The 2018 CW Act
(The Northern Mariana Islands U.S. Workforce Act of 2018)
A big concern for new investors to the CNMI is how they will staff their businesses. The CNMI has a very small labor pool, and essentially full employment.1 New investors hear about CW Visas and there seems to be a general impression that the CW Visa Program will allow them to hire all the foreign employees they will need. That is in fact not the case. The CW Act is a temporary solution to the problem of the CNMI not having enough US Citizen workers. This article will briefly explain the Northern Marian Islands U.S. Workforce Act of 2018 that was signed into law by President Donald Trump on July 24, 2018.2
The Purpose of the Act is to Promote Hiring US Citizens and to Protect Them in Their Employment
The Act has three stated purposes:
1. To increase the percentage of United States workers in the CNMI while maintaining the minimum number of workers who are not United States citizens;
2. To encourage the hiring of United States workers; and
3. To ensure United States workers are not put at a disadvantage in employment or displaced by foreign citizen workers.
Act at Section 2.
The purposes of the Act do not include promoting the hiring of foreign workers, but the Act does recognize that because of the changing nature of the CNMI economy, foreign citizen workers are needed in the CNMI. The expectation is that overtime, the CNMI will be able to train enough local US Citizen employees to fill all the available jobs. The reality is that the population is too small to support what the economy could be here, and to realize the full potential of the local economy, a large number of foreign workers will always be needed.
Transition to an All US Citizen Workforce in the CNMI
The new Act amends a similar act from 2008, called the Consolidated Natural Resources Act of 2008 (the “CNRA”). The CNRA created a special category of work visa called the “CW Visa” just for the CNMI. Under the CNRA, CW Visas were to be phased out over a ten-year period and all the workers in the CNMI were to be US Citizens by November 2019. The Northern Marian Islands U.S. Workforce Act of 2018 (the “CW ACT”) essentially takes the number of foreign workers in 2016 who had valid CW Visas and starts with that number (13,000) as a cap on foreign workers for fiscal year 2019. Each year the cap is reduced by 500 until 2023. Then it drops by 1,000 until 2029. Then it drops by 4,000 and ends after the first quarter of 2030.
This is the schedule for the reduction of foreign workers in the CNMI labor force under the CW Act:
No Construction Workers Holding CW Visas
The CW Act expressly prohibits construction workers from receiving a CW Visa. The reason for this is that under the CNRA construction workers took so many slots the cap was repeatedly reached, and many businesses were unable to hire the workers they needed. There was a belief that construction workers could be hired under a different visa program, the H-2B program. The truth is that the H-2B program allows construction workers to be brought in for specific projects. For small projects (like a homeowner adding a room to their house, or a business owner wanting to renovate their store) finding construction workers is going to be very difficult. But big projects like hotels and resorts should be able to get the construction workers they need under the H2B program, but not the rest of us.
Restrictions on Eligible Employers
The CW Act seeks to ensure only legitimate employers can hire foreign workers. For an employer to be eligible to hire foreign workers under the CW Act the employer must have “substantially complied with wage and hour laws, occupational safety and health requirements, and all other Federal, Commonwealth and local requirements related to employment during the preceding 5 years.”3 The employer must also not engage in prostitution or human trafficking or “knowingly benefit” from those or other illegal activities.4 In addition, the employer cannot have an owner, investor, manager, or other person meaningfully involved with the company who has themselves violated either of these two provisions.5 And the employer cannot be a successor to a company that violated these provisions.6
Employers will also have to participate in and be in good standing with E-Verify, and the employer must meet all local requirements to be in good standing as a business.7 One requirement of the local law is that all employers must have in number in their workforce, US Citizen employees equal to or greater than the percentage of available US Citizens in the CNMI workforce overall.8 The number of US Citizens in the CNMI workforce is roughly 30%. So what this means is that at least 30% of a company’s employees must be US Citizens.
