On 1st December 2020, Judge Jeffrey White of the U.S. District Court for the Northern District of California issued an order blocking two Interim Final Rules (IFRs) on H-1B regulations proposed by the Departments of Labor and Homeland Security to restrict the ability of U.S. companies to hire foreign-born employees on H-1B visas. The Department of Homeland Security (DHS) Interim Final Rule was set to go into effect 7th December 2020, but will not as a result of this ruling. The Department of Labor (DOL) Interim Final Rule went into effect 8th October 2020, and is now no longer in effect. This decision effectively enjoins DOL and DHS from further implementing the rules unless an appeals court finds otherwise.

The DOL IFR changed the manner in which the DOL calculates prevailing wage rates and adjusted the prevailing wage percentiles for Levels I and IV upward. The DHS IFR concurrently made a number of changes to the H-1B visa program, including revisions to the regulatory definitions of “specialty occupation” and the employer-employee relationship and reductions to the validity period for H-1B workers employed at third party job sites from three years to one year.

In his ruling, Judge White found that the U.S. Departments of Labor and Homeland Security had violated the Administrative Procedures Act (APA) when issuing two new regulations as IFRs and denying the public the opportunity to provide comment. The Court’s decision hinged on whether the U.S. Government demonstrated that the impact of the COVID-19 pandemic on domestic unemployment justified dispensing with the “due deliberation” that normally accompanies rulemaking to make changes to the H-1B visa program. The Court concluded, however, that the U.S. Government did not show good cause to excuse notice and comment procedures.  Specifically, the Court held that the evidence did not support the U.S. Government’s assertion that the ongoing impact of the pandemic on the domestic labor market made it “impracticable” to allow for notice and comment before it issued the Rules.     

NASSCOM had submitted comments on behalf of thousands of our member companies, objecting to the IFRs on both procedural and substantive grounds. We viewed the rule as unjustified and had sought for rescinding the IFR’s in its entirety, given the significant harm it would do to American businesses, American workers, and to the United States’ economy as a whole.  It clearly was not supported by statute or procedure. By failing to permit public review and comment, DOL did not receive stakeholder input that would have pointed out the flaws in the new calculations for wage rate determinations, and the reliance interests affected by the sudden imposition of this IFR. 

Study after study have demonstrated that the H-1B program plays an essential role in helping U.S. enterprises secure skill sets that they cannot find locally and that these high-skilled employees provide tremendous benefit to their employers and the U.S. as a whole. Even during the height of the unemployment spike this year created by the COVID- 19 pandemic, unemployment in the IT sector remained extremely low going from 3% in January 2020 to 3.5% in September 2020. 

We welcome the court decisions that clearly recognizes the importance of the high skill visa programs to the United States; and that the IFRs issued previously did not hold legal statute. NASSCOM believes this will help U.S. businesses access talent critical to the economic recovery phase in the post-COVID world.