Labor Certification for the Permanent Employment of Aliens in the United States; Reducing the Incentives and Opportunities for Fraud and Abuse and Enhancing Program Integrity, 27904-27947 [E7-9250]

Agencies

• Employment and Training Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 72, Number 95 (Thursday, May 17, 2007)]
[Rules and Regulations]
[Pages 27904-27947]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-9250]



[[Page 27903]]

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Part II





Department of Labor





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Employment and Training Administration



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20 CFR Part 656



Labor Certification for the Permanent Employment of Aliens in the 
United States; Reducing the Incentives and Opportunities for Fraud and 
Abuse and Enhancing Program Integrity; Final Rule

Federal Register / Vol. 72, No. 95 / Thursday, May 17, 2007 / Rules 
and Regulations

[[Page 27904]]


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DEPARTMENT OF LABOR

Employment and Training Administration

20 CFR Part 656

RIN 1205-AB42


Labor Certification for the Permanent Employment of Aliens in the 
United States; Reducing the Incentives and Opportunities for Fraud and 
Abuse and Enhancing Program Integrity

AGENCY: Employment and Training Administration, Department of Labor.

ACTION: Final Rule.

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SUMMARY: The Department of Labor (DOL or Department) is amending its 
regulations to enhance program integrity and reduce the incentives and 
opportunities for fraud and abuse related to the permanent employment 
of aliens in the United States.
    This Final Rule includes several major provisions. It prohibits the 
substitution of alien beneficiaries on permanent labor certification 
applications and resulting certifications. The Final Rule provides a 
180-day validity period for approved labor certifications; employers 
will have 180 calendar days within which to file an approved permanent 
labor certification in support of a Form I-140 Immigrant Petition for 
Alien Worker (Form I-140 hereafter) with the Department of Homeland 
Security (DHS). The rule prohibits the sale, barter or purchase of 
permanent labor certifications and applications. In addition, this rule 
requires employers to pay the costs of preparing, filing and obtaining 
certification. An employer's transfer to the alien beneficiary of the 
employer's costs incurred in the labor certification or application 
process is strictly prohibited. The rule makes clear an alien may pay 
his or her own legitimate costs in the permanent labor certification 
process, including attorneys' fees for representation of the alien. The 
rule also reinforces existing law pertaining to the submission of 
fraudulent or false information and clarifies current DOL procedures 
for responding to incidents of possible fraud. Finally, the rule 
establishes procedures for debarment from the permanent labor 
certification program.
    Consistent with the proposed rule, the provisions in this Final 
Rule apply to permanent labor certification applications and approved 
certifications filed under both the Program Electronic Review 
Management (PERM) program regulation effective March 28, 2005, and 
prior regulations implementing the permanent labor certification 
program. This rule also clarifies the Department's ``no modifications'' 
policy for applications filed on or after March 28, 2005, under the 
new, streamlined PERM process.

DATES: This Final Rule is effective July 16, 2007.

FOR FURTHER INFORMATION CONTACT: William L. Carlson, Administrator, 
Office of Foreign Labor Certification, Employment and Training 
Administration, U.S. Department of Labor, 200 Constitution Avenue, NW., 
Room C-4312, Washington, DC 20210. Telephone: (202) 693-3010 (this is 
not a toll-free number).
    Individuals with hearing or speech impairments may access the 
telephone number above via TTY by calling the toll-free Federal 
Information Relay Service at (800) 877-8339 (this is a toll-free 
number).

SUPPLEMENTARY INFORMATION

I. Background

    The purpose of this Final Rule is to impose clear limitations on 
the acquisition and use of permanent labor certification applications 
and permanent labor certifications in order to reduce incentives and 
opportunities for fraud and abuse in the permanent labor certification 
program. It also promulgates key measures to enhance the integrity of 
the permanent labor certification program. This Final Rule continues 
efforts the Department initiated several years ago to construct a 
deliberate, coordinated fraud reduction and prevention framework within 
the permanent labor certification program. The Department laid the 
groundwork for greater integrity and security during the planning and 
promulgation of the 2004 Final Rule to implement the re-engineered PERM 
system. While fraud prevention has always been a goal of the 
Department's labor certification programs, our continuing program 
experience and that of other Federal agencies has demonstrated the need 
to focus on the specific opportunities for fraud and abuse addressed in 
this rule.

A. Statutory Standard and Current Department of Labor Regulations

    Under section 212(a)(5)(A) of the Immigration and Nationality Act 
(INA or Act) (8 U.S.C. 1182(a)(5)(A)), before the Department of 
Homeland Security (DHS) may approve petition requests and the 
Department of State (DOS) may issue visas and admit certain immigrant 
aliens to work permanently in the United States (U.S.), the Secretary 
of Labor (Secretary) must certify to the Secretary of Homeland Security 
and the Secretary of State that:
    (a) There are not sufficient U.S. workers who are able, willing, 
qualified, and available at the time of the application for a visa and 
admission into the United States and at the place where the alien is to 
perform the work; and
    (b) The employment of the alien will not adversely affect the wages 
and working conditions of similarly employed U.S. workers.
    If the Secretary of Labor, through the Employment and Training 
Administration (ETA), is satisfied in his or her review of a sponsoring 
employer's application for certification that these two requirements 
have been met, he or she so certifies by granting a permanent labor 
certification. If DOL cannot make both of the above findings, the 
application for permanent labor certification is denied. The Department 
of Labor's regulation at 20 CFR part 656 governs the labor 
certification process for the permanent employment of immigrant aliens 
and sets forth the responsibilities of employers who wish to employ 
immigrant aliens permanently in the United States.
    The INA does not specifically address substitution of aliens in the 
permanent labor certification process. Similarly, the Department of 
Labor's regulations are silent on the question of substitution.
    On May 6, 2002, the Department published a Notice of Proposed 
Rulemaking (NPRM) to streamline the permanent labor certification 
program. 67 FR 30466 (May 6, 2002). A Final Rule implementing the 
streamlined permanent labor certification program through revisions to 
20 CFR part 656 was published on December 27, 2004, and took effect on 
March 28, 2005. 69 FR 77326 (Dec. 27, 2004). The prior 20 CFR part 656 
(2004) governs processing of permanent labor certification applications 
filed prior to March 28, 2005, except where certain provisions of this 
Final Rule will impact such applications. Previously filed applications 
may be refiled under the new PERM rule.

B. General Immigration Process Involving Permanent Labor Certifications

    To obtain permanent alien workers, U.S. employers generally must 
engage in a multi-step process that involves DOL and DHS and, in some 
instances, DOS. The INA classifies employment-based (EB) immigrant 
workers into categories, e.g., EB-2 and EB-3, based on the general job 
requirements and the perceived benefit to American society.

