An August 25^th, 2026 Court Ruling on the H-2A Wage Rule:

What It Does and What Comes Next

United Farm Workers v. U.S. Department of Labor, No. 1:25-cv-01614 (E.D. Cal.)

Order dated August 25, 2026

Executive Summary

If you work in or around agriculture, chances are I don’t need to explain how critical the H-2A program is to the industry, nor do I need to tell you how grateful the agriculture community was for the recent changes made to the program by the Trump administration.  Unfortunately, the most significant administrative reforms of H-2A in twenty years, those imposed by the U.S. Department of Labor’s October 2025 interim final rule (IFR), have now been found to be unlawful, and the agriculture community will once again have to navigate a murky path forward.

On August 25, 2026, a federal district court in Fresno, California ruled on a legal challenge to the IFR that modernized the Adverse Effect Wage Rate (AEWR) methodology for the H-2A program.  The Court held that the IFR was unlawful, largely on the basis that the four central components of the IFR were inadequately explained.  The Court also concluded that most of them should have gone through a more formal notice-and-comment rulemaking procedure than the IFR process.

Importantly, the court did not outright vacate or enjoin the rule.  The AEWRs published under the IFR remain in effect … for now.  Instead, the court sent the rule back to DOL with an order to promptly produce a new wage methodology and publish new AEWRs pursuant to it.   It is quite possible that the DOL’s revised methodology (in a new rule) could create adverse effect wage rate results that are very similar to those set by the IFR, but according to the Court, DOL will have to better explain its thinking and better defend it in court.

The court kept jurisdiction of the case, meaning it will continue to monitor the administration’s next steps and, most significantly for growers, it ordered DOL to notify employers that they may owe wage adjustment payments once new rates are published.  That backpay exposure deserves every employer’s attention now and going forward.  In the meantime, employers should continue complying with the AEWRs established by the 2025 IFR.

What the Court Decided

The court reviewed four components of the IFR and found each arbitrary and capricious under the Administrative Procedure Act.  Pause here for a moment and observe that this standard – the arbitrary and capricious standard under the APA – is one that is ordinarily quite deferential to the agency.  Generally, if the agency can show it did its homework and didn’t pull its rule out of thin air, it can survive the type of challenge brought against the H-2A IFR here.  The court’s job in a case like this one is not to ask whether the agency made the best call, or even the call the judge would’ve made. It’s asking whether the agency made a reasonable call and can show its work.  The federal judge in this case concluded DOL could not meet that standard.

On the substantive issues, you will first recall that the IFR created a two-tier skill system, and that the Department predicted that as many as 92% of all H-2A workers would be classified into the lower level, Skill Level I.  The court accepted that dividing H-2A jobs into tiers is “not inherently unreasonable,” but it rejected the specific wage levels chosen.  The IFR had computed the Skill-Level I AEWR at the equivalent of the 17th percentile of the occupational wage distribution, and the Skill-Level II AEWR was computed at the equivalent of the 50th percentile of the occupational wage distribution.  The Court was clearly troubled by pegging the AEWR for Level I to that 17^th percentile, when the Department had historically used average or mean wages to set the AEWR.  It also pointed out that in doing so, DOL was contradicting certain findings the agency made during the Obama administration, and that the agency didn’t adequately explain why those findings were no longer valid.

Second, on the housing adjustment, the court found three insurmountable problems.  To begin with, it disagreed with the DOL’s position that free housing created a compensation disparity favoring H-2A workers over U.S. workers.  The Court noted that U.S. workers in corresponding employment who cannot return home daily receive the same free housing as H-2A workers, which in turn means that the adjustment to H-2A wages actually makes H-2A workers cheaper to hire than those U.S. workers (the ones who use employer provided housing).  It also held that deducting the value of employer-provided housing from the wage floor conflicts with the existing regulation requiring that housing be provided at no cost to workers.  Finally, it observed that the deduction’s mechanics could overcharge workers who work more than forty hours per week, as the deduction is applied to all of the workers’ hours and not capped at the first forty.

Third, on the switch to the Bureau of Labor Statistics OEWS survey as the wage data source, given that the USDA survey is no longer active, the court did not say OEWS can never be used.  It faulted DOL for not addressing the fact that OEWS captures farm labor contractor employees rather than farm establishments, and for not considering adjustments or alternatives to account for that. In the Court’s words:  “The IFR’s selection of the OEWS, without adequate consideration of the problems engendered by that data source, and without consideration of reasonable alternatives to adjust that data source to more accurately reflect actual farmworker wages, is arbitrary and capricious.”

