On Monday, August 20, a federal judge in Philadelphia upheld the Department of Labor ("DOL") rule setting minimum wage requirements for foreign workers holding H-2B visas. The proposed rule has drawn much attention, and criticism, because it potentially will cost $874,000,000 or more per year in increased labor costs for employers with H-2B visa holders.

For over fifty years, employers have relied on non-immigrant workers with H-2B visas to fill temporary positions in non-agricultural industries that qualified U.S. workers declined to accept. Although the Department of Homeland Security ("DHS") has final authority to determine whether to issue a H-2B visa, it defers to the DOL for advice on the validity of the employer’s need to hire such non-immigrant workers. Critics argue that availability of H-2B visas is a millstone on U.S. workers because it permits employers to hire non-immigrant workers at depressed rates.

In January 2011, the DOL issued proposed rules that, among other things, would require H-2B visa holders to be paid wages equal to or exceeding the highest of the prevailing wage among the applicable federal, state and local minimum wages. The DOL estimated its new rule would increase hourly wages for such positions by $4.83 per hour. Not surprisingly, the DOL received over 300 comments to its proposed rule. After a series of DOL postponements, the rule is now to go into effect on October 1, 2012.

The proposed rule also sparked lawsuits by industry groups that argued that the DOL lacks congressional authority to promulgate rules on the H-2B program because (i) final decision making authority lies with the DHS, and (ii) the DHS’ rulemaking authority is non-delegable and/or DHS never delegated it to the DOL. In response to these legal challenges, the DOL postponed implementation of the proposed rule three times. Monday’s decision in The Louisiana Forestry Assn v. Solis may be a significant first-step towards final adoption of the proposed rule. Rejecting the procedural challenges described above, the court found that the DOL had followed proper guidelines and procedural requirements in formulating and announcing the proposed rule. More importantly, the court also determined that the DOL had acted properly when promulgating guidelines for a program technically administered by another agency. According to the court, while the DHS has the ultimate power to grant H-2B visas, it may rely upon recommendations from the DOL in determining whether to grant a particular H-2B visa application. Accordingly, to the extent the DHS has sought the DOL’s advice, the agency has the authority to establish its own set of requirements or guidelines that employers seeking its blessing must satisfy.

Interestingly, before the court entered Monday’s ruling, other industry groups filed a lawsuit in the United States District Court for the Northern District of Florida that raised the same procedural challenges. In that case, Bayou Lawn & Landscaping Service v. Solis, the court entered a temporary injunction barring the DOL, on a nationwide basis, from implementing its proposed rule. Appealing to the United States Court of Appeals for the Eleventh Circuit, the DOL, among other arguments, asserts that the lower court abused its discretion in entering a nationwide injunction. Undoubtedly, the DOL will raise The Louisiana Forestry Association, Inc. to support the legality of its rulemaking authority and as evidence of a "split" among the federal courts over this issue that requires review by the United States Supreme Court.

These conflicting decisions muddy whether the DOL’s proposed rule will actually be implemented on October 12. The DOL also recognizes the immediate limbo and, in its appellate submission, suggests a interim hiatus of the H-2B visa program. That "solution", however, is likely as unpalatable for most affected employers because of the "Can we or can’t we?" increased costs they face if the proposed rule is ultimately adopted. Reed Smith will continue to monitor and provide guidance regarding the status of DOL’s proposed rule and its impact for employers.