DOL's Use of Private Wage Surveys In H-2B Program Struck Down by 3rd Cir.

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By Laura D. Francis

Dec. 5 — The Labor Department's use of 2009 guidance allowing private employer surveys to determine prevailing wages under the H-2B program is arbitrary and capricious and must be vacated, the U.S. Court of Appeals for the Third Circuit ruled Dec. 5.

Overturning a Pennsylvania district court's determination that the case wasn't ripe for review, the appeals court said just because the DOL is planning to engage in further rulemaking on the issue doesn't mean that it hasn't finalized its 2009 guidance. The DOL has been relying on that guidance when issuing labor certifications under the H-2B low-skilled, nonagricultural guestworker program, the court said.

Furthermore, the court said the DOL's use of private employer wage surveys has had the effect of depressing wages, harming both H-2B workers and U.S. workers. It also is harming employers that can't afford to commission a survey and instead have to rely on the Occupational Employment Statistics survey from the DOL's Bureau of Labor Statistics.

Reaching the merits of the case, the Third Circuit held that the DOL's use of the private surveys was arbitrary and capricious in violation of the Administrative Procedure Act. The agency offered no explanation for allowing the surveys in 2005 and again in 2008—even in the face of public comments objecting to them when government wage surveys were available, the court said.

“After years of litigation, DOL cannot offer any rational justification for this policy as it leads to similarly situated workers in the same market in the same season bringing home widely disparate paychecks,” Judge Morton I. Greenberg wrote for the Third Circuit.

And use of the surveys now is especially “unjustifiable” considering DOL statements, in promulgating the 2011 H-2B wage rule, that the OES and surveys under the Davis-Bacon Act and Service Contract Act are far more reliable, the court added.

“Given DOL’s endorsement of the OES wages as ‘among the largest, most comprehensive, and continuous statistical survey programs of the Federal Government,' … and its finding that the OES survey ‘is the most consistent, efficient, and accurate means of determining the prevailing wage rate for the H-2B program,' … we are satisfied that DOL acted arbitrarily and capriciously when it permitted—and by its policies, structurally encouraged—employers to rely on details of a private survey when there was a valid OES wage survey available for use in determining the prevailing wage for the implicated employment,” Judge Morton I. Greenberg wrote for the court.

History of H-2B Wage Rule

The decision is the latest development in a history of regulations, legislation and litigation over the H-2B wage rule, which the DOL uses to calculate prevailing wages employers must offer under the H-2B program.

The DOL's 2008 rule, which based the prevailing wage on the four-tier methodology used in the H-1B highly skilled guestworker program, was struck down by the U.S. District Court for the Eastern District of Pennsylvania in March 2013 (Comité de Apoyo a Los Trabajadores Agricolas v. Solis, 933 F. Supp. 2d 700, 2013 BL 74772 (E.D. Pa. 2013).

The 2011 H-2B wage rule was intended to replace the 2008 rule, but its funding was repeatedly barred by Congress, ultimately causing the DOL in August 2013 to indefinitely delay its effective date. Instead, the DOL reverted back to using the 2008 wage rule up until the CATA decision.

Without a way to determine the prevailing wage following CATA, the DOL and the Department of Homeland Security in April 2013 promulgated an interim final rule that eliminated the four-tier methodology under the OES but said nothing about private surveys.

Congress ultimately lifted the funding ban on the 2011 H-2B wage rule in January 2014, and in February, the Third Circuit upheld the 2011 rule's validity in Louisiana Forestry Association, Inc. v. Secretary of Labor, 745 F.3d 653, 2014 BL 31651 (3d Cir. 2014).

These two developments prompted the DOL to announce that it will be issuing a new notice of proposed rulemaking on H-2B prevailing wages, slated for release this month.

District Court Found Case Unripe

The announcement about the impending rulemaking caused the U.S. District Court for the Eastern District of Pennsylvania in July to determine that a challenge to the use of private wage surveys under the H-2B program brought by a group of H-2B guestworkers and organizations representing them wasn't ripe for review (Comité de Apoyo a los Trabajadores Agricolas v. Perez, 2014 BL 203457 (E.D. Pa. 2014)).

On appeal, the Third Circuit disagreed.

“DOL’s use of the challenged rules distinguishes this proceeding from cases the District Court cited in its opinion as in those cases the agencies involved had not implemented the challenged rule,” Greenberg said, pointing out that the DOL has been using private wage surveys in making final agency actions. “This finality is not undermined even though the present rules may not remain DOL’s last position with regard to H-2B program rules,” he said.