[[Page 27905]]

U.S. employers must demonstrate that the requested job requirements, 
and in some cases the alien, fit into one of these classifications. The 
first step in the process for the EB-2 and EB-3 classifications, 
further described below, generally begins with the U.S. employer filing 
a labor certification application with DOL in accordance with 20 CFR 
part 656. The U.S. employer must demonstrate to DOL, through a test of 
the labor market, that there are no U.S. workers able, willing, 
qualified, and available at the time of the application for a visa and 
admission to the United States and at the place where the alien is to 
perform the work. The employer must also demonstrate that the 
employment of the alien will not adversely affect the wages and working 
conditions of similarly employed U.S. workers. Following review of the 
permanent labor certification application, DOL will either certify or 
deny the application.
    The Immigrant Petition for Alien Worker (Form I-140) is a petition 
filed with the United States Citizenship and Immigration Services 
(USCIS), within DHS, by a U.S. employer for a prospective permanent 
alien employee. Most Form I-140 petitions filed under section 203(b)(2) 
and (3) of the Act, the EB-2 and EB-3 classifications, must be 
accompanied by an approved labor certification issued by DOL. DHS has 
established procedures for filing Form I-140 petitions under 8 CFR 
204.5.
    DHS reviews the approved labor certification in conjunction with 
the Form I-140 petition and other supporting documents to evaluate 
whether the position being offered to the alien named in the petition 
is the same as the position specified on the labor certification and 
whether the employment qualifies for the immigrant classification 
requested by the employer. In addition, DHS evaluates the alien's 
education, training, and work experience to determine whether the 
particular alien meets the job requirements specified on the labor 
certification. The approved labor certification is also used to 
establish the priority date for which an immigrant visa will be made 
available to the alien, based on the date the labor certification 
application was originally filed.

C. Current ETA Practices Involving Permanent Labor Certifications

    Although not mentioned in 20 CFR part 656, ETA has for years 
informally allowed employers to substitute an alien named on a pending 
or approved labor certification with another prospective alien 
employee. Labor certification substitution has occurred either while 
the permanent labor certification application is pending at DOL or--by 
DOL's delegation to DHS--while a Form I-140 petition, filed with an 
approved labor certification, is pending with DHS. Historically, this 
substitution practice was permitted as an accommodation to U.S. 
employers due to the length of time it took to obtain a permanent labor 
certification or receive approval of the Form I-140 petition.
    Currently, the regulations do not set any validity period on a 
permanent labor certification and, thus, permanent labor certifications 
are valid indefinitely. Also, DOL regulations do not address payments 
related to the permanent labor certification program or debarment 
authority. In this Final Rule, the Department addresses problems that 
have arisen related to substitution, lack of a validity period for 
certifications, and financial transactions related to the permanent 
labor certification program.

D. Issues Arising From Current Practices

    For more than 15 years, the Department has expressed concern that 
various immigration practices, including substitution, were subject to 
a high degree of fraud and abuse. See, e.g., Interim Final Rule, 56 FR 
54920 (October 23, 1991).\1\ This concern was heightened by a number of 
recent criminal prosecutions by the Department of Justice (DOJ) as well 
as recommendations from the Department of Justice and the Department of 
Labor's Office of Inspector General (OIG), and public comments 
concerning fraud received in response to the May 6, 2002, NPRM on PERM. 
See, e.g., 69 FR at 77328, 77329, 77363, and 77364 (Dec. 27, 2004).
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    \1\ The 1991 Interim Final Rule included a provision prohibiting 
substitution. That provision was overturned by the U.S. Court of 
Appeals for the D.C. Circuit on Administrative Procedure Act 
procedural grounds. Kooritzky v. Reich, 17 F.3d 1509 (D.C. Cir. 
1994). DOL addressed the court's concern through publication of the 
NPRM for notice and comment on February 13, 2006, consideration of 
comments received and development of this Final Rule. 71 FR 7656 
(Feb. 13, 2006). It is of no small significance that the plaintiff 
in that suit, an attorney, was later convicted for the criminal sale 
of fraudulent labor certifications used for substitution. U.S. v. 
Kooritzky, No. 02-502-A (E.D. Va. 2003).
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    The Department's review of recent prosecutions by DOJ, in 
particular, revealed that the ability to substitute alien beneficiaries 
has turned labor certifications into commodities which can be sold by 
unscrupulous employers, attorneys, or agents to those seeking a ``green 
card.'' Similarly, the ability to sell labor certifications has been 
greatly enhanced by their current open-ended validity, providing a 
lengthy period during which a certification may be marketed. In many of 
these applications, the job offer was fictitious. In others, the job in 
question existed but was never truly open to U.S. workers. Rather, the 
job was steered to a specific alien in return for a substantial fee or 
``kickback.'' The Federal Government has prosecuted a number of cases 
resulting from employers, agents, or attorneys seeking to fraudulently 
profit from the substitution of aliens on approved labor certifications 
and applications. One attorney filed approximately 2,700 fraudulent 
applications with DOL for fees of up to $20,000 per application. Many 
of these applications were filed for the sole purpose of later being 
sold to aliens who would be substituted for named beneficiaries on the 
approved labor certifications. See U.S. v. Kooritzky, No. 02-502-A 
(E.D. Va. 2003). Additional prosecutions have also involved the sale of 
fraudulent applications or certifications. See, e.g., U.S. v. 
Ivanchukov, et al., No. 04-421 (E.D. Va. 2005); U.S. v. Mir, No. 8:03-
CR-00156-AW-ALL (D. Md. 2003); U.S. v. Fredman, et al., No. WMN-05-198 
(D. Md.); U.S. v. Lee, No. 03-947-M (E.D. Va.); U.S. v. Mederos, No. 
04-314-A (E.D. Va.); U.S. v. Yum (E.D. Va. 2006); U.S. v. Mandalapa, 
No. 205-NJ-03117-PS (D. N.J. 2006); U.S. v. Heguman, No. CR 04-1635(A)-
RSWL (C.D. Cal. 2007). Our program experience confirms that such 
fraudulent activity adds to the cost of foreign labor certification 
programs--for example, resources spent processing fraudulent 
applications, anticipating and combating unscrupulous conduct, and 
assisting debarments or prosecutions after the fact.
    The Final Rule implementing the streamlined permanent labor 
certification program also discussed DOL's and others' concerns about 
fraud in the program and the steps the Department would be taking to 
minimize the filing of fraudulent or non-meritorious applications. 69 
FR at 77328, 77329, and 77363 (Dec. 27, 2004). As implemented, the 
basic labor certification process under the new PERM system 
incorporates fraud detection measures targeting areas that have 
historically shown vulnerability. These measures include system and 
manual checks in key areas, as well as the use of auditing triggers and 
techniques, both targeted and random, which can be adjusted as 
appropriate to maintain security and integrity in the process.
    Personal Identification Numbers (PINs) and passwords for 
registration into the automated filing system are assigned to accounts 
issued to

