DOL’s proposed rule to significantly hike H-1B wages is likely illegal

The US Department of Labor’s (DOL’s) proposed rule to sharply raise prevailing wage requirements for H-1B visa holders and employment-based immigrants could violate US immigration law and significantly increase hiring costs for employers, according to a new analysis by the National Foundation for American Policy (NFAP). Immigration attorneys TOI spoke to said that legal challenges are not ruled out.The proposed rule, published by the Department of Labor in March 2026, would raise required prevailing wages by an average 33% for Level I positions, 24% for Level II, 21% for Level III and 22% for Level IV, according to DOL’s own estimates. Comments on the proposal were due by May 26, and a final version of the rule could take effect before the next H-1B electronic registration cycle in March 2027. NFAP argued that the rule effectively seeks to “price high-skilled foreign nationals out of the US labour market.” The public policy research organisation also compared the proposal to the Trump administration’s recently introduced $100,000 fee on the entry of new H-1B visa holders, saying both measures appear aimed at restricting high-skilled immigration. Under US immigration law, employers hiring H-1B workers are required to pay either the prevailing wage or the actual wage paid to similarly qualified US workers, whichever is higher. NFAP argued that Congress never intended employers to pay a wage premium for foreign nationals beyond market salaries. The report said the proposed rule changes the methodology used to determine prevailing wages by sharply increasing the percentile benchmarks across all four wage levels. Under the current system, Level I wages are pegged at the 17th percentile, but the proposed rule would raise them to the 34th percentile. Level II would rise from the 34th to the 52nd percentile, Level III from the 50th to the 70th percentile, and Level IV from the 67th to the 88th percentile. According to NFAP, these changes would dramatically increase hiring costs for employers across major technology and engineering hubs in the United States.For instance, a San Francisco employer hiring a Level I software developer would see the required prevailing wage rise from $135,699 to $181,009, an increase of more than $45,000. For a Level IV software developer, the required wage would jump from $213,512 to $259,801. Similarly, an employer in Boston would pay nearly $36,000 more for a Level I software developer and over $38,000 more for a Level IV developer under the proposed system.NFAP said the proposed rule mirrors a similar Trump administration rule issued in January 2021 that never ultimately took effect. The policy brief strongly criticised the methodology used by the Department of Labor to justify the higher wage levels. According to the report, DOL officials “invented or contrived a ‘gap’ between the wages of H-1B visa holders and average U.S. workers in the same areas and occupations and chose numbers or percentiles to eliminate the gap.” The analysis said the department compared mostly early-career H-1B professionals with all workers in the same occupations, including employees with significantly greater experience, longer job tenure, bonuses and second-job income. According to Mark Regets, labour economist and senior fellow at NFAP, the comparison itself is fundamentally flawed. “The wage measures are not comparable, and the workers are not comparable,” Regets said. “DOL has invented a gap and then selected percentiles to eliminate the average gap,” he added. “That’s bad because it is not a real gap and it produces a required wage requirement well above DOL’s definition of a prevailing wage.” The report also cited multiple studies suggesting H-1B workers are already paid at least on par with comparable US professionals.A study by George Mason University economist Michael Clemens found H-1B visa holders earned salaries up to 6% higher than comparable US workers, while an analysis by Glassdoor found H-1B salaries were around 2.8% higher across 10 cities and roughly 100 occupations studied. The Government Accountability Office also found that electrical and electronics engineers in H-1B status earned median salaries roughly $5,000 higher than comparable US engineers in the 20-39 age group. “Legitimate research shows that, on average, H-1B visa holders are paid more than comparable U.S. workers with the same levels of experience and qualifications,” the NFAP release said. The report further argued that private wage surveys — widely used by employers for compensation decisions and immigration compliance — show the current prevailing wage framework already aligns closely with market salaries.NFAP said it found only a 1% average difference between existing DOL prevailing wage levels and Willis Towers Watson private wage survey data across major H-1B occupations in large metropolitan areas. The public policy research organisation compared wage data across 55 city-occupation combinations in major metropolitan areas including New York, Chicago and Los Angeles, focusing on occupations such as software developers and computer systems analysts. The report added that the proposed rule could face legal scrutiny following the US Supreme Court’s June 2024 ruling in Loper Bright Enterprises et al. v. Raimondo. According to this verdict, courts “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” NFAP concluded that the existing prevailing wage framework already reflects market realities and that the Department of Labor is “not solving a problem” but instead attempting to make it significantly more expensive for employers to hire highly skilled foreign professionals.