Just to be clear, at least 30% of a company’s employees must be US Citizens.9
Mandatory 30-Day “Vacation” Every Two Years
A new provision of the CW Act involves the mandatory exit of foreign workers for 30 days every two years. Basically, the CW Visa is a one one-year visa that can be renewed. But before it can be renewed for a third year, the foreign worker must exit the CNMI and stay out for 30 days. 10
It is, however, possible to get a three-year CW Visa for employees who were present in 2015 and every year thereafter. The three-year CW Visa can be renewed once for an additional three years.11 It is unclear what happens after that. Possibly the employee must exit for 30 days and then can reenter on a one-year CW Visa.
Employers Must Pay the “Prevailing Wage”
Employers who hire foreign workers under the Act must pay wages that are “not less than the greater of”: (1) the CNMI minimum wage; (2) the Federal minimum wage; or (3) the prevailing wage that is applicable for the occupation.12 The prevailing wage is based on a survey conducted by the Governor and the Secretary of Labor, and will always be higher than the CNMI minimum wage and most likely will also be higher than the Federal minimum wage.
Regulations Still Needed
The Secretary of Homeland Security and the Secretary of the Department of Labor are required to issue rules specifying how they will implement the new Act.13 The rules are due in 180 days.14 Fortunately, USCIS has agreed to begin immediately processing renewals of existing CW Visas that were cut off by the cap that was in place up until the CW Act became law on July 24, 2018. But regulations setting forth how the Act will be implemented are needed. For example, the 30-day mandatory “vacation” that CW Vise holders must take before a third-year renewal can be processed may not need to be 30 consecutive days. If it is 30 consecutive days that will hurt both employers and employees, but if it is allowed to be spread over the two-year initial period that will still meet the intent of the Act. USCIS will need to let everyone know by regulation how these 30 days are to be taken and also address many other issues.
The New CW Act Saves the CNMI Economy but Is Not A Solution to the Labor Shortage Problem
The CW Act was absolutely necessary for the CNMI economy. As mentioned, the US Citizen workforce in the CNMI can cover only about 30% of the available jobs. If 70% of the workforce had to exit the CNMI with the expiration of the CNRA, it would not close down just 70% of the businesses in the CNMI. The ripple effect of pulling that many income earners out of the economy would likely force the shutdown of 95% if not more of the CNMI’s businesses.
The CW Act is a transitional act and sunsets in basically 2030. The CNMI population will have to triple by then to meet all the available jobs today, and all indications are that the CNMI economy can continue to grow from where it is now. By 2030 the CNMI may need five times the number of adults in the workforce than it presently has. How will the CNMI be able to reach those numbers?
It is important to keep in mind that most of the jobs in the CNMI are unskilled. The only industry here (and really the only industry that will ever be here) is the tourist industry. The CNMI has beautiful beaches, warm weather, and an engaging island culture. But the CNMI is a chain of islands. The tourist industry drives the CNMI economy.
The tourist industry needs hotel workers to manage the front desks, change the bedsheets, and keep the hotels clean and operating. Workers are also needed in the restaurants to serve the food and clean the dishes. Workers are also needed in the giftshops and stores to sock the merchandize and ring up sales. Workers are also needed to drive and maintain the tourist buses and keep the tourist sites clean. These are all unskilled or semiskilled jobs.
Even if the CNMI pays wages for these unskilled positions much more than what is paid on the mainland USA, workers from the mainland are going to be reluctant to move so far away from their families. The costs of travel to the mainland to visit families is prohibitively high, and the time it takes to get back and forth from the mainland is too long. US Citizen workers will never relocate from the US mainland to the CNMI to work in unskilled positions in the tourist industry.
The H1 visa program is available for CNMI employers, but H1 visas are not available for unskilled positions.
