Chamber of Commerce of the United State of America v. United States Department…

Background

The plaintiffs brought claims under the Administrative Procedure Act, a federal law that generally requires agencies to publish proposed rules and allow interested people to submit comments. They asked the court to set aside two interim final rules issued on October 8, 2020:

- The Department of Labor rule changed the wage levels used for certain H-1B and employment-based immigrant visa programs. It raised the wage percentiles from 17%, 34%, 50%, and 67% to 45%, 62%, 78%, and 95% for four wage levels. - The Department of Homeland Security rule changed parts of the H-1B program, including the definitions of “specialty occupation” and the employer-employee relationship, and reduced the validity period for some H-1B workers at third-party job sites from three years to one year.

The plaintiffs’ first two claims alleged that the agencies issued the rules without following legally required procedures. The parties agreed to consolidate the plaintiffs’ request for a preliminary injunction with the merits of those claims. The plaintiffs’ third and fourth claims, which challenged the rules as arbitrary, capricious, or otherwise unsupported by law, were stayed and were not decided in this opinion.

Both agencies invoked the Administrative Procedure Act’s “good cause” exception. That exception can excuse notice and comment when an agency finds that those procedures are impracticable, unnecessary, or contrary to the public interest. The Department of Labor also relied on the exception to make its rule effective immediately and argued that advance notice would encourage employers to file labor condition applications under the existing, lower wage rates.

Legal standard

In an Administrative Procedure Act case based on an administrative record, the court does not resolve ordinary factual disputes as it would in a typical summary-judgment case. Instead, it decides whether the record legally permitted the agency to take the challenged action. The court reviewed the agencies’ good-cause determinations independently, without deference on that legal question.

The court emphasized that the good-cause exception is narrow and is generally reserved for emergencies in which delay would cause real harm. The court also considered the totality of the circumstances, including the agencies’ delay and the evidence supporting their explanations.

Court’s analysis

The court held that the agencies had not shown good cause to bypass notice and comment for either rule.

For the Department of Homeland Security rule, the court found that the agencies had relied on broad unemployment statistics without adequately connecting them to the types of high-skilled positions held by H-1B workers. The record showed that unemployment was concentrated in service occupations, that job vacancies remained in areas affected by the rules, and that the unemployment rate for workers with bachelor’s degrees was 4.8% in September 2020. The agencies also had not acted for more than six months after identifying the relevant unemployment concerns, and the court noted that some of the problems addressed by the rule had been under consideration since 2017.

The court also noted that the rules made significant and apparently lasting changes, rather than temporary measures designed to last only until the emergency eased. The agencies did not dispute that the lack of notice and comment had prejudiced the plaintiffs. The court therefore concluded that the DHS rule was issued without following procedures required by law and had to be set aside.

For the Department of Labor rule, the court rejected the argument that notice and comment would harm the public interest because employers would rush to use existing wage rates. The Department of Labor relied on its prediction about employer behavior, its limited discretion in reviewing labor condition applications, employers’ flexibility in deciding when to file, and unspecified historical filing patterns. The court found that factual support insufficient, particularly because the relevant employer decisions involved planning rather than the rapid market changes present in cases where good cause had been found.

The court also considered the agencies’ earlier public statements that wage rates would be increased. Those statements made it harder to accept the argument that advance notice had to be withheld. Considering the agencies’ delay, the public statements, the scope of the changes, and the evidence concerning unemployment in H-1B-related fields, the court concluded that the Department of Labor had not shown that notice and comment would have caused consequences so severe that the procedures could be skipped.

Disposition

The court granted the plaintiffs’ motion for partial summary judgment and denied the defendants’ cross-motion. It granted the plaintiffs summary judgment on the first claim concerning the DHS rule and granted partial summary judgment on the claims concerning the DOL rule, as stated in the order. The court set aside both rules because they were issued in violation of the Administrative Procedure Act’s notice-and-comment requirement and entered partial judgment on the first two claims under Federal Rule of Civil Procedure 54(b). The plaintiffs’ third and fourth claims remained stayed.