Yesterday the U.S. District Court in the Eastern District of California ruled against the Department of Labor in a case brought by United Farm Workers that challenged an interim final rule that reshaped the calculation of the adverse effect wage rate for H-2A guest workers.
In this ruling, the court ordered the Labor Department to create a new wage calculation methodology. The decision comes on the heels of newly released AEWR rates.
The court found the interim final rule to be unlawful but did not vacate it.
“The current rule is in effect,” says John Hollay, president and CEO of the National Council of Agricultural Employers. “The judge has left the rule in effect but has ordered the Department of Labor to do, really, two critical things. One is to go back and rewrite the rule and address specifically the issues that the judge raised in the order.”
Potential Back Pay Creates Unprecedented Liability for Employers
Hollay says the second part of the order is likely to cause severe concern among agricultural employers: If the judge deems the Labor Department’s revised wage rate unacceptable, the court could order back pay at the conclusion of the proceedings. Furthermore, the department must notify all H-2A employers of this potential back-pay liability within seven days.
“The back pay — again, if it were to be required — would be calculated from the day that the department sent out that notice to the day that the court ultimately concludes its proceedings and the new wage is established,” Hollay explains. “It could be weeks, it could be months, it could be longer than that, and to have that kind of liability on your balance sheet as an employer, particularly a farmer, is really impossible to do and to plan for the future.”
Legal Experts Advise Meticulous Recordkeeping Amid Wage Uncertainty
Chris Schulte, partner at Fisher Phillips, a national law firm that focuses on labor and employment law for employers, says while the court signaled the current AEWR wage rates are not correct, there is uncertainty over what correct wages will be, adding that there’s no real process for growers to set money aside to potentially cover that difference in payment. He says, generally, the Administrative Procedure Act authorizes judges to keep or invalidate regulations, not to award monetary damages.
It’s a good practice, though, for H-2A employers to track workers’ hours and the work performed as accurately as possible, Schulte says.
“One part of the AEWR rule that the judge found ‘unlawful’ was the ‘primary duties’ test — suggesting that employers may end up paying different hourly rates to workers depending on the specific job duty that they are performing,” he says. “The H-2A rules already require employers to keep ‘records showing the nature and amount of the work performed’ by each worker, and this may become important if the court decides to order some kind of back pay under the next version of the wage rule.”
Schulte and his colleagues at Fisher Phillips have published an informational guide detailing what agricultural employers need to know about the ruling.
Hollay calls the ruling a devastating setback. The interim final rule was originally projected to save growers approximately $17.3 billion in wage overpayments during a 10-year period, including $2.4 billion in its first year alone. He warns that any eventual back-pay requirement will essentially undo those savings.
“That’s the crisis that we really felt that the department and the Trump administration helped agriculture avoid by putting the interim final rule in place when the Farm Labor Survey went away and they had no way to calculate the AEWR wages; the department stepped up,” Hollay says. “But this judge out in California has really undone that solution and created a crisis single-handedly by himself.”
Industry Leaders Urge Congress to Pass Permanent Ag Labor Reforms
Hollay emphasizes that the ruling underscores the urgent need for a permanent legislative solution from Congress, specifically pointing to the Securing Agriculture’s Workforce Act, or SAWA, proposed by Rep. Glenn “GT” Thompson, chair of the House Committee on Agriculture.
“This is a clear opportunity for them to make sure that the producer community is protected from being on the hook from, again, another price gouging,” he says.
While Congress is in recess, Hollay sees the ruling as a critical window for fresh produce growers to urge lawmakers to support SAWA.
“It’s one thing to be loud, but it’s one thing to be loud and specific,” he says. “It’s important for policymakers, both in Congress and the administration, to understand the financial impact of decisions like this. First: the savings that were made off of the IFR, what farmers were able to do with that savings. It may be hire more people. It may be change their wage structure. It may be other things. And what they’re not going to be able to do as a result of this.”
Between newly announced AEWR rates, which surged by more than 20% in key produce states, and this latest court decision, Hollay emphasizes that industry action is urgent.
“There’s nearly no more excuses,” Hollay says of inaction in Congress. “You can’t just turn and say, ‘Oh, well. The administration has done all that’s needed in this space for now, and Congress can just sit back.’ That option is no longer there.”
Hollay points to a section of the decision where the judge sided with UFW, citing 2025 as a record-profit year for agriculture, an assertion that many in the specialty crop and fresh produce sectors strongly dispute.
“If we don’t speak up, other folks are going to speak for us, and they’re going to speak about our issues and not know what they’re talking about, and this is a federal judge that just cut off a lifeline for producers who’s clearly misinformed about the economic well-being of farmers and whether or not they can pay wages that were leading them to bankruptcy,” he says. “And to have the court kneecap them like this is really unfortunate.”