[[Page 27906]]

sponsoring employers, who may then create sub-accounts for attorneys or 
agents who represent the employer. The initial stages of registration 
and application include system checks to verify the employer-applicant 
is a bona fide business entity. Once DOL's initial review of a filed 
application shows it to be technically acceptable for processing, the 
application transfers to a substantive review queue, where it may be 
selected for audit either randomly or based on specific criteria that 
tie closely to program requirements. Staff at ETA's National Processing 
Centers, where PERM applications are processed, also confirm 
information directly with employers, for example, to ensure each 
employer is aware an application has been filed on its behalf and is, 
in fact, sponsoring the alien named on the application.
    While these measures are targeted based on our program experience, 
they focus largely on discrete activities (employer verification, 
sponsorship, etc.) or on program requirements as reflected in questions 
throughout the application, and do not address broader labor 
certification policies historically of concern to the Department. For 
example, in the Final Rule to implement the PERM program, the 
Department noted the practice of allowing the substitution of alien 
beneficiaries may provide an incentive for fraudulent applications to 
be filed. 69 FR at 77363 (Dec. 27, 2004). The Department also concluded 
in that Final Rule that the emerging ``black market'' for purchase and 
sale of approved labor certifications is not consistent with the 
purpose of the labor certification statute at section 212(a)(5)(A) of 
the INA. While DOL was not able to address many of these fraud issues 
in the PERM Final Rule because they arguably went beyond the scope of 
the proposals contained in the PERM NPRM, the Department clearly 
indicated it would be exploring regulatory solutions to address these 
issues. 69 FR at 77328, 77329, and 77363 (Dec. 27, 2004).
    Similarly, the Department determined that additional regulatory 
action was required to reinforce and clarify core program components, 
both to strengthen fraud prevention and enhance program integrity. For 
example, a prohibition on modifications to applications was an original 
assumption of the PERM program and having such a clear, enforceable 
prohibition is critical to its long-term efficiency and effectiveness. 
A prohibition against the transfer of labor certification costs from 
sponsoring employers to alien beneficiaries keeps legitimate business 
costs with the employer, minimizes improper financial involvement by 
aliens in the labor certification process, and strengthens the 
enforceability of the bona fide job opportunity requirement.
    Accordingly, on February 13, 2006, the Department published in the 
Federal Register a Notice of Proposed Rulemaking to amend its 
regulations governing the permanent labor certification process to curb 
fraud and abuse and strengthen program integrity. 71 FR 7656. As 
proposed, the rule prohibited substitution of aliens not originally 
named on applications for permanent labor certification; limited the 
period of validity of a permanent labor certification to 45 calendar 
days; prohibited certain financial transactions or activities related 
to permanent labor certifications; and took other steps to enhance 
program integrity and reduce or avert fraud.
    This Final Rule builds on the foundation laid in the 2004 Final 
Rule implementing the streamlined permanent program and follows through 
on the strong commitment reflected in the NPRM for this rulemaking, 
culminating a multi-year effort to enhance integrity and fraud 
prevention mechanisms in the permanent labor certification program.
    To assist compliance and enforcement under this rule, the 
Department is reviewing available resources to determine its ability to 
establish a new toll-free telephone number, or to develop other means, 
to receive reports of potential violations. Calls would be screened by 
DOL staff, who would refer calls or inquiries to appropriate agencies 
within or outside the Department.

II. Overview of the Regulation

    In order to protect the integrity of the permanent labor 
certification program, reduce the incentives for fraud and abuse, and 
comply with the Department's statutory obligation to protect the wages 
and working conditions of U.S. workers, the Department proposed in the 
NPRM a number of regulatory changes. As stated in the NPRM, the 
revisions were proposed in part in response to concerns raised 
historically by stakeholder agencies and individual program users. They 
also responded to the numerous substantive comments received to the May 
6, 2002 NPRM. At its essence, each change was motivated by our program 
experience and desire and responsibility under the authorizing statute 
to restore and maintain the integrity of the labor market test. The 
Department's regulations at 20 CFR part 656 establish the fact-finding 
process designed to develop information sufficient to support the 
Secretary of Labor's determination, required under the statute, of the 
availability of or adverse impact to U.S. workers. The labor market 
test forms the basis for notice to U.S. workers of the job vacancy, for 
the recruitment process through which U.S. workers have the opportunity 
to apply and be considered for each job, and for employer attestations 
related to key terms and conditions of employment. While we remain 
sensitive to concerns raised by employers and others over the impact of 
these changes, we nonetheless have concluded, after careful review of 
comments on each proposal, that the identification and deterrence of 
fraud and the broader integrity of the program require a strong, 
comprehensive approach to which these regulatory reforms are critical. 
Accordingly, in this Final Rule the Department amends part 656 to add 
fraud prevention and redressive measures in the key areas identified in 
the proposed rule, as follows.
    Substitution--Consistent with the proposed rule, this Final Rule 
adds a new Sec.  656.11 to prohibit the substitution of alien 
beneficiaries as of the effective date of the Final Rule. This 
prohibition will apply to all pending permanent labor certification 
applications and to approved permanent labor certifications, whether 
the application was filed under the provisions of 20 CFR part 656 in 
effect before March 28, 2005, or on or after March 28, 2005. 
Additionally, as proposed, the Final Rule revises Sec.  656.30(c) to 
provide that a certification resulting from an application filed under 
20 CFR part 656 in effect before March 28, 2005, or on or after March 
28, 2005, is only valid for the alien named on the original permanent 
labor certification application. These regulatory changes do not affect 
substitutions approved by the Department or DHS under either regulation 
prior to this Final Rule's effective date. They also do not affect 
substitution requests in progress as of this rule's effective date. Due 
to the considerable evidence of past and continuing fraud in the 
permanent labor certification process, DOL through this Final Rule, 
among other measures, is eliminating the practice of substitution. The 
Department will work with the Departments of Justice and Homeland 
Security to explore appropriate circumstances under which substitution 
could be reinstated. We anticipate that there may come a time when all 
affected agencies are satisfied that there are sufficient anti-fraud 
protections to alleviate the concerns motivating this rule.

