Ustun Law Group, PLLC

An Overview of ITSERVE ALLIANCE, INC. et al v. SCALIA et al, and Why It Matters!

by | Oct 20, 2020 | Blog

 

 

   

 

 

Background

  • H1-B employers are supposed to pay as per the prevailing wage levels for H1B workers similar to US workers in an area
  • The wages paid to H1B workers are  submitted as part of the H1-B Labor Condition Application (LCA)
  • According to the new regulation, the H1B prevailing wage rates went up significantly. If you are not familiar with the H1B and PERM wage level changes, you can see the details of the increase and the implications of the rule here.

This wage level change has a significant impact for many of the H1B employers, it can impact up to 400K H1B employees based on as per FY2019 stats published on H1BGrader

H1BGrader.com collects data about LCA, they have published a report on H1B Prevailing wage Level Distribution from FY 2017 to FY 2020.

The Highlights of that report is as follows for 4 wage levels:

Prevailing Wage Level I

  • Level 1 filings have reduced from 35.8% to 14.1%.
  • This is due to the factor of Computer Programmer Level 1 wage RFEs

Prevailing Wage Level II

  • Level 2 wage filings, have gone up from 28.9% in FY 2017 to 47.4% in FY 2020
  • Apparently, companies are hiring more than entry-level positions in recent years

Prevailing Wage Level III

  • Level 3 wage filings,  were  10% in FY 2017, but they are close to 20% in 2020
  • So, more Wage Level 3 filings are done in recent years
  • It means more senior roles are hired on H1B
  • These positions will remain, even if the rule in the original form gets implemented

Prevailing Wage Level IV

  • For Wage Level 4 as well, we had barely 5.7% in FY 2017, but it is 12.5%, which is also more than double
  • Needless to mention, these positions will also remain if the rule becomes a reality

What Type of Companies Will be Most Affected by this Change?

  • This wage level change has a significant impact on the IT outsourcing companies
  •  ITServe Alliance Inc, that represents the majority of the IT Services, Staffing, and Consulting Companies has filed a lawsuit in New Jersey Court on Oct 16, 2020, challenging the wage level changes
  • Note, ITServe Alliance also won against USCIS on the H1B Employer-Employee Relationship, Itinerary Case, earlier this year
  •  It ended up in settlement with USCIS scraping some of the decade-old policies, which was often used to deny H1B visas

Details About this Case:

  1. Case Name, Title: ITSERVE ALLIANCE, INC. et al v. SCALIA et al” with case number “CASE #: 3:20-cv-14604”.
  2. Case Location: The lawsuit is filed in US District Court in the District of New Jersey.
  3. Law Firm Representing ITServe Alliance: The case is represented by Wasden Banias Law firm
  4. Plaintiff- The lawsuit is filed by ITServe Alliance and all the companies given below
  • Precision Technologies Corp
  • Iflowsoft Solutions Inc.
  • Smart Works LLC
  • Dots Technologies
  • Zenith Services
  • Kolla Soft Inc.
  • NAM info

More Details About the Parties who have Filed the Lawsuit:

  • ITServe Alliance:
    • Plaintiff ITServe Alliance, Inc. (“ITServe”) is a nonprofit corporation under Texas law with its principal place of business in Dallas, Texas
    • Its members Case 3:20-cv-14604 Document 1 Filed 10/16/20 Page 3 of 36 Page ID: 3 4 comprise more than 1,250 information technology companies throughout the United States, including member companies located in New Jersey
    • The named Plaintiffs below are members of ITServe that are organized under the laws of New Jersey or have places of business in New Jersey
  2. Plaintiff Dots Technologies, Inc. (“Dots”) is a corporation organized under the laws of New Jersey with its principal place of business in Piscataway, New Jersey
  3. Plaintiff Iflowsoft Solutions Inc. (“Iflow”) is a corporation organized under the laws of New Jersey with its principal place of business in Iselin, New Jersey
  4. Plaintiff Kolla Soft Inc. (“Kolla Soft”) is a corporation organized under the laws of Arizona with an office located in Middlesex, New Jersey
  5. Plaintiff NAM Info, Inc. (“NAM”) is a corporation organized under the laws of New Jersey with its principal place of business in Cranbury, New Jersey
  6. Plaintiff Precision Technologies Corporation (“Precision”) is a corporation organized under the laws of New Jersey with its principal place of business in Monmouth Junction, New Jersey
  7. Plaintiff Smart Works, LLC (“Smart Works”) is a limited liability company organized under the laws of New Jersey with its principal place of business in Edison, New Jersey
  8. Plaintiff Zenith Services, Inc. (“Zenith”) is a corporation organized under the laws of New Jersey with its principal place of business in Princeton, New Jersey
  9. Defendant Eugene Scalia is the Secretary of Labor for the United States Department of Labor, and he is  is sued in his official capacity
  10. Defendant John Pallasch is the Assistant Secretary of Labor for the Employment and Training Administration, he is also sued in his  official capacity

Summary of Key Argument Points  Raised in the Lawsuit:

