December 9, 2013
Last week, the Department of Labor’s Board of Alien Labor Certification Appeals (“BALCA”) ruled that DOL’s H-2B prevailing wage regulation does not allow DOL to unilaterally raise prevailing wage rates mid-season. The long-awaited ruling came in Island Holdings, No. 2013-PWD-00002.

An employer that wants to participate in the H-2B Program must agree to pay its H-2B workers at least the “prevailing wage.” DOL determines the prevailing wage using a formula set by regulation. In 2008, DOL adopted a new formula for setting the prevailing wage. Worker advocacy groups challenged this formula and a federal court upheld their challenge. However, the court allowed DOL to continue using the formula until DOL adopted an alternative.

In March 2013, the court ordered DOL to stop using the challenged formula and gave DOL 30 days to come up with an alternative. DOL issued an Interim Final Rule (“IFR”) with a new formula. DOL then applied the new formula retroactively to prevailing wage determinations that it had already issued. For large numbers of H-2B employers, this meant a significant, unplanned for increase in their wage obligations.

Island Holdings And Many Other Employers Appeal
Island Holdings (“Island”) is a family resort in Edgartown, Massachusetts. DOL applied the new wage determination retroactively resulting in a significant increase in the wage that Island Holdings had to pay mid-season to its already certified H-2B servers, housekeepers, and cooks. Working with its agent, Practical Employee Solutions as well as MAS Labor H-2B, LLC and Amigos Labor Solutions, Inc., Island challenged DOL’s claim through an appeal. Other employers appealed. Altogether almost 1,400 other post-certification prevailing wage determinations were appealed. Island Holdings’ case became the lead case. Island’s case was litigated throughout the summer with CJ Lake as counsel. Briefing was completed in late September and BALCA, the Board that hears employers’ appeals, began considering the case.

BALCA Rules In Favor Of Island Holdings
On December 3, 2013, BALCA ruled unanimously in Island Holdings’ favor. BALCA ruled that DOL could not increase H-2B prevailing wage rates mid-season. It therefore ordered DOL to set aside the supplemental prevailing wage determinations that DOL issued to Island and to all employers who had appealed.

What The Island Holdings Decision Means For Employers
Island Holdings is a very significant decision. Although precise estimates are difficult to come by, it is certain that BALCA’s decision saves employers millions of dollars in unforeseeable and unplanned for expenses. Many employers simply could not pay the new rates and would have had to curtail operations or close their doors. That will not happen now.

More important in the long run, Island Holdings prevents DOL from blindsiding employers with large, mid-season prevailing wage rate increases. Under Island Holdings and the current regulation, DOL’s pre-certification prevailing wage determination will be valid for the duration of the proposed employment. For as long as the current regulation remains unchanged, there will be no mid-season prevailing wage increases.

DOL is currently considering how it will implement the Island Holdings decision. But based on the ruling itself, we expect that following will happen for three main groups of employers:

  • Employers who appealed. These employers are likely to receive a notice vacating/cancelling the supplemental prevailing wage determination that they received in spring. They have no obligation to pay the higher wage.
  • Employers who did not appeal, but escrowed funds instead. DOL will contend that these employers are required to pay the higher wage because they did not appeal. Future litigation will determine whether this argument succeeds
  • Employers who did not appeal, but paid the higher wages. Because these employers did not appeal, it will be very difficult to recover the funds.

Island Holdings establishes that DOL may not, under the current H-2B regulation, unilaterally change prevailing wage rates mid-season. Employers may now plan their labor costs without worrying that DOL will change the required wage without warning. The case also shows that a coordinated litigation effort can succeed in challenging DOL’s unlawful actions.