In August, the U.S. District Court for the Eastern District of California ordered the Department of Labor to create a new calculation methodology for the adverse effect wage rate, which is the mandatory minimum baseline wage agricultural employers in the U.S. must pay temporary foreign agricultural guest workers in the H-2A program, as well as domestic workers performing the same roles.
The case, brought forth by United Farm Workers, challenged an interim final rule that reshaped the calculation of the AEWR for H-2A guest workers.
On Oct. 2, the federal court ordered the Department of Labor to issue a new interim final rule for calculating the AEWR by no later than Dec. 30. The court ruled that the current interim final rule will remain in place; it will be officially vacated Dec. 30.
The judge also ordered both parties to file joint status updates every three weeks starting Oct. 22 until the new interim final rule is issued.
This comes as UFW and the Labor Department met Oct. 1 to discuss different timelines, where the court wanted the department to issue a quick interim methodology instead of waiting for a formal rule. The Labor Department argued it needed up to six months — three months to draft and clear the initial rule and an additional three months for review.
Court Sets Tight Dec. 30 Timeline
Shawn Packer, principal member of JPH Law, a Washington, D.C.-based firm focusing on the needs of employers dealing with programs and investigations administered by the federal government, says this order gives the industry a defined timeline, but it doesn’t give much certainty.
“DOL now has less than three months to develop a replacement methodology, complete the required interagency process, and publish a new rule,” Packer says in a LinkedIn post. “And the stakes are significant because the court has already preserved the possibility of retroactive wage adjustments for the period employers are operating under the current rates.”
John Hollay, president and CEO of the National Council of Agricultural Employers, agrees.
“We’re talking about another new wage construct that still remains unknown for producers who are trying to set contracts,” he says. “We have a little more clarity, obviously, from the judge on what the timeline is for him. But we’re still awaiting some further certainty on how exactly the department and the administration are going to comply with the judge’s order.”
Hollay says there is still uncertainty with this ruling.
“A lot of questions remain right now about what the future of the AEWR is going to look like,” he says. “A lot of questions still exist for what producers are going to be responsible for going forward.”
Back-Pay Exposure and Financial Risk
As part of the August ruling, the Department of Labor notified all agricultural employers of a potential back-pay liability if the court deems the wage rate the department creates is unacceptable.
Packer says that back-pay liability would run from Sept. 2, when the Labor Department published the notification, to the release of the new interim final rule.
“The back pay would basically be if the wage is different, under whatever they publish, it’ll be the delta between the wage certified under the contract and whatever the new wage is,” he says.
Packer’s advice to growers is to ensure they have good payroll and hour records in case the Labor Department’s published rule results in a wage differential.
“Don’t assume today’s AEWR is necessarily the final cost of the labor being performed today,” Packer says in a LinkedIn post.
But, good records go beyond just paperwork.
“This is not just for payroll records, but also ways to get in touch with workers who might have already left by the Dec. 30 deadline for DOL to publish,” he says.
Hollay says this back pay adds additional uncertainty on top of uncertainty.
“That’s the question,” he says. “Producers, as they’re going into their banker, they’re going to have to ask for money to potentially cover that exposure,” he says. “The uncertainty hits the farmer who’s asking for resources, because he may have to take out a loan that he doesn’t need.”
Preparing for Year-End Wage Updates
Packer says it’s likely the Department of Labor will use Occupational Employment and Wage Statistics to calculate the wage using the 50th percentile.
While many growers wrap up this season’s harvest and look to H-2A applications for next season, Packer says growers should view this Dec. 30 new wage rate deadline much like in previous H-2A application seasons from 2024 and earlier, where a new wage rate was published at the end of the year. He says growers should plan, prepare and think about the pending update.
“If you’re starting your contract in December or whenever — some in Yuma, some in Southern California, some in Florida are doing that, that’s what’s going to happen,” he says. “It’s kind of back to 2024.”
Hollay further notes that the timing of this new methodology comes just days before the new minimum wage rate for agricultural workers in California goes into effect.
“With the particular wrinkle in California — with their new wage construct — the timing of all of this brings more uncertainty for producers for the holiday season,” he says.