Count I: Violation of Notice and Comment Process for Rulemaking

  • DOL published the Interim Final Rule (IFR) without prior notice and opportunity for public comment as required under 5 U.S.C. § 553(b)
  • DOL’s IFR is adversely affecting ITServe’s members and the named Plaintiffs because they were deprived of an opportunity to provide comments, data, or information to DOL before the agency published the IFR
  • DOL’s IFR is adversely affecting ITServe’s members and the named Plaintiffs because the IFR dramatically increases their costs and expenses in terms of increased wage obligations owed to H-1B workers under LCAs filed on or after October 8, 2020
  • DOL lacks the necessary factual and legal justification to invoke the good cause exception for avoiding the required notice and comment procedures because:
    1. The agency’s contention that H-1B workers are paid less than United States workers is not supported by the available economic data and empirical studies and is based on flawed reasoning;
    2. The agency relied on outdated data to support its allegation of an emergency
    3. The agency failed to consider directly relevant data regarding the current and historically low unemployment rates for persons with bachelor’s degrees
    4. The agency failed to consider directly relevant data regarding the current and historically low unemployment rates in computer-related occupations
    5. The agency’s strategy of preventing wage scarring of unemployed workers conflicts with basic economic theory
    6. The agency’s strategy of increasing wage rates in the H-1B program will hinder the return of unemployed workers back to full employment
  • Because DOL lacks the necessary factual support to establish good cause for avoiding the required notice and comment procedures
  • The Court is authorized to set aside the agency’s IFR as contrary to law or as issued without observance of procedures required by law. See 5 U.S.C. § 706(2)(A), (D)

Count II: DOL Action Against H1B Statute of Degree Requirement

  • Congress established the minimum qualification for entry into the H-1B program as the attainment of a bachelor’s degree in a specific specialty. See 8 U.S.C. §1184(i).
  • DOL based the new level 1 prevailing wage rate upward adjustment on the assumption that the wages paid to individuals with a master’s degree represent the entry-level wages for H-1B workers. 85 Fed. Reg. at 63889.
  • DOL improperly set the level 1 prevailing wage rates at the fifth decile or the 45th percentile of the OES wage distribution for each occupation based on criteria inconsistent with the statute. DOL’s improper setting of the level 1 prevailing wage rate renders its related adjustments to the other three prevailing wage levels defective
  • Because DOL used a standard contrary to the statutory criteria for determining the minimum requirements for entry into the H-1B program, the Court is authorized to set aside the agency’s defective decision as contrary to law

Count III – DOL Action is Random and Not Based on Logic

  • DOL’s decision to revise the prevailing wage methodology for the H-1B program based on the proposition that the wages paid to H-1B workers generally below the wages paid to similarly situated United States workers is not supported by the facts or relevant empirical studies
  • DOL failed to consider empirical studies showing that the employment of H-1B workers does not adversely affect the wages or working conditions of United States workers.
  • DOL failed to consider empirical studies showing that the employment of H-1B workers generally helps with job creation, wage growth, and the investment in research and development
  • DOL failed to consider empirical studies showing that the lack of availability of H-1B workers has a deleterious effect on the economy in terms of job loss, off-shoring of jobs, or a decline in investments in the United States
  • DOL’s decision to change the prevailing wage methodology under the IFR conflicts with basic economic theory
  • DOL’s failure to consider directly relevant evidence regarding the employment of H-1B workers or the agency’s failure to respond to directly relevant evidence renders the agency’s decision to change the prevailing wage methodology under the IFR arbitrary and capricious

ITServe is asking the court for giving a preliminary injunction and also permanently stop DOL from implementing the New-Wage Levels Rule.

Prayer For Relief

Plaintiffs, therefore, pray that this Court enters an order:

  1. Taking jurisdiction over the subject matter of this civil action and Plaintiffs’ causes of action
  2. Holding unlawful and set aside as arbitrary and capricious, contrary to law, and contrary to procedures required by law, DOL’s issuance of the IFR for failing to follow the required notice and comment procedures
  3. Holding unlawful and setting aside as not in accordance with the Immigration and Nationality Act, as amended, DOL’s setting the level 1 prevailing wage rates under the IFR at the fifth decile of the OES distribution
  4. Holding unlawful and set aside as not in accordance with the Immigration and Nationality Act, as amended, the level 2, level 3, and level 4 prevailing wage rates under the IFR
  5. Preliminarily and permanently enjoining DOL from implementing, applying, or enforcing the IFR or any of the prevailing wage methodologies or prevailing wage rates under the IFR as against Plaintiffs and any member of ITServe Alliance, Inc.
  6. Awarding Plaintiffs attorney’s fees and costs under the Equal Access to Justice Act
  7. Granting all other relief that is necessary, just, or equitable

If you have questions about this new proposed rule, the lawsuit, or have questions about the Green Card procedure in general, you can schedule a consultation with us:

Schedule a call at 469-994-9407  or contact us using the form.

New Jersey Courthouse Picture: By Hudconja – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=22053546