A federal court has ruled that the U.S. Department of Labor’s (DOL) methodology for reducing wage rates under the H-2A temporary agricultural worker program was unlawful, creating uncertainty for agricultural employers and potentially exposing some businesses to future back pay obligations.
In United Farm Workers v. U.S. Department of Labor, the U.S. District Court for the Eastern District of California determined that the administration’s interim final rule modifying the Adverse Effect Wage Rate (AEWR) was both arbitrary and capricious and improperly implemented without following required federal rulemaking procedures.
The case is United Farm Workers v. U.S. Department of Labor, No. 1:25-cv-01614 (E.D. Cal.). The order was issued on August 26, 2026.
Background
The AEWR establishes the minimum wage that employers must pay H-2A workers and is designed to ensure that the employment of foreign agricultural workers does not adversely affect wages and working conditions for U.S. workers.
In 2025, the Department of Labor issued an interim final rule that created a revised wage methodology and lowered wage rates for many H-2A positions. The administration argued that the change was necessary to:
- Better reflect market-based compensation;
- Reduce labor costs for agricultural employers; and
- Address concerns about the availability of agricultural labor and the stability of the U.S. food supply.
DOL estimated that the revised methodology would reduce employer costs by approximately $2.5 billion annually.
Court’s Findings
The court concluded that DOL failed to adequately justify key aspects of the rule.
According to the decision, the agency:
- Failed to reasonably explain its adoption of a two-tier wage system based on worker skill levels;
- Did not adequately justify wage levels that were set below relevant market rates;
- Failed to sufficiently consider alternative wage data sources; and
- Improperly bypassed the Administrative Procedure Act’s notice-and-comment requirements.
The court also rejected DOL’s assertion that an emergency existed that justified immediate implementation of the wage changes without traditional rulemaking procedures.
The judge noted that the agency did not provide sufficient evidence showing that lower wage rates were necessary to address labor shortages or protect the nation’s food supply.
Rule Remains Temporarily in Place
While finding the rule unlawful, the court stopped short of immediately vacating the regulation.
Instead, the judge directed DOL to develop a new AEWR methodology.
As a result:
- The current rule is not immediately invalidated;
- DOL must revisit and revise its wage-setting approach; and
- Future wage calculations may change once the agency issues a replacement framework.
Potential Back Pay Exposure
One of the most significant implications for employers is the possibility of future wage adjustments.
If DOL adopts a new methodology that results in higher required wage rates, some employers that paid workers under the lower interim rates could potentially face:
- Back wage obligations;
- Payroll adjustments; and
- Additional compliance responsibilities.
The scope of any retroactive obligations remains unclear and will likely depend on future agency action and potential additional court proceedings.
Erickson Insights & Analysis
The decision creates significant uncertainty for employers relying on the H-2A program. While the court did not immediately overturn the wage rule, it has ordered DOL to develop a legally supportable replacement methodology. Future rulemaking could affect labor costs, wage obligations, and overall workforce planning for agricultural employers nationwide.
Erickson Immigration Group will continue monitoring developments and sharing updates as more news is available. Please contact your employer or EIG attorney if you have questions about anything we’re reporting above or if you have case-specific questions.