Fourth, the court set aside the “greater than 50 percent” rule for classifying mixed-duty jobs, finding DOL failed to address concerns it had itself raised in earlier rulemakings.  Again, the Court did not entirely foreclose the possibility that a 50 percent rule could be justified, it more or less concluded that the Department simply did not adequately justify it.

The Court also addressed some process complaints raised by the plaintiffs.  It concluded that DOL had good cause to move immediately to select a replacement data source after USDA discontinued the Farm Labor Survey, given the year-end deadline to publish new AEWRs.  But the Court faulted DOL for issuing an IFR that was immediately effective instead of going through a full public notice and comment period when it came to the two-tier system, the housing adjustment, and the greater-than-50-percent rule to set wages.

What the Order Does Not Do

Three points to note. The order does not outright vacate the IFR. The court recognized that immediate vacatur would likely leave no operative AEWRs in place and create significant disruption for farmers and workers alike.  So the current AEWRs continue to govern while DOL works on remand.  The order does not freeze DOL into the old methodology or any particular formula; the court repeated that its review is deferential and that it may not substitute its own policy judgment for the agency’s.  This, by the way, should be appreciated by everyone, as the Court seemed to really care about the need to stay in its lane. Positively, the order does not reject the concept of modernization. Tiering survived in principle, and OEWS remains available as a data source if DOL grapples with its limitations.  Congress wrote the standard, no adverse effect on U.S. workers, but it did not mandate a single wage formula, and nothing in this order says otherwise.

The Backpay Issue: The Item That Deserves the Most Attention

The most consequential piece of this order for agricultural employers is prospective backpay exposure. The court ordered DOL to notify state workforce agencies, employers, and the public within seven days that employers who hired H-2A labor at IFR-based AEWRs during the “backpay period,” meaning the window between that notice and the date DOL issues its new methodology, may be required to make wage adjustment payments to qualifying H-2A workers and to U.S. workers in corresponding employment.

Note that the Court does not suggest that the backpay would be required for the entire period since the beginning of the H-2A workers’ employment, but just to the period after the DOL notice (which should be made by September 2^nd) and the DOL’s issuance of a new AEWR methodology.  Whether backpay is owed, and how much, is reserved until the new AEWRs exist, and the court will have the parties brief that question in more depth then.

Employers will receive DOL’s notice in the coming days, and we encourage everyone not to read it as more than it is. The notice is a disclosure the court required; it is not a finding that any money is owed, and no employer action on backpay is required at this time.

That said, the exposure is real and worth planning for. Wages paid at current AEWR levels from the date of DOL’s notice forward carry a contingent liability equal to the gap, if any, between those rates and the new rates DOL publishes. The size of that exposure is unknowable today and will turn entirely on the new methodology. Prudent employers will keep careful payroll and hours records for all H-2A and corresponding workers during this period and factor potential wage adjustments into budgeting. The faster DOL completes its work on remand, the shorter the exposure window, which is why we will be watching the remand schedule closely.

What Happens Next

DOL owes (technically, both parties owe) the court an initial status report in roughly two weeks describing its first steps and anticipated timeline for the new methodology. DOL must then move promptly to produce a new AEWR methodology and publish new rates under it.

Our Perspective

This ruling is a setback for the IFR as written, but it is not a rejection of administrative reform for H-2A. The path forward is a better-explained rule built on an even more robust record than DOL generated in the first go round, and a more full-throated defense in the courts.  Because the court faulted DOL for bypassing public comment on the tier system, housing adjustment, and classification (50%) rule, we expect the replacement rule to go through notice and comment, which realistically means current rates remain in place for at least several more weeks.

Regarding the bigger picture, our view has not changed. A wage methodology grounded in the actual economics of farm labor protects American farmworkers and keeps American farms producing. When the AEWR rises detached from market reality, farms shift away from labor-intensive crops, production moves offshore, and the country grows more dependent on imported food. Food security and farmer resiliency are two sides of the same coin, and both depend on getting this methodology right. We intend to be fully engaged on remand to help DOL do exactly that.  That process is where coalition work matters most. The record we help build, including credible economic evidence on farm labor costs, farm viability, and the consequences of pricing American farms out of production, is precisely what the court seemed to suggest was missing.

We cannot resist the urge to remind H-2A stakeholders to observe where this latest development unfolded.  A courtroom.  Agriculture continues to see its most fierce policy debates ultimately fought out before judges, not legislators.  We are so grateful for Congressional efforts aimed at reforming the program, some of which even incorporated part of the Trump IFR.  But we need those efforts to lead to adoption.

You can read a copy of the Court’s order here.