Labor & Employment Law Daily Wrap Up, WAGE-HOUR—E.D. Cal.: DOL rule slashing wages for seasonal farmworkers rejected as arbitrary and capricious, (Aug 27, 2026)

By Todd Harrison, J.D.

The overhaul of minimum wage rate calculations for H-2A temporary agricultural workers must be replaced with new wage standards.

Finding the challenged components of a DOL interim final rule (IFR) ending the use of the mean wage to calculate the adverse effect wage rate (AEWR) for seasonal H-2A farmworkers to be arbitrary and capricious, a federal district in California further determined that the IFR failed to establish that there was good cause to bypass the APA’s procedural requirements for most of the challenged components. Although the court declined to vacate the rule immediately, it did order DOL promptly to produce a new methodology for calculating AEWRs for H-2A workers consistent with the court’s order and to publish new AEWRs under that new methodology promptly. The court did not rule immediately on the issue of backpay, reserving its determination until new AEWRs are issued (United Farm Workers v. United States Department of Labor, No. 1:25-cv-01614-KES-EGC (E.D. Cal. Aug. 25, 2026)).

To ensure that the employment of H-2A workers will not “adversely affect” U.S. farmworkers’ wages, DOL regulations provide that employers must pay H-2A workers the wage that is the highest among (1) the AEWR; (2) the prevailing wage; (3) an agreed-upon collective bargaining wage; or (4) the federal or state minimum wage.

Farm Labor Survey. DOL has had a longstanding practice of using the average or mean wage of all farmworkers in a state or region to determine the AEWR for that state or region. To that end, DOL has relied on data from the USDA’s Farm Labor Survey (FLS). The FLS was the only statistical survey that collected state- or region-level wage data from farm establishments in the U.S. However, in August 2025, the USDA announced it was discontinuing the FLS.

Interim final rule. On October 2, 2025, DOL issued an IFR implementing a host of changes to the methodology used to calculate AEWRs. The IFR took effect immediately, and DOL invoked the APA’s “good cause” exception to bypass notice-and-comment rulemaking.

Subsequently, the plaintiffs filed this action asserting three claims for relief: (1) the IFR is not in accordance with the law; (2) the IFR is arbitrary and capricious; and (3) the IFR failed to demonstrate good cause to bypass notice-and-comment rulemaking. They requested that the court find the IFR unlawful, remand the matter to DOL so that it can generate a new methodology for calculating AEWRs, and order DOL to require employers to provide backpay for the period between the court’s order and the date that DOL issues a new rule for calculating AEWRs.

Challenged components. In asserting that the IFR is arbitrary and capricious, the plaintiffs challenged four components of the rule: (1) its implementation of a tier system; (2) a housing adjustment; (3) the use of DOL’s Occupational Employment and Wage Statistics survey (OEWS) as a new data source for calculating AEWRs; and (4) its adoption of a “greater than 50 percent” rule. The court evaluated each challenged component in turn.

The tier system. For decades, DOL set the AEWR for a given state or region at the mean wage for all workers in that state or region. It reasoned that “[s]etting the AEWR below the mean . . . may have a depressive effect on the wages of workers in the United States similarly employed.” Although the IFR agrees with the general proposition that AEWRs must be “market-based,” it states that setting AEWRs at the mean “would tend to overstate wages for similarly employed American agricultural workers with less experience and understate wages for similarly employed American agricultural workers with more experience.” The IFR attempts to address this issue by creating a tier system.

Under this system, two tier levels exist: Skill Level I and Skill Level II. A Skill Level I AEWR is assigned to “entry-level positions [for which] workers need no formal education or specialized training credentials.” A Skill Level II AEWR is assigned to positions for workers “who possess, either through education, training, or experience, demonstrated skills or knowledge to perform the work.” The IFR predicts that 92 percent of H-2A workers will be classified as Skill Level I.

The plaintiffs acknowledged that the use of two tiers could conceivably be a reasonable choice if the AEWRs for Skill Level I and Skill Level II reflected market-based wages. However, the problem, as pointed out by the plaintiffs, was that the AEWR paid to 92 percent of workers will equal the 17th wage percentile for all workers, rather than the mean. The IFR also set the AEWR for Skill Level II positions at the 50th wage percentile.