[[Page 27907]]

    Modifications to applications--This Final Rule finalizes with minor 
changes the provision in the proposed rule prohibiting modifications to 
permanent labor certification applications once such applications are 
filed with the Department. The Department has implemented technological 
changes in the PERM program to alert applicants to technical grounds 
for deniability, thus eliminating the need for many modifications. 
Section 656.11(b) clarifies that requests for modifications to an 
application, where the application was filed after this Final Rule's 
effective date, will not be accepted. To comport with this 
clarification while ensuring due process, the Final Rule revises Sec.  
656.24(g) to more precisely define what evidence may be submitted with 
an employer's request for reconsideration.
    Validity period--Although the Department had originally proposed 
permanent labor certifications be filed with DHS within 45 calendar 
days, this Final Rule extends that period to 180 calendar days. 
Accordingly, all permanent labor certifications approved on or after 
the effective date of this Final Rule will expire 180 calendar days 
after certification, whether the original application was filed under 
20 CFR part 656 in effect prior to or after March 28, 2005, unless 
filed prior to expiration in support of a Form I-140 petition with DHS. 
Likewise, all certifications approved prior to this Final Rule's 
effective date will expire 180 calendar days after the Final Rule's 
effective date unless filed in support of a Form I-140 petition with 
DHS prior to the expiration date.
    Ban on sale, barter, purchase, and certain payments--This Final 
Rule prohibits the sale, barter, and purchase of applications and 
approved labor certifications, as well as certain payments to employers 
in compensation or reimbursement for the employer's costs incurred to 
obtain labor certification. This ban will apply to all such 
transactions on or after the effective date of This Final Rule 
regardless of whether the labor certification application involved was 
filed under 20 CFR part 656 in effect before March 28, 2005, or on or 
after March 28, 2005. In consideration of comments, the Final Rule more 
precisely describes the payments being prohibited. Proposed Sec.  
656.12(b), now Sec.  656.12(b) and (c), has been revised to reflect 
this approach and definitions have been added to Sec.  656.3.
    Debarment and program integrity--Finally, the Final Rule institutes 
several enforcement mechanisms as described in the proposed rule, with 
revisions to clarify procedures and address comments received in 
response to the NPRM. On or after the effective date of this Final 
Rule, the Department may debar an employer, attorney or agent based 
upon certain enumerated actions such as fraud, willful provision of 
false statements, or a pattern or practice of noncompliance with PERM 
requirements, regardless of whether the labor certification application 
involved was filed under the prior or current regulation. In addition, 
other provisions related to all applications filed under 20 CFR part 
656 in effect before March 28, 2005, or on or after March 28, 2005, 
highlight existing law pertaining to submission of fraudulent or false 
information and clarify our procedures for responding to possible 
fraud.
    As proposed, this Final Rule extends from 90 to 180 days the period 
during which the Department may suspend processing of applications 
under criminal investigation. In addition, in response to comments 
requesting a materiality standard for the various debarment provisions, 
the Final Rule adds an intent requirement (``willful'') to the false 
information section; to be actionable, the employer must willfully 
provide false or inaccurate information to the Department. The Final 
Rule also raises the standard for debarment based on failure to comply 
with the terms of Forms ETA 9089 or 750, failure to comply with the 
permanent labor certification program's audit process, or failure to 
comply with the program's supervised recruitment requirements, to 
require there must be a pattern or practice of noncompliance in each 
case. These changes in the standard for debarment at Sec.  656.31(f) 
work in tandem with the revision to Sec.  656.26(a)(1). The new Sec.  
[acute]656.26(a)(1) expands the existing provision for a right to 
review the Department's denial of an application or revocation of a 
certification, to encompass a right to review of a debarment action. 
The request for review would be made to, and in appropriate cases a 
concomitant hearing would be held by, the Board of Alien Labor 
Certification Appeals (BALCA).

III. Discussion of Comments on Proposed Rule

    The Department received a total of 489 comments from attorneys, 
educational institutions, trade associations, individuals, and 
businesses. Many of the comments were duplicative in nature and have 
been grouped together for discussion purposes. Although most of the 
commenters were critical of one or more of the proposed changes, they 
also supported the Department's efforts to deter fraud in the permanent 
labor certification program. Several commenters suggested alternatives 
for improving the fraud rule, while some suggested abandonment of the 
proposed rule entirely.

A. Prohibition of Substitution or Change to the Identity of Alien 
Beneficiaries on Permanent Labor Certifications and Applications

    The proposed rule prohibited the substitution of alien 
beneficiaries on pending applications for permanent labor certification 
and on approved labor certifications. The comments we received on the 
prohibition of substitution raised concerns in a number of key areas: 
the Department's authority to make the rule change; the nexus between 
the proposed ban and the incidence and types of fraud that have 
occurred; the Department's premise that substitution is no longer 
needed, both because the new, automated system has significantly 
reduced processing time and because the backlog of permanent labor 
certification applications filed prior to March 28, 2005, will be 
eliminated by September 30, 2007; the application of the ban to all 
pending applications and approved certifications; and the hardships 
that employers would suffer and costs they would incur as a result of 
such a ban.
    We address the comments bearing on each of these issues below. 
However, after thoughtfully reviewing and deliberating over the 
concerns raised, we continue to find that the public benefit of 
eliminating substitution on permanent labor certifications and 
applications outweighs any potential disadvantages to individual 
program users. Consequently, as originally proposed in the NPRM, the 
Final Rule includes a new Sec.  656.11 providing that, as of the 
effective date of the Final Rule, substitution of alien beneficiaries 
will be prohibited: (1) On all pending permanent labor certification 
applications; and (2) on certifications, regardless of whether the 
application was filed under 20 CFR part 656 in effect before or on or 
after March 28, 2005. Likewise, once this Final Rule takes effect, the 
revised Sec.  656.30(c) makes a certification valid only for the alien 
named on the original application.
    As explained in the NPRM, this regulatory change has no retroactive 
effect on substitutions approved by the Department or DHS prior to this 
Final Rule's effective date. As made implicit by the new Sec.  
656.11(a), this Final Rule also has no retroactive effect on 
substitution requests in progress (submitted) prior to this rule taking

