage determination based on several factors, including:
Standard Occupation Code (SOC) Job Title
When requesting a prevailing wage determination, the employer suggests a SOC occupational code based on expected job responsibilities. The NPWC then reviews the suggestion based on the duties required by the employer.
Some SOC codes may share similar duties and responsibilities. In such cases, the NPWC considers the employer’s suggestion, provided it gives an accurate description of the job.
Location of Employment
Prevailing wages vary by location. For instance, an entry-level computer programmer position in Des Moines, Iowa, has an average annual salary of $36,774 and an average annual salary of $52,478 in New York.
The geographical area is determined by where the actual work is done.
For instance, if a company is recruiting employees for work to be performed in remote branches, the prevailing wage will be determined based on the location of the branch.
Increases in Wage Level
Job title, position, and area of employment are key considerations, but other factors may also be considered when determining prevailing wage rates.
As employees advance in education, experience, special skills, and supervisory duties, they move to higher wage levels and are thus entitled to higher salaries.
For example, an entry-level civil engineer in New York earns an average annual salary of $60,861. A fully competent level 4 civil engineer in New York earns an average annual salary of $105,082. As the level 1 civil engineer advances in skills and job responsibilities, they advance through wage levels, attracting higher salaries commensurate with their increased knowledge, expertise, and professional skills.
The Impact of Prevailing Wage on H-1B Visa Applications
H-1B visa requirements dictate that the nature of the job determines wage levels.
The H-1B prevailing wage is thus one of the greatest reasons for H-1B visa rejection.
As such, nonimmigrant employees earning less than the prevailing wage in their region for a specific job may have significantly lower chances of getting their Labor Condition Application (LCA) approved.
Employers may also use the H-1B visa application to undercut employees. According to recent findings, prevailing wages for the lowest H-1B wage levels are significantly lower than the local median salaries.
Some employers may take advantage of this “loophole” by selecting level 1 and 2 wage levels instead of the higher paying levels to undercut potential employees.
Navigating Prevailing Wage Requirements: Strategies for Employers and Employees
Here are some of the most effective strategies for employers and employees navigating H-1B prevailing wage requirements.
Tips for Employers on Filing Labor Condition Applications (LCA) and Ensuring Compliance
U.S. federal regulations require employers to set up a Public Access File documenting compliance with regulations stipulated in employer Labor Condition Applications (LCAs). The government randomly audits to ensure compliance with these requirements.
Here’s what employers need to know when filing LCAs:
Create Public Access Files
Whenever an employer files an LCA for an H-1B employee, they must create a public access file. While they’re at it, they need to include all requirements to increase the chances of approval and avoid potential penalties.
These requirements include:
- Labor Condition Application – ETA 9035
- Prevailing wage documentation
- Posted notice
- Wage rate memo
- Actual wage memo
- Evidence of sending a certified signed LCA to the H-1B Worker
- A summary of benefits
Watch for Job Position and Corporate Structure Changes
Certain changes to an employee’s position and/or changes in the corporate structure may trigger LCA compliance issues. As such, employers must keep up with these changes, as some may require amending petitions or filing new LCAs.
Ensure Your HR Is Trained on LCA and Public Access Files Compliance
Employers should know how to complete a public access file properly.
If you’re unsure how to do so, seek advice from a qualified business immigration lawyer. Avoid changing the job position or corporate structure before getting the go-ahead from your lawyer or an experienced HR practitioner.
Advice for Potential H-1B Employees on Understanding Their Rights and Ensuring Fair Wages
H-1B workers owe a duty to themselves to fully understand their rights under H-1B prevailing wage regulations, to best ensure fair compensation and prevent exploitation.
In that regard, here are some notable H-1B rights:
Determine the Required Wage for an H-1B Employee
All H-1B employees are entitled to receive the required wage as determined by the prevailing or actual wage, whichever is higher. The prevailing wage is determined based on a review of the area of intended employment, job description, and hiring requirements for the position. Conversely, the actual wage reflects what the employer pays similarly suited employees in a specific location.
Once the Foreign Labor Certification Data Center determines and verifies the actual and prevailing wages, the employer must pay the H-1B employee the higher wage rates.
The Required Wage Must Be Paid Free and Clear
U.S. immigration law requires all wages for H-1B workers to be paid free and clear.
This means that any bonuses not guaranteed to the worker cannot be used to satisfy wage requirements. Similarly, employers cannot factor in the value of benefits offered to the worker to meet wage requirements.
Employees Cannot be “Benched” Without Pay
The employer must continue to pay the employee even if they don’t have any work for the employee for a certain period.
Such payments should continue throughout the validity of the workers’ H-1B visa unless the employee is unavailable for work or there is a valid, bona-fide termination of employment.
Certain Deductions Are Not Permitted
Under U.S. immigration law, only certain deductions are permitted from an H-1B worker’s wage. These include employee contributions to premium health insurance, income tax, retirement benefits, or savings.
In that regard, employers are prohibited from making any other deductions, including anything related to business expenses or fees and costs associated with the H-1B visa application process.
The Big Picture on H-1B Prevailing Wage
By setting specific wage requirements for various positions, H-1B prevailing wages effectively limit employer capabilities and incentives to hire lower-paid foreign workers over qualified U.S. workers. They also ensure employers do not underpay or exploit foreign workers.
But H-1B prevailing wage compliance can be complex. It involves many distinct pay rates, often set at multiple tiers for the same job in the same place, and is governed by a legislative framework designed in stages, over many years, to support both foreign and domestic workers.
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