While DOL’s choice to separate H-2A workers into two tiers was not inherently unreasonable, its choice to set the Skill Level I AEWR at the 17th percentile and the Skill Level II AEWR at the 50th percentile was arbitrary and capricious, said the court. Further, the statute requires that DOL ensure the hiring of H-2A workers will not “adversely affect the wages and working conditions of workers in the United States similarly employed.” By setting the AEWRs for the vast majority of H-2A workers well below the relevant market wages through its use of the tier system, the IFR failed to reasonably consider whether its methodology could fulfill DOL’s statutory duty, explained the court.

The housing adjustment. Next, the court considered the plaintiffs’ challenge to the IFR’s housing adjustment. A DOL regulation requires agricultural employers to “provide housing at no cost to the H-2A workers and those [U.S.] workers in corresponding employment who are not reasonably able to return to their residence within the same day.” The IFR states that this “free housing” policy creates a “disparity in compensation” between H-2A workers and U.S. farmworkers. To address this, the IFR creates a “housing adjustment” that deducts an amount sufficient to cover the cost of this free housing from the per-hour AEWR rate. However, DOL conceded that the IFR does not purport to change the legal requirement that employers provide free housing. The court determined that the housing adjustment was arbitrary and capricious for three independent reasons.

Disparity? First, the IFR reasons that the free housing policy creates a disparity between H-2A workers and U.S. workers. However, the court noted that this was not entirely accurate. The regulation requires that employers provide free housing to both “the H-2A workers and those [U.S.] workers in corresponding employment who are not reasonably able to return to their residence within the same day.”

By applying the housing adjustment only to H-2A workers, the IFR ensures that H-2A workers are cheaper than those U.S. farmworkers “who are not reasonably able to return to their residence within the same day,” which will in turn incentivize agricultural employers to hire H-2A workers over those U.S. farmworkers. DOL made a clear error of judgment by concluding that the free housing policy created a disparity between all H-2A workers and all U.S. farmworkers, said the court.

Regulatory conflict. Second, the IFR’s imposition of a housing adjustment to reduce the AEWRs for H-2A workers directly conflicts with the regulation requiring employers to provide free housing to such workers. The IFR effectively eliminates free housing for most H-2A workers by adjusting the AEWRs to offset their wages with the housing adjustment, observed the court.

Value exceeded. Third, the housing judgment exceeds the value of the housing that many H-2A workers receive. The calculation of the housing adjustment assumes a 40-hour work week to arrive at the per-hour rate. However, the court noted, many H-2A workers put in more than 40 hours per week. “The housing adjustment therefore incentives employers to hire more H-2A workers working more than 40 hours per week, because those workers would overpay for the housing that employers would provide,” said the court. Thus, such workers would be more attractive to employers than U.S. farmworkers and likely have a depressive effect on U.S. farmworkers’ wages, explained the court. The IFR did not consider or address this issue.

In creating the housing adjustment, DOL failed to reasonably consider whether it could satisfy its statutory obligation to ensure that the hiring of H-2A workers will not “adversely affect” U.S. farmworkers’ wages, concluded the court on this issue.

OEWS data. Turning to the plaintiffs’ challenge to the use of the OEWS as a new data source to calculate AEWRs, the IFR acknowledged that the OEWS does not capture data from farm establishments, only farm labor contractors. However, because the USDA discontinued the FLS, the IFR concluded that the OEWS was the best available alternative data source.

Two problems were identified by the plaintiffs in using farm labor contractors to calculate AEWRs. First, although farm labor contractors employ 42 percent of all H-2A workers, H-2A workers made up only 16 percent of all farmworkers in 2024. Thus, the data from farm labor contractors represents a minority of H-2A workers, and an unspecified percentage of all farmworker jobs, observed the court.

