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Carnival Nightmare: Will New H-2B Ruling Rule Out Foreign Workers?

5/20/2015

By Timothy Herrick

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On April 29th, the Department of Labor (DOL) and the Department of Homeland Security (DHS) issued an Interim Final Rule (IFR) that enabled the H-2B program - the worker program that allows foreign workers to temporarily work in the United States - to resume processing Visa applications. This IFR however, not only reinstates previous restrictions on employers, but many in the fair industry see the new regulation as being more severe than previous rulings. They fear it will result in such a drastic increase in labor costs that companies not driven out of business will have to drastically curtail operations.

This recent chapter in what has become an ongoing saga began in December when a federal judge, M. Casey Rodgers, ruled in the case of Perez vs. Perez, that Congress had given the authority over the H-2B program to DHS, not DOL. The DOL appealed that ruling, but in March, Judge Rodgers blocked Labor from imposing new rules for H-2B visas, which suspended the program, putting employers and visa applications in a state of limbo, although reportedly most carnival companies and concessionaires had already secured sufficient foreign workers for the 2015 fair season. The judge soon granted a stay on her decision, allowing the H-2B program to continue processing visa applications, which was due to expire by May 15. 


New Rules

According to a DOL spokesperson - who responded to Carnival Warehouse queries via email, "After the Florida court's decision, the DOL was required to stop processing applications for temporary labor certifications, and was only able to resume the processing of such employer applications after receiving a temporary stay from the court, which is set to expire on May 15.  Since the March 4 decision, the Departments [DHS & DOL] have been working expeditiously to issue a rule. The 2015 IFR jointly issued by both Departments brings certainty, stability, and continuity to the program."

For the Mobile Amusement Industry, DOL's IFR cure is far worse than the disease. The H-2B program allows for 66,000 workers to temporarily work in the United States - approximately 4,000-5,000 H-2B workers are in the Fair industry, mainly employed by carnival companies and concessionaires. The IFR imposes wage requirements and other regulations that threaten the ability of the core segments of the fair industry to function. 

Through lobbying efforts and in the courtroom, the Mobile Amusement Industry has been mostly successful in fighting the most arduous H-2B measures, but the new IFR shows how fragile those gains are. The industry is still trying to understand both the complexities of the new rules and the extent of their impact while simultaneously devising a strategy of where to take the fight next. 
"We had several conference calls this week with industry attorneys and experts in the H-2B program," said Robert Johnson, President, Outdoor Amusement Business Association. "There is no question, from the OABA board and other stakeholders, that this new IFR program and wage rules, as it is currently drafted, is going to kill the H-2B program and how it relates to the Mobile Amusement Industry ."
 
Protection or Threat

The DOL insists the new rules are in the interest of U.S. workers. "The 2015 IFR strengthens U.S. worker protections, ensuring that workers have a fair shot at finding and applying for jobs for which employers are seeking H-2B workers, and that U.S. workers who are doing essentially the same jobs as H-2B workers have substantially the same rights and benefits as those workers," a DOL spokesperson told Carnival Warehouse (via email). "The new regulations also strengthen worker protections with respect to wages, working conditions, and benefits that must be offered to H-2B and U.S. workers alike."

But the mobile amusement industry argues the IFR will have the opposite effect by destroying the job security of both domestic and foreign workers. "The real problem is that in the program, there are so many things layered in, it is death by a thousand cuts," said Wayne Pierce, attorney for the OABA.

"We have found that carnival and concessions have learned to operate effectively with the guest worker program," said Gregg Hartley of Cloakroom Advisors, the lobbyist for the OABA. "They can get good, consistent workers through the guest-worker visa program, and good domestic workers. It allows for the kind of workforce that the H-2B program was designed for. This new rule will hurt that work force, especially the smaller companies and ride providers." 

"The DOL is creating a crisis," said Johnson. "What they don't understand is that we can't hire Americans to do all of these jobs, because we can't get enough Americans to support the large midway operations. It is insurmountable task to find enough Americans who are willing to take these jobs, who can work eight to 10 months year." 

James K. Judkins, President of the JKJ Workforce Agency, who recruits and aids in the processing of more than 3,000 guest workers annually, mainly for carnival companies, concessionaires and circuses, calls the new rules set forth in the IFR, "unworkable, too expensive and burdensome for the mobile entertainment industry." 

Judkins points out that the IFR, "adversely affects U.S. workers," because if all the slots of a carnival or concessionaire workforce aren't filled, the company cannot operate. You need the foreign guest workers because there is no way to sustain a workforce without them, and U.S. workers who are part of the workforce will lose their jobs." 