[[Page 27908]]

effect. These and the other regulatory changes promulgated in this 
Final Rule modify the statement in the preamble to the December 27, 
2004, PERM Final Rule that applications filed before that Final Rule's 
effective date would continue to be processed and governed by the then-
current regulation. 69 FR 77326 (Dec. 27, 2004).
1. Statutory Authority
    Several commenters questioned the Department's authority under the 
INA to eliminate substitution of aliens on certifications and 
applications.
    Statutory authority relative to qualifications and identity of 
alien--Many commenters opposed the ban on substitution as being 
overbroad and overreaching. Commenters referred to the plain language 
of the authorizing statute and opposed the elimination of substitution 
on grounds that DOL's jurisdiction, based on 8 U.S.C. 1182(a)(5), stops 
with determining worker unavailability and adverse impact and does not 
extend to activities related to worker identity or qualifications. 
Commenters stated that the authority to scrutinize the qualifications 
of the alien named on the petition rests solely with USCIS.
    More specifically, commenters questioned the Department's authority 
to join the labor certification application to a specific alien, 
asserting labor certifications are related to the job opportunity, not 
the employee. They argued that the identity of the specific alien 
employee, whether the original beneficiary or a substituted 
beneficiary, is not relevant to a good faith labor market test. One 
commenter stated that the elimination of substitution, requiring a 
second labor market test for the position, contravenes what it believes 
is the legislative intent that the labor certification process require 
only a single labor market test.
    With respect to the statutory requirement that U.S. workers be 
unavailable, one commenter stated that the identity of the alien is not 
relevant to the labor market test, as long as he or she qualified for 
the job opportunity when the labor certification application was filed. 
With respect to the requirement of no adverse impact, the commenter 
stated that the alien's identity is also not relevant as long as the 
qualified alien is offered the appropriate wages and working 
conditions. The commenter raised concern that this rule would refocus 
labor certification from the job opportunity to the identity of the 
sponsored alien, and would do so without statutory change, evidence of 
fraud, or analysis of the increased costs to the employer. In fact, 
this commenter stated that given the automated, largely attestation-
based nature of PERM, DOL is clearly unprepared and lacking in 
resources to evaluate evidence bearing on whether the alien is 
qualified for the job.
    The Department's authority to regulate and ban the substitution of 
aliens on labor certifications and applications is clear. The INA 
treats each alien individually and, for employment-based immigration 
requiring labor certification, makes every alien inadmissible, absent 
the Secretary of Labor's determination on U.S. worker availability and 
adverse impact. The trigger for such a determination has always been, 
at its core, the existence of a vacancy that an employer wishes to fill 
with an alien, and the burden of proof is always upon the petitioning 
employer to overcome the presumption of the inadmissibility of an 
individual intended immigrant employee through a test of the labor 
market.
    The statute itself could not be clearer that the labor 
certification process is alien specific. In defining the Department's 
role in the admission of an alien for employment-based permanent 
residence, INA section 212(a)(5)(i) ties the required certification to 
``the place where the (emphasis added) alien is to perform such skilled 
or unskilled labor[,]'' and the necessity of certifying that ``the 
employment of such (emphasis added) alien will not adversely affect the 
wages * * *.'' The plain language of these provisions (i.e., the use of 
terms such as ``the alien'' and ``such alien'') is meant to focus not 
on the process but solely on its use to admit one, specific alien.
    It is this Department's responsibility to judge how and under what 
circumstances a labor market determination should be made, and what 
constitutes the employer's actual minimum requirements for performance 
of the job. It is appropriate and consistent with the broader statutory 
and programmatic intent to apply these requirements any time a position 
that is the subject of a labor certification application is or becomes 
vacant, regardless of whether the application covering it was 
previously in process and for how long. The labor market changes 
rapidly, and it is consistent with the Department's obligation to 
protect the jobs, wages and working conditions of U.S. workers to 
require that there be another labor market test when the job 
opportunity effectively changes through the unavailability of the 
original alien worker.
    The Department's regulations authorize it to closely review the 
information provided on the application with respect to the named 
alien. Our authority to examine the stated qualifications of the alien 
named on the application also extends to our determination of whether 
an employer has accurately stated the minimum qualifications necessary 
to perform the job, or has inflated or misstated job requirements. 56 
FR 54920 (Oct. 23, 1991); see 20 CFR 656.17(i).
    Nevertheless, the Department does not undertake in this Final Rule 
to determine the visa eligibility of individual aliens. This rule 
governs the processing of labor certification applications, the 
validity of approved certifications, and other Department of Labor 
activities implementing relevant INA provisions and 20 CFR part 656; it 
does not speak to activities by the Departments of Homeland Security or 
State conducted under their respective authorities and jurisdiction. 
Further, the Department's focus is not on the identity of the 
individual alien but on the employer's failure to conduct a second 
labor market test for available U.S. workers when the original alien 
beneficiary becomes unavailable and, subsequently, when an employer 
seeks substitution. As stated in the NPRM, if the original alien 
beneficiary is no longer available, then the employer must use some 
means to fill that job opportunity. Clearly, the employer used some 
recruitment tool to find the new foreign worker for that newly opened 
job opportunity. Prohibiting substitution will ensure the employer 
again makes the reopened employment opportunity available to U.S. 
workers. In the event another alien is again the only qualified person 
available, then it is consistent with this program's purpose and the 
statute's plain language to require that the employer file a new 
application reflecting the new recruitment undertaken.
    The Medellin decision--A number of commenters cited the decision in 
Medellin v. Bustos, 854 F.2d 795 (5th Cir. 1988) in support of the 
argument that the Department lacks authority to prohibit substitution. 
The commenters argue that in Medellin, the Fifth Circuit held that the 
Department's administrative decision (based on operational guidance to 
program staff) to revoke a permanent labor certification based on the 
employer's substitution of another alien in place of the named alien 
more than six months after the certification was granted was not in 
accordance with applicable law. The commenters further argued that 
limiting a labor certification to ``the alien for

[[Page 27909]]

