By: Robert S. Groban, Jr.
U.S. Department of Labor Issues Proposed Rule on H-2B Wage Rates
On October 4, 2010, the Employment and Training Administration, U.S. Department of
Labor (“DOL”), issued a proposed rule that would require employers to pay H-2B and
American workers recruited in connection with an H-2B job application a “wage that meets
or exceeds the highest of: the prevailing wage, the federal minimum wage, the state minimum
wage or the local minimum wage.” The proposed rule was published on October 5, 2010, in
the Federal Register. Interested parties have 30 days to comment.
The H-2B program allows for the admission of 66,000 skilled or unskilled temporary guest
workers annually when qualified American workers are not available and the employment of
foreign workers will not adversely affect the wages and working conditions of similarly
employed Americans. The proposed rule was promulgated in response to the federal district
court decision in Comite de Apoyo a los Trabajadores Agricolas v. Solis, Civil Action No.
09-240 (E.D. Pa. Aug. 31, 2010), which held that the 2008 H-2B wage regulations issued by
the DOL violated the Administrative Procedure Act.
In its preamble to this proposed regulation, the DOL indicated that it has grown increasingly
concerned that the current method for calculating permissible H-2B wages does not
adequately reflect the wages necessary to ensure that American workers are not adversely
affected by the employment of H-2B workers. Under the DOL’s proposed rule, the prevailing
wage for H-2B workers would be based on the highest of three measures:
1) Wages established under a collective bargaining agreement;
2) A wage rate established under the Davis-Bacon Act or the Service Contract
Act for the occupation in the area of intended employment; or
3) The mean wage rate established by the Occupational Employment Statistics
wage survey for that occupation in the area of intended employment.
The DOL added that the inclusion of Davis-Bacon Act or Service Contract Act wages would
protect U.S. worker wages by ensuring the prevailing wage determinations reflect the
“highest wage from the most accurate and diverse pool of government wage data available
with respect to a job classification and the area of intended employment.” Additionally, the
DOL indicated that the proposed rule would eliminate the current four-tier wage structure and
the use of private wage surveys, which the DOL feels often are “not relevant to the unskilled
positions generally involved in the H-2B program.”
Fifth Circuit Rules that Hotel Workers on H-2B Visas Are Not Entitled to
Recoup Visa Expenses Under FLSA
On October 1, 2010, the U.S. Court of Appeals for the Fifth Circuit decided Castellanos-
Contreras v. Decatur Hotels LLC, No. 07-30942 (5th Cir. Oct. 1, 2010)(en banc). In an 8-6
decision, the Fifth Circuit held that foreigners working as temporary guestworkers at New
Orleans hotels under the H-2B program are covered by the Fair Labor Standards Act
(“FLSA”), but that the FLSA does not require these employers to reimburse the workers for
recruitment, visa, and travel expenses in determining whether the employee is receiving the
FLSA-mandated minimum wage.
In reaching this conclusion, the Fifth Circuit declined to enforce retroactively a 2009 DOL
interpretive bulletin that indicated that the FLSA covers visa and travel expenses. The Fifth
Circuit noted that the DOL bulletin was issued in 2009, long after the events in question
occurred in 2005-2006, and found that it had to follow the general rule not to apply changes
in the law retroactively. In the Fifth Circuit’s decision, Judge Catharina Hayes wrote,
“Whatever deference may be due to the [DOL]'s informally promulgated bulletin in the
future, it does not itself in any way purport to apply retroactively. Accordingly, we decline to
apply it to the situation here.”
The Castellanos-Contreras case arose from an FLSA collective action filed by H-2B workers
hired by Decatur Hotels in New Orleans in 2005 after Hurricane Katrina. The H-2B workers'
hourly pay rates exceeded the federal minimum wage. The workers argued, however, that the
money they paid to obtain employment in the United States, including visa, transportation,
and recruitment costs, must be reduced from their pay when calculating whether Decatur was
actually paying them the minimum wage required by the FLSA. If this were not done, the
workers argued, it would have the effect of cutting their wages to less than the FLSAmandated
minimum wage for the relevant pay periods.
The DOL’s proposed rule on calculating wages for the H-2B guest worker program, coupled
with the Fifth Circuit’s decision in Castellanos-Contreras, should serve to remind employers
in industries that use temporary or seasonal H-2B guest workers, such as the recreational,
construction, and hospitality industries, that they must be careful about the wages they pay to
avoid what are clearly renewed efforts by the DOL to regulate wages and working conditions
in this area.