The new ruling is "forcing the government to shape their program around the seasonal amusement industry, and it is impossible. What the government doesn't understand is that they want round holes, and we're a square peg," he said.


Bunkhouse Credit
 
The most noticeable and immediate impact of the IFR will be a dramatic increase in the cost of labor for the fair industry. One particular cost factor it increases - and one that exemplifies issues specific to the fair industry that IFR opponents claim the regulations now ignore - is the elimination of what is commonly referred to as the bunkhouse credit. Unlike some of the other industries participating in the H-2B visa program, the Mobile Amusement Industry provides housing and transportation to its employees, the cost of which was taken into account when determining wages under the old regulations. The IFR eliminates the consideration, and employers are not liable for all costs. 

"Wages are no longer a function of the total cost of labor with the new rule," said Pierce. "In what other industry, are employers not allowed to claim housing or food as a credit?"

"DOL's longstanding position is that deductions or costs incurred for facilities that are primarily for the benefit or convenience of the employer will not be recognized as reasonable and therefore may not be charged to the worker," said the DOL spokesperson. "Thus, housing that is provided by employers with a need for a mobile workforce, such as those in the carnival or forestry industries where workers are in an area for a short period of time, need to be available for work immediately, and may not be able to procure temporary housing easily, is primarily for the employer's benefit and convenience and cannot be charged to the workers."

This new rule disrupts existing salary patterns, and the Mobile Amusement Industry feels that all workers - regardless of industry - require housing and usually pay out of pocket for their accommodations; they argue that the cost of providing housing should be taken into account when determining wages for Mobile Amusement Industry employees. "Why should your salary be the same as someone who has to pay for their own housing if the employer provides with you housing and transportation," said Judkins. "The new rule says we must provide workers the same wage as somebody who doesn't provide housing. They are adding additional burdens to our industry." 

A May 1st statement by the H-2B Workforce Coalition - an advocacy group for all industries affected by the IFR - stated: "According to DOL and DHS estimates, the new rules will cost about $2.5 billion over 10 years or $250 million per year. If you divide this cost among the program's approximately 4,600 certified program users, the average annual cost per employer is about $54,000 per year. Many small businesses cannot simply absorb these costs and cannot often pass them along to their customers without losing significant business."

Artificial Raises

Peirce considers that figure low for the fair industry, estimating that ultimately the cost could grow to more than $100,000 per worker. "The impact on the fair industry will be in the millions of dollars, artificially raising the wages of individual worker until companies are driven out of business," said Pierce.

The increase in labor costs will also be due to determining wages - for example, companies that travel through several states, there's a question as to which state's minimum wage will be used as the starting wage. In addition, the IFR wage methodology revision also eliminates paying workers based on their skill level - which was called a four-tiered wage system, instead establishing - by the use of wage surveys and other measures - the Occupational Employment Statistics (OES) mean wage, in effect giving all workers a raise, whether merited or not. " We are still reviewing the financial impact of the IFR on the Mobile Amusement Industry 's H-2B visa program," said Johnson. "We don't believe the government's OES wage determinations are correct."

In addition to the IFR's raising labor costs, other regulations affect recruitment procedures - employers must demonstrate they adequately attempted to recruit domestic workers before seeking foreign employees - as well as a range of their issues that affect carnival companies have concessionaires. "They have changed the protections we used to have, and made the system worse," said Judkins. "The Visa processing system is twice as difficult under the new rules."

Industry Response

What will the Mobile Amusement Industry do next? A week or so after such a complicated and wide-reaching ruling, it is unsurprising many are still reeling. But there are three immediate strategies being developed. The issuing of the IFR includes a public comment period, which closes June 29th, where industry members can make their voices heard. Then there's the two "L's" - litigation and legislation. 

"Litigation and the public comment period are the most immediate actions we will be taking," said Pierce. In terms of the former, he foresees revisiting the issue of whether the DOL has overstepped its authority with the new IFR. "Congress said the H-2B is governed by the DHS, not the DOL, which is how a federal judged ruled in March." 

But with the IFR still being processed by the myriad of affected Mobile Amusement Industry companies and organizations in the mobile, comprehensive litigation strategiesare undergoing development. Pierce said "I will be working almost exclusively on this for the foreseeable future" 

"Litigation has basically slowed the DOL," said Johnson. "We have held them at bay in the courts. We're also grateful for legislators, who were able by to stop the DOL from advancing those rules by adding language to appropriations bill." 