Not only that, but the court found that the DOL's use of private surveys to make prevailing wage determinations is having the effect of depressing wages for both H-2B and U.S. workers—the opposite of what the agency's role in the guestworker program is supposed to accomplish.

In the 12 months leading up to the March 2013 CATA decision striking down the 2008 H-2B wage rule, employers seeking labor certification for H-2B visas submitted a total of 49 applications using private surveys to determine the prevailing wage, the court said. By contrast, employers submitted 1,559 applications using private surveys in the nine months between July 1, 2013, and March 31, 2014—a 3,182 percent increase.

According to the court, 21.1 percent of those prevailing wage determinations certified wages less than the average wage for the lowest skill level on the OES survey, and 94.4 percent of the determinations included wages lower than the OES's Level II.

“We are convinced that we should not permit DOL to continue to discharge its investigatory and rule-making functions as it is doing now because its continued approval of skill-level wages submitted based on employer wage surveys is not only adversely affecting the wages of similarly employed United States workers, but the H-2B program as now administered is leading to unjustified disparities between employers who submit private wage surveys and otherwise similarly situated employers who do not submit surveys and who therefore must pay the OES prevailing wage,” Greenberg added.

Arbitrary and Capricious

On the merits, the court found that the DOL's lack of explanation as to why it allowed the private wage surveys when the OES was otherwise available made the agency's action arbitrary and capricious.

The DOL didn't permit private wage surveys in that context before 2005 and didn't explain why it took a different course that year, the court said. The agency similarly failed to justify the codification of that guidance in the 2008 H-2B wage rule, it said.

In its 2011 H-2B wage rule, the DOL reversed course and refused to permit private wage surveys when a government survey was available, in that instance providing an explanation for its decision, the court noted. But the agency then reverted to its previous practice, without explanation, when Congress began enacting funding bans on the 2011 rule.

“Though we are aware that DOL faced considerable difficulty implementing the 2011 rule because of congressional appropriations riders precluding the spending of funds for that purpose, we nevertheless find DOL’s scant explanations insufficient to comply with APA requirements,” Greenberg wrote.

In addition to being procedurally faulty, the court also said the use of private wage surveys is substantively arbitrary.

The DOL's adherence to the 2009 guidance “creates a system that permits employers who can afford private surveys to bring H-2B workers into the country for employment at lower wages than employers who cannot afford such surveys and who therefore must offer the higher OES prevailing wage,” Greenberg said.

‘Completely Unjustified.'

“This kind of disparity that harms workers whether foreign or domestic, is readily avoidable, and completely unjustified,” he added. “After years of litigation, DOL cannot offer any rational justification for this policy as it leads to similarly situated workers in the same market in the same season bringing home widely disparate paychecks.”

The practice also is contrary to both the 2013 interim final rule—which eliminated the use of skill-level tiers for the OES—and the Immigration and Nationality Act's directive that the DOL prevent the wages and working conditions of U.S. workers from being adversely affected by the employment of H-2B workers, the court determined.

The court found vacatur to be the appropriate remedy. “We direct that private surveys no longer be used in determining the mean rate of wage for occupations except where an otherwise applicable OES survey does not provide any data for an occupation in a specific geographical location, or where the OES survey does not accurately represent the relevant job classification,” it held.

The court suggested that the DOL instead use the private wage survey portion of the 2011 H-2B wage rule, which “offers rational, lawful limits on the use of employer surveys, already has gone through notice and comment, has been funded by Congress in its 2014 authorization, and has been upheld by this Court in Louisiana Forestry.”

Judges Julio M. Fuentes and Robert E. Cowen joined the opinion.

Sarah M. Clausen of Centro de los Derechos del Migrante Inc. in Baltimore; Vanessa A. Coe and Gregory S. Schell of Florida Legal Services Inc. in Lake Worth, Fla.; D. Michael Dale of the Northwest Workers' Justice Project in Portland, Ore.; Arthur N. Read of Friends of Farmworkers Inc. in Philadelphia; Meredith B. Stewart of the Southern Poverty Law Center in New Orleans; and Edward J. Tuddenham in New York represented CATA. Stuart F. Delery, Glenn M. Girdharry and Geoffrey Forney of the Justice Department in Washington represented the DOL.

To contact the reporter on this story: Laura D. Francis in Washington at lfrancis@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the opinion is available at http://www.bloomberglaw.com/public/document/Comite_de_Apoyo_a_los_Trabajad_et_al_v_Thomas_E_Perez_et_al_Docke.