Second, those employed by farm labor contractors are not representative of most farmworkers. As DOL noted in a prior rulemaking, those employed by farm labor contractors “are less educated[,] less likely to be U.S. citizens than employees of farm establishments[,] [and] typically have substantially lower wage rates[.]” Therefore, relying on wage data from farm labor contractors to set AEWRs for all farmworkers would likely result in an AEWR that is lower than the true market rate, explained the court. The IFR failed to acknowledge or address this issue, and thus entirely failed to consider an important aspect of the problem, said the court.

Proposed alternatives. Several alternatives were proffered by the plaintiffs that the IFR could have employed, including taking the most recent AEWRs generated using the prior FLS data source and applying an upward adjustment to account for anticipated year-over-year increases in AEWRs. DOL pointed out the proposed alternatives had their own flaws, but the court explained that agencies must consider feasible alternatives.

To reasonably rely on the OEWS data to calculate AEWRs, DOL must consider alternatives, including alternatives to adjust the OEWS data to address the undercalculation of farmworker wages reflected in that data, and DOL must proffer an explanation for rejecting those alternatives, said the court. In its failure to do so, its decision was rendered arbitrary and capricious.

Greater than 50 percent rule. Finally, the plaintiffs challenged the IFR’s greater than 50 percent rule to determine the relevant Standard Occupational Classification (SOC) code. Under this rule, if an H-2A job involves duties that fall under multiple SOC codes, the entire job will be subject to the SOC code that applies to the tasks a worker performs for the majority of the time. For example, if a worker spends three days packing fruit and two days driving a tractor, the SOC code for packing fruit would apply to the entirety of the worker’s week of labor. The worker in this example would receive a substantially lower hourly wage than if they were paid for three days of fruit packing and two days of tractor driving.

This rule could, in turn, adversely effect U.S. farmworkers’ wages, observed the court. Employers might be encouraged to intersperse higher-skilled, higher-paying work among many workers so that the higher-paying work is never a duty “primarily” performed by one employee. Such an approach would also undermine DOL’s goal of preventing the misclassification of workers.

“The IFR did not address these significant concerns and failed to reasonably consider whether its ‘greater than 50%’ rule was consistent with its statutory obligation to protect U.S. farmworkers’ wages from the adverse effects of hiring H-2A workers,” said the court, also rendering this component of the IFR arbitrary and capricious.

Good cause exception. Turning to the plaintiffs’ argument that the IFR failed to follow the APA’s procedural requirements, DOL asserted the “good cause” exception. The court noted that the IFR properly invoked the good cause exception to select a new data source, based on the discontinuation of the FLS. However, the court found that it failed to demonstrate good cause for emergency rulemaking as to the other challenged components, which should have gone through the notice and comment process.

Remedies. In considering relief, the court explained that vacating the IFR immediately would likely result in the current AEWRs being vacated, resulting in an absence of AEWRs and likely disruption. Therefore, the court held that IFR was unlawful and ordered DOL to produce a new methodology for calculating AEWRs for H-2A workers, without vacating the IFR at this time.

As to the plaintiffs’ request for backpay for the period between the court’s order and the date that DOL issues a new rule for calculating AEWRs, the court noted that any award of backpay would depend on the new AEWRs that DOL issues after generating a new methodology for calculating AEWRs. Given that this comparison point does not yet exist, the court instead ordered DOL to notify growers that they may be required to provide backpay for the period between the entry of this order and the date on which DOL publishes new AEWRs, reserving the issue of whether backpay should be awarded and in what amount.

The case is No. 1:25-cv-01614-KES-EGC.

Judge: Sherriff, K.

Attorneys: Cecilia Guevara Langberg (California Rural Legal Assistance Foundation) for United Farm Workers, UFW Foundation, Irene Mendoza, Claudia Garcia, Cristano Serrano, Yesenia Contreras Cervantes, Jose Cruz, Francisco Alvares Flores, Aaron Grimaldo, Juan Manuel Flores Ayala, Margaret DeAnda Magallon, Carina Martinez, Evelyn Medina, Isabel Rinton Panfilo, Celeste Whittle, Fortino Lopez, and Jesus Lopez. Patrick Keating, U.S. Department of Justice, for U.S. Department of Labor, Lori Chavez-DeRemer, and Lori Frazier Bearden.

Companies: United Farm Workers; UFW Foundation

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