whom the certification was granted'' ran contrary to both the INA 
provisions (now at INA section 212(a)(5)) stating the Secretary of 
Labor's authority to determine worker availability and adverse impact, 
and the Department of Labor's own regulations, which provided that a 
labor certification was valid indefinitely, hence disconnecting 
validity and any time limitations.
    We carefully considered the Fifth Circuit's opinion in Medellin 
prior to the issuance of the NPRM and concluded that the dictum relied 
upon by commenters in the decision was not so compelling as to overcome 
the strong argument, based on the Department's authority and 
experience, that supports the elimination of substitution. We have 
reviewed that matter again as a result of comments and reach the same 
conclusion for a number of reasons.
    First, the ultimate basis for the Medellin decision was an 
administrative law issue not relevant to this rulemaking. Medellin 
involved a challenge to provisions in an ETA Technical Assistance Guide 
(TAG) that permitted the substitution of an alien on an approved labor 
certification only for the first six months after issuance. As the 
Medellin court correctly noted, the TAG was not published using notice 
and comment rulemaking procedures. Further, the six-month limitation 
was inconsistent with the then regulation at 20 CFR 656.30(a) that made 
labor certifications valid indefinitely. This rulemaking directly 
addresses the administrative law problem identified in Medellin by 
clarifying, after notice-and-public comment rulemaking, that a labor 
certification is valid only for the alien who was the beneficiary of 
the original application and only for a limited time, 180 days.
    The discussion in the Medellin decision about the relative 
responsibilities of DOL and INS in the labor certification process is 
dictum and clearly is not the legal grounds for the court's decision. 
Further, the reasoning in that dictum is not compelling and reflects an 
overly narrow view of the Department's role in the immigration process. 
Under the INA, the Department is responsible for requiring a labor 
market test that is the statutory prerequisite to the granting of a 
labor certification. Banning substitution enhances protections for U.S. 
workers by offering U.S. workers another chance when a job that was the 
subject of a labor certification once again becomes available through 
the departure of the alien employee.
    Section 212(a)(5) of the INA makes a foreign worker inadmissible 
unless, as one condition precedent, the Department determines there is 
no able, willing, and qualified domestic worker available to fill the 
position for which the foreign worker's admission is sought. Judicial 
interpretation of the word ``willing'' led to the creation of the 
process that has been in place since 1978, whereby the certification 
approval is predicated on an employer's demonstrated unsuccessful 
efforts to recruit a domestic worker. See Production Tool Corporation 
v. Employment and Training Administration, 688 F. 2d 1161 (7th Cir. 
1982). The position that the job opportunity for which certification is 
being sought must be a job that a domestic worker can actually fill has 
been affirmed by two appellate courts subsequent to the Medellin 
decision. Bulk Farms v. Martin, 963 F. 2d 1286 (9th Cir. 1992); Hall v. 
McLaughlin, 864 F. 2d 868 (D.C. Cir. 1989).
    Given these considerations, it is perfectly reasonable for the 
Department to require the employer to conduct a new test of the labor 
market, and file a new labor certification application, every time the 
job opportunity becomes vacant. The Medellin litigation simply did not 
take place in a context that allowed the Department's concerns 
regarding the new test of the labor market to be adequately addressed.
    Relationship to DHS regulations--One commenter supported the ban on 
substitution but expressed concern that the impact of the change may be 
quite limited until DHS adopts corresponding regulations to prohibit 
the substitution of aliens. Another commenter argued that the public 
should not be placed in the position of dealing with competing and 
possibly inconsistent regulations issued by different agencies and 
suggested that DOL should withdraw its proposal until DHS signals its 
equivalent concern.
    DOL disagrees that there is a likelihood of competing or 
inconsistent regulations between DOL and DHS. No DHS regulations 
address or authorize substitution of alien beneficiaries on labor 
certifications. Rather, at present, DHS permits substitution on 
permanent labor certifications through a delegation of authority from 
DOL. See March 7, 1996 Memorandum of Understanding between the 
Immigration and Naturalization Service (INS) and Employment and 
Training Administration (signed by Louis D. Crocetti, Jr., Associate 
Commissioner, Examinations, and Raymond Uhalde, Deputy Assistant 
Secretary for Employment and Training). INS (the portion of that agency 
that provided immigration benefits) later became U.S. Citizenship and 
Immigration Services (USCIS) at the Department of Homeland Security. 
Pursuant to that 1996 MOU, when substitution is requested, DHS requires 
employers to submit a new (employer-completed but not processed) DOL 
permanent labor certification application form with the name of the 
substituted alien, along with the approved labor certification in the 
name of the original alien beneficiary. See USCIS Adjudicator's Field 
Manual, Sec. 22.2(b)(6) (Sept. 12, 2006). This Final Rule alters the 
current practice by providing that labor certifications, once approved, 
are valid only for the alien named in the original application and that 
substitution of alien names on the certification is prohibited. DOL and 
DHS have agreed that DOL will rescind the delegation of authority 
contained in the 1996 MOU consistent with the terms of this Final Rule 
and effective on the same date as this Final Rule. Because substitution 
of aliens on labor certifications has occurred pursuant to DOL 
authority, regulatory action by DHS is not necessary to implement a 
termination of its delegated authority with respect to DOL permanent 
labor certifications.
    Thus, following the effective date of this rule, employers will 
face a consistent approach to labor certifications: Substitution of the 
alien beneficiary on a permanent labor certification application or on 
the resulting certification is prohibited. As reflected throughout this 
Final Rule, the Department has determined that this prohibition on 
substitution is consistent with its statutory responsibilities and is 
necessary to achieve important objectives. DOL is responsible for 
administering the labor certification process and is authorized and 
accountable for improvements to the program, independent of employment-
based immigration programs overseen by other Federal agencies. 
Therefore, although we have closely coordinated with DHS, DOL OIG, DOJ, 
and other appropriate agencies in this rulemaking and other fraud 
prevention efforts, DOL has determined, in light of the evidence of 
fraud and the continued concerns about fraud and program integrity 
raised by many sources, and the Department's statutory responsibility 
to U.S. workers, that it is appropriate to issue this regulation 
governing the part of the employment-based immigration process for 
which we are responsible. The Department has authority to administer, 
enforce, and reform programs under its jurisdiction, including to 
regulate the meaning and nature of a permanent labor certification 
issued under 20 CFR part 656. Nothing in this Final Rule in

[[Page 27910]]