Legislative Outlook
While a new H-2 Bill seems unlikely in the short term, "Congress can use the emergency rule process to extend the period of conflict," said Hartley. This legislative maneuver, which has been used in the past, adds language to Appropriations Bill that "restricts what the DOL can do with certain aspects of their rule, such as the setting of different levels of wages." 

Hartley estimates that the earliest this legislative option can take place "More than likely after October 1st." 

On the positive side, there has been bipartisan support for H-2B reform, but "our arguments are better received by Republicans," said Hartley.

With Republican victories in the recent mid-term election that returned congress to the GOP, "we have new chairmen on the committees, and there is a view that there has been over-reaching by a number of agencies in a way that is anti-business."  

In April, before the IFR issuance, 36 Members of Congress, both Democrats and Republicans, sent Jeh Johnson, DHS secretary, a letter requesting that the "new regulations for the H-2B seasonal guest worker program be user-friendly for the thousands of businesses that rely on the program and protect American workers," according to a press release from the House Judiciary Committee. After the IFR, House Judiciary Committee Chairman Bob Goodlatte (R-Va.) issued this statement: "The Obama Administration had the opportunity to issue user-friendly regulations for the thousands of American employers who use the H-2B program, but it knowingly failed to do so. The new regulations issued by the Obama Administration are overly burdensome for the small and seasonal businesses that play by the rules and use this guest worker program to hire a legal workforce. By keeping the Department of Labor's heavy hand in the process, employers will face more red tape and higher costs when using the program. The House Judiciary Committee is closely examining this issue and the impact of the Administration's new regulations."


Immigration Complication

The debate over worker rights, wages and foreign workers taking away American jobs is only one political maze that will the Mobile Amusement Industry must navigate. The other potential hazard is if the H-2B debates becomes entangled in the conflicts over immigration policy, a sure bet to be a contentious issue in next year's presidential race.

Hartley said lobbying efforts "have made good, incremental progress on this issue on both sides of the aisles," and is confident that those efforts can avoid getting pulled into the immigration debate. "This is not an immigration issue, but a worker-visa and labor issue, which most politicians realize," he said. "We have actually worked well on this issue with both Democrats and Republicans." 

Unfortunately, just as in the wake of 9-11 when national security concerns led to the creation of the program that included putting it under the co-auspices of the then new DHS, the current controversies over immigration reform linger in the background of the current H-2B discussions. "It always will be confused with immigration, but these workers aren't immigrants, they do a job nobody else wants and go home," said Judkins. 

According to Johnson, midway providers and concessionaires have been working "with a sense of insecurity" since the Federal Court ruled in December to vacate the H-2B program. The IFR ruling may not have brought a desired closure - instead it has opened up a new battle front - but at least it revealed what the industry is now up against. "There is a sense that this jeopardizes the fair industry, the cost of these programs is too much to bear," he said, but also noting that industry association, including the International Association of Fairs & Expositions, the Florida Federation of Fairs, and the National Independent Concessionaires Association have all offered support. "They have all been in contact with me and offering to write letters and lobby on our behalf. They understand that this new ruling affects all fairs and the entire industry."


Storm Front

"We've seen this storm coming, and we've been fighting parts of it over the years," said Judkins. "This new set of rules has come through and we are going to have to use all of our tools."

Judkins credited the OABA for doing a good job in conveying the issue to the Mobile Amusement Industry, but said that more must be done both within the industry and by industry members and interested stake holders. "The fairs have their own agenda, and the carnival companies needs to be educating the fairs about what is going on with this issue, because it does affect them." 

Judkins supports litigation and active participation in the Public Comment period, although he adds "that has got to be done, but it is waste of time in the long run. The most importantthing for the fair industry is to be working with their members of congress, explaining to them who they are and that this issue is about saving American jobs. Fighting in the court can slow things down, but it will only be solved with legislation."

He added, "Focus on the main issue. Carnival companies are properly treating workers, people are happy to come back season after season. The main issue is that these companies cannot get enough help to operate because of these new rules."

Legislation, litigation - even devising effective comments for the Public Comment period - will take time, but the reason to begin as soon as possible is not just due to the massive effort that will be involved. The IFR threat to carnival companies and concessionaires may be more immediate than many assume. While it is true that the majority of these companies have secured a stable workforce for 2015, Pierce warned that there is a potential impact on some companies this year. If a company's visa program is being audited - a common occurrence - right now, "it appears to me that there is room for making alleged violations on the basis of the new regulation regarding a current audit."

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