DOL Announces New Skill Based H-2A Wage System for Ag Workers

The Department of Labor (DOL) has issued a new Interim Final Rule (IFR) for the H-2A visa program that offers immediate potential for labor cost reductions.

Effective immediately for new job orders, the rule introduces two critical mechanisms that allow agricultural employers to lower their required cash wage payouts: a Housing Compensation Adjustment and a Two-Tiered Skill System.

If you employ H-2A workers, you likely no longer need to pay the inflated "one-size-fits-all" Adverse Effect Wage Rate (AEWR). Instead, you can now account for the value of the free housing you provide and separate entry-level workers from experienced staff.

Here is exactly how the new savings work and the compliance steps you must take to secure them.

The "Housing Compensation Adjustment"

For the first time, the DOL is officially recognizing the financial burden of providing free housing to H-2A workers. The new rule allows you to apply a standard downward adjustment to the hourly cash wage you pay H-2A employees to offset this cost.

How to Calculate Your Savings

The adjustment is not a guess; it is a fixed calculation based on HUD’s Fair Market Rents (FMRs) for your specific state.

• The Calculation: You take the base OEWS wage rate for the occupation and subtract the state-specific housing adjustment value.

• The Impact: Depending on your location, this will lower your required hourly cash wage by approximately $1.00 to $3.00 per hour.

• The Constraint: You must pay the highest of the applicable wage floors. If the adjusted rate drops below the State or Federal Minimum Wage, you must pay the Minimum Wage.

Real-World Example: If the standard OEWS wage for a farmworker in your region is $17.50, and your state’s housing adjustment is $2.50:

$17.50 (Base) – $2.50 (Housing Credit) = $15.00 (New Hourly Cash Wage)

This adjustment acknowledges that your total compensation package (Wage + Housing) is competitive, even if the cash portion is lower.

Two-Tiered Skill Wages

The rule replaces the single "farmworker" wage with a two-tiered structure based on the Occupational Employment and Wage Statistics (OEWS) survey. This allows you to pay entry-level staff a rate that reflects their actual experience level.

Skill Level I: Entry-Level

• Definition: Workers with no formal education, no specialized training, and little to no experience (typically 0-2 months).

• The Rate: Calculated based on the average wage of the lower third of the workforce in that occupation.

• Why it Matters: This creates a lower, more realistic wage floor for general labor tasks like harvesting or packing.

Skill Level II: Experienced

• Definition: Workers with demonstrated skills, specific training credentials, or significant prior experience.

• The Rate: Calculated based on the mean (average) of the entire wage distribution.

• Why it Matters: This tier prevents the higher wages of skilled equipment operators or supervisors from artificially inflating the cost of your entry-level crews.

Critical Compliance Warnings

To utilize these savings, you must navigate three specific compliance traps. Failing to do so could result in back-wage liability or audit failures.

1. The "Domestic Worker" Trap

The Housing Compensation Adjustment applies ONLY to workers receiving free housing (typically H-2A).

• The Rule: You generally cannot reduce the wage of U.S. workers in corresponding employment unless you also provide them with free housing.

• The Risk: If you pay your local crew the lower "adjusted" H-2A rate but do not give them housing, you are underpaying them. You must maintain separate pay codes to ensure U.S. workers receive the full, unadjusted rate.

2. The "Majority Duties" Standard

Your Job Order determines your Skill Level. The DOL assigns the wage tier based on the duties performed for the majority (over 50%) of the workdays.

• The Risk: If you include "driving heavy trucks" or "supervision" in a Job Order for an entry-level harvester "just in case," the Certifying Officer may classify the entire position at Skill Level II, eliminating your savings.

• The Fix: Scrub your job descriptions. Ensure they accurately reflect entry-level duties if you intend to pay Level I wages.

3. State Minimum Wage Overrides

In states like California, New York, and Washington, the State Minimum Wage may be higher than the new adjusted H-2A AEWR.

• The Fix: Always run the comparison: Adjusted AEWR vs. State Minimum vs. Federal Minimum. You must pay the highest of the three.

Why The Rules Changed

If you are wondering why the rules shifted so suddenly, it is the result of a rapid legal and regulatory sequence in late 2025.

1. The Vacation (August 2025): A federal court in Louisiana vacated the previous 2023 Wage Rule, which had caused significant wage inflation by pegging many jobs to high prevailing wages.

2. The Gap: This ruling effectively left the DOL without a modern methodology, threatening to revert the industry to 2010 standards which the DOL argued would depress wages too severely.

3. The "Good Cause" (October 2025): To prevent market instability, the DOL bypassed standard notice periods to issue this Interim Final Rule. They cited the need to protect the food supply and provide immediate clarity to employers.

This "Skill-Based" approach with housing offsets is the DOL's attempt at a compromise—offering relief to employers who bear high housing costs while maintaining wage floors based on granular market data.

Next Step: Review your current job orders immediately. If you have upcoming filings, ensure you are classifying your workforce into the correct Skill Levels and applying the housing adjustment where legal.