any fashion interferes with DHS' authority or its ability to address 
fraud issues through a rulemaking process of its own.
    Entitlement to substitution--Many commenters asserted that since 
the practice of substitution has been permitted by DOL for several 
decades, the statute and regulations provide entitlement to 
substitution. One commenter asserted that the Department, under its 
current regulations at 20 CFR 656.30(c)(2), effectively provides that 
the labor certification application can be valid for any qualified 
worker, which the commenter interpreted to include a substituted 
worker. 20 CFR 656.30(c)(2). Another commenter opined that the absence 
of statutory entitlement to substitution is irrelevant to the clear 
value of substitution, which in its view far outweighs the perceived or 
potential benefits from reducing incentives for fraud.
    The Department disagrees with these comments. While substitution 
has been a long-standing practice at the Department and by delegation 
to DHS, the statutory framework to allow the permanent admission of 
foreign nationals to perform work was deliberately protective of U.S. 
workers and contains nothing approaching an entitlement to 
substitution. It is consistent with the statute's presumption of alien 
inadmissibility that admissibility must be demonstrated by each 
employer for each alien and that the statute does not provide for 
substitution of individual aliens on labor certifications or 
applications. This regulatory action is also consistent with the 
Congressional intent to grant the Secretary of Labor broad discretion 
in implementation of the permanent labor certification program. Nor is 
it surprising that the practice of substitution has not been authorized 
or addressed in DOL's regulations. Substitution has been permitted 
simply as a procedural accommodation to employer-applicants. The 
Department recognizes that this accommodation has had a distinct 
benefit to employers and applicants in allowing them to retain an 
earlier priority date and apply the results of a completed labor market 
test. However, as discussed later in this Preamble, the equities do not 
support retention of the earlier priority date. Accordingly, in light 
of the evidence that substitution is an important contributor to fraud 
in the labor certification program and of DOL's statutory interest in 
protecting U.S. workers by reestablishing worker unavailability 
whenever a position once again becomes vacant, the demonstrated ``black 
market'' in labor certifications, and the significant number of 
prosecutions for fraudulent activity related to the program, we 
conclude the benefits to elimination outweigh the potential 
disadvantages. As stated previously, the Department will continue to 
work with other Federal agencies with an interest in the employment-
based immigration system to explore, under appropriate circumstances, 
potential alternatives to the current practice.
2. Evidence of Fraud
    Several commenters mentioned that the Department has not provided 
evidence of or statistics on widespread labor certification fraud or 
abuse and needs to consider the benefits of substitution against 
relatively few abuses. One commenter opined that elimination is 
appropriate only when a policy is commonly or largely misused. It 
stated the burden is on the Department to show the connection between 
fraud and substitution, and to establish that its elimination will not 
impede legitimate business practices.
    Some commenters questioned the effectiveness of eliminating 
substitution; they were concerned the rule does not target the most 
common sources of abuse or deter persons with intent to defraud. One 
commenter suggested that persons intending to engage in these abuses 
will find the substitution prohibition does not provide a significant 
obstacle to their endeavors. It stated such persons will remain free to 
file fraudulent applications naming the intended beneficiary and that 
substitution elimination will only succeed in moving the initiation of 
the fraudulent transaction with the foreign national back to a point in 
time before the filing of the application. The commenter asserted it is 
highly questionable whether such a minor achievement justifies the harm 
done to legitimate employers by the prohibition of substitution. Some 
commenters claimed the substitution prohibition will do little to 
eliminate the filing of applications without the knowledge of the 
employer, and the filing of applications by employers who are paid to 
engage in a fraudulent scheme and who have no intention of filling the 
job opportunity described in the application. Citing U.S. v. Kooritzky, 
No. 02-502-A (E.D. Va. 2003), they observed those who are determined to 
commit fraud will find a way to commit fraud.
    The NPRM detailed the reasons for our proposal to eliminate the 
practice of substitution. Our experience with the failures of this 
practice is longstanding and shared by other Federal agencies. The 
Department disagrees that eliminating substitution contributes only a 
``minor'' achievement to addressing the realm of abuses over which the 
Department has control. The fraud cases prosecuted even within the 
recent past indicate a significant number of instances where 
substitution played a role in fraudulent activity in obtaining an 
immigrant benefit. See, e.g., U.S. v. Yum (E.D. Va. 2006); U.S. v. 
Mandalapa, No. 205-NJ-03117-PS (D.N.J. 2006).
    The Department continues to believe, based on the activity in these 
and other cases, that fraudulent substitution is a core contributor to 
the marketability of labor certifications because it is only if one can 
substitute that one can benefit from a certified application naming 
another individual. This marketability results in the use of labor 
certifications for fraudulent purposes--by aliens and employers with no 
intent to have a legitimate employment relationship.
    We agree there are numerous sources of fraud in employment-based 
immigration programs government-wide, and individuals intent on 
committing fraud and abusing the system may still find a way to do so. 
However, the existence of other types of fraud, separate from that 
generated by the practice of substitution, does not obviate the need to 
address the documented fraud related to alien substitution. As 
described earlier, the Department has instituted specific checks and 
balances in the PERM process to address and prevent the filing of 
applications without the employer's knowledge. For example, the 
National Processing Centers contact the employer directly to confirm it 
is aware of the application and is sponsoring the alien, and the ETA 
Form 9089 requires distinct contact information for the employer and 
the attorney or agent filing the application. The substitution 
prohibition enhances and supplements existing anti-fraud and program 
integrity measures.
    Alternatives to a regulatory ban on substitution, including 
limiting or tailoring the option to substitute--One commenter asserted 
the elimination of substitution in no way facilitates the 
identification of fraudulent labor certification applications, and this 
rule instead takes a ``shotgun'' approach at the expense of legitimate 
program users. The comment stated the goal of reduced fraud is better 
achieved by heightened enforcement measures, which it states the 
Department has already put in place in the PERM program. The commenter 
also pointed to traditional law enforcement measures, like the

[[Page 27911]]

discernment of patterns in groups of applications filed by a given 
employer or attorney, to ferret out fraud and abuse. One commenter 
argued existing regulations provide a sufficient basis to prosecute 
employers, employees, and attorneys alike who engage in fraudulent 
activity associated with the permanent labor certification process. 
Others also suggested there is no need to ban substitution because of 
the additional provisions prohibiting the sale, barter, or purchase of 
labor certifications at Sec.  656.12; the safeguards already in place 
at the Backlog Processing Centers to confirm the bona fide nature of 
applications; and the PERM program's strict employer registration 
requirements. Another commenter stated it is concerned about the 
elimination of substitution in small town or rural areas where 
employers have great difficulty finding qualified engineers, and 
requested the Department relax its requirements for rural or small town 
situations.
    One commenter suggested that in order to limit occurrences of 
fraud, DOL should limit the prohibition on substitutions to filings 
made under section 245(i) of the INA. As an alternative, the commenter 
suggested the establishment of an exception to the rule for large 
corporations. The commenter also suggested the Department could 
establish appropriate criteria to allow employers who, for example, 
have a demonstrated record of filing appropriate labor certification 
applications to use substitutions.
    The Department disagrees with these comments. The heightened 
enforcement measures in the PERM program are designed to catch fraud 
``in process'' and do not address fraudulent activity that transpires 
thereafter, as the new substitution policy will. Further, the 
prohibition on substitution is not designed as a fraud detection 
mechanism, but rather as one of several protective measures to 
altogether prevent fraud related to this activity by preventing the 
commodification of labor certifications. The prohibition will be more 
effective because it will cover applications filed under 20 CFR part 
656 in effect before and after March 28, 2005. Further, while we agree 
that other fraud prevention and detection methods may be available, the 
effectiveness of those other methods does not remove the need for 
additional, targeted techniques like those instituted in this Final 
Rule. For example, we are well aware of other laws, such as those 
governing perjury, that support detection and prosecution of fraud. 
However, such statutes are not always sufficient to prevent, deter and/
or redress unlawful conduct. By removing the opportunity to engage in 
the fraudulent activity, this rule permits existing investigative and 
prosecutorial resources to be better focused, and frees resources 
across government agencies for other pressing needs.
    We have no programmatic evidence that applications filed under 
section 245(i) are particular sources of fraud. In addition, this 
suggested alternative would result in a one-time solution, since the 
INA section 245(i) cases have already been filed and are being 
processed in the Department's Backlog Processing Centers. Further, such 
a policy would establish unequal rules for employers based upon the 
unsupported assumption that applications filed under section 245(i) are 
the only ones in which substitution fraud occurs. Labor certifications 
issued for 245(i) cases are indistinguishable from others and require 
the same steps of employers; absent a strong rationale, they should not 
be subject to different conditions or limitations than the limitations 
that attach to other labor certifications.
    We also do not agree that exceptions for large corporations or for 
rural areas are warranted. Exceptions for certain categories of 
employers, as suggested by commenters, do not further the Department's 
obligation to ensure a sufficient test of the labor market for the 
admission of each alien each time a job opportunity opens. We also have 
determined that it is not wise to establish a list of pre-approved 
employers, in part because the types of fraud we are targeting by this 
Final Rule are in some cases committed by attorneys and agents without 
the knowledge of the employer named on the application.
3. Change in Conditions That Originally Warranted Allowance of the 
Practice
    Various organizations provided comments concerning current 
processing times and the Department's remaining backlog of permanent 
labor certification applications in relation to the proposed ban on 
substitution. These commenters generally took issue with the 
Department's premise that substitutions are no longer needed to 
accommodate application processing delays. Some commenters questioned 
the premise based on the number of applications pending at the 
Department's Backlog Processing Centers and experiences to date with 
applications filed under the PERM system. They stated even if the 
Backlog Processing Centers meet what appears to be an unrealistic 
backlog elimination goal, the premise is quite obviously false.
    For example, one commenter stated it has 1,100 pending, 
unadjudicated labor certification applications and that, in many cases, 
because of the multi-year adjudication times for these applications, 
the original alien beneficiary has already moved on to a new position 
and the employee currently in the position has become the new intended 
beneficiary of the application. Another commenter referred to over 
1,000 Reduction-in-Recruitment applications pending at the Department's 
Backlog Processing Centers, and stated about half of all of its PERM 
applications still remain pending for up to five months from date of 
submission. Both commenters suggested the Department should continue 
its efforts to eliminate the backlog and to speed up the PERM process 
prior to considering changes to the practice of substitution.
    The Department disagrees. The agency operating conditions under 
which alien substitution was initially permitted have noticeably 
changed. The Department acknowledged in the preamble of the proposed 
rule that the strongest historical argument in support of substitution 
has been the length of time it once took to obtain a permanent labor 
certification. 71 FR at 7656, 7659 (February 13, 2006). However, the 
Department also noted the streamlined process introduced by the PERM 
regulation has significantly reduced the labor certification processing 
time for applications filed under the new system. Since the PERM 
program began accepting applications on March 28, 2005, 68 percent of 
the certified applications have been processed in less than 60 days. 
And in FY 2006 alone, approximately 75 percent of the certified 
applications were approved in 60 days or less. In addition, the PERM 
system will continue to improve as we gather baseline information from 
which to implement process improvements. In other words, we expect 
applications to be adjudicated at least as quickly in the future as the 
system builds upon its knowledge base.
    With respect to the pending applications at our Backlog Processing 
Centers, we have significantly reduced the number of backlogged 
applications from an estimated 365,000 to less than half that number. 
This effort places us on target to meet our goal of eliminating the 
backlog by September 30, 2007. Thus, the argument in support of 
allowing substitutions to continue because of long processing delays 
has been appropriately addressed by both the new, streamlined PERM 
process and the large reduction in backlogged applications. In light of 
these changes,

[[Page 27912]]

we believe it is imprudent to wait to adopt this rule, as some 
commenters suggest, until all backlogs are completely eliminated, thus 
giving those who wish to fraudulently use substitutions additional time 
to do so.
4. Extending Regulation to Pending Applications for Permanent Labor 
Certification and to Approved Certifications
    The Department received a number of comments opposing the 
application of the substitution ban to applications filed under 20 CFR 
part 656 in effect either before March 28, 2005, or on or after March 
28, 2005, and to certifications already granted. These commenters urged 
the prohibition on substitution should be limited to only those 
applications filed under the current streamlined regulation and should 
not encompass any applications filed under the 20 CFR part 656 in 
effect before March 28, 2005.
    Commenters stated employers and employees across the country have 
made critical hiring and transfer decisions in reliance on the 
availability of substitution. They stated that by applying the rule 
change to all substitutions except those approved by the effective date 
of the Final Rule, the Department would be setting itself up for 
further challenges and pressures. The commenters cited Bowen v. 
Georgetown Univ. Hospital, 488 U.S. 204 (1988), asserting it supported 
their contention that a Federal agency lacks the power to issue 
retroactive rules absent a statutory grant of authority. They contended 
it is unfair, and most likely unlawful, for the Department to change 
the rules midstream, and that any change in the rules governing 
substitution should only be prospective in effect.
    Others commented that the Department's proposed regulation 
constitutes a retroactive ban that raises legal questions. Some stated 
the proposed rule improperly seeks to retroactively invalidate approved 
labor certification applications, when such approval was obtained under 
the current rule that such certifications are ``valid indefinitely.'' 
Others stated the proposed application is contrary to the prohibition 
on retroactive agency rules as found in the Administrative Procedure 
Act (APA). They noted that, under the APA, a rule is defined as the 
whole or part of an ``agency statement of general or particular 
applicability and future [emphasis added] effect designed to implement, 
interpret, or prescribe law or policy.'' Commenters stated the 
Department would need specific authority from the Congress to 
promulgate retroactive regulations. Several commenters referenced 
Health Ins. Assn. of America, Inc. v. Shalala, 23 F.3d 412, 423 (D.C. 
Cir. 1994) for the proposition that, under the APA, rules may only have 
future effect. The court cited Justice Scalia's concurrence in Bowen v. 
Georgetown Univ. Hosp., 488 U.S. 204, 216-23 (1988), which interpreted 
the APA to mean that a rule is a statement that has legal consequences 
only for the future and found that a rule that alters a future 
regulation in a manner that makes worthless substantial past investment 
incurred in reliance upon the prior rule may for that reason be found 
``arbitrary'' or ``capricious.'' One commenter asserted the proposed 
provisions eliminating substitution would be illegal retroactive 
rulemaking because employers have filed applications with the 
expectation of substitution as a potentially significant benefit should 
the original beneficiary drop out, and this benefit is a form of a 
property right.
    One commenter argued the application of the rule proh