The reality is a choice has to be made: allow foreign workers and allow the CNMI to have a thriving tourist industry; or require the full CNMI workforce to be US Citizens and accept that the CNMI will not be able to support a large tourist industry. What is a shame is that the people of the CNMI will not be able to make this choice. The decision will be made for them by a government in Washington DC that is not elected by the people of the CNMI.15
As a long time attorney and resident of the CNMI, I will offer a little historical explanation as to why the CNMI even has CW Visas. In short, the CNMI controlled its own immigration until that control was taken away by the federal government when the CNRA was enacted. The enactment of the CNRA was politically motivated by certain Washington DC politicians to get back at a lobbyist, Jack Abramoff, and at former House of Representatives Majority Whip, Tom DeLay.
For about 15 years, from about 1988 until about 2002, the CNMI had a garment manufacturing industry. This industry existed on an island with no natural resources, electrical grid problems, an insufficient workforce, far from mainland US markets where the garments were sold, and far from China where the fabric came from to make the garments for two reasons: (1) a quota was placed on knit goods manufactured in China that did not apply to garments made in the CNMI, and (2) the CNMI controlled its own immigration. The CNMI allowed Chinese citizens to work in factories on Saipan. The factories were mostly owned by Chinese. This setup allowed Chinese garment manufactures to get around the quota (what was made on Saipan was technically made in America).
There were labor abuses in the factories, and they got national attention. Although the Department of Labor, the Occupational Safety and Health Administration, and the Equal Employment Opportunity Commission all had investigator and attorneys who enforced federal laws in the CNMI, certain politicians in Washington tried for year to take away the CNMI’s control over immigration as the ultimate way to end labor abuses in the factories. Jack Abramoff16 and Tom DeLay17 successfully blocked those efforts…until 2008.
In 2008 the Democrats obtained a majority in both Houses and Barack Obama was elected President. The Democrats then set about going back over all the ways that they had been thwarted from their agenda by lobbyists like Abramoff and Republicans like DeLay. They remembered the garment industry in the CNMI. They enacted the CNRA.
The CNRA took away from the CNMI its control over immigration and who could get a visa to work in the CNMI. The CNRA created the CW Visa as a transitional visa to apply for 10 years (until 2019) and then all workers in the CNMI would have to have US Citizenship or visas issued pursuant to federal law (no more CW Visas).
What makes what the Federal Government did in 2008 by enacting the CNRA particularly unjust is that the trade restriction on knit goods (the quota) had expired in 2002. By 2004 the last garment factory on Saipan that shipped knit goods to retailers on the mainland United States had closed.
The good news is that the CW Act was signed into law and now new investors should be able to hire the foreign employees that they need to open their new businesses. But ultimately, new investors to the CNMI must plan to hire US Citizens. Having 30% is the minimum. New investors should fill as many positions as possible with US Citizens.
Michael has been practicing law for more than 25 years. He has taken and passed bar exams in California, Hawaii, and the Commonwealth of the Northern Mariana Islands. He has appeared in courts in California, Guam, the Republic of Palau, Texas, Louisiana, and actively practices and appears in the Commonwealth.
1 There has been a lack of training available in the CNMI and the Act does try to provide funding for more vocational education and apprenticeship programs for the local workforce. See, Section 3(a)(6)(iii).
2 The full Act can be found at www.congress.gov/bill/115th-congress/house-bill/5956/text
3 Section 3(iv)(II)(cc)
4 Id., at (dd).
5 Id., at (ff).
6 Id., at (gg).
7 Section 3(iv)(II) at (ee) and (bb).
8 See, 3 CMC §4525
9 It is possible to obtain a waiver but waivers of this requirement are not easy to get.
10 Section 3(7)(A)(ii).
11 Id., at Section 3(7)(B).
12 Id., at Section 3(2)
13 Id., at Section 3(2)
15 The residents of the CNMI are not allowed to vote for the US President. Every state of the United States has two Senators. The CNMI is allowed no Senators. The residents of the States have Congressmen. The CNMI has a Congressman but he is only allowed to vote in Committee.
16 Jack Abramoff pled guilty in 2006 to charges arising principally from his lobbying work for Native American tribes involved in the casino gambling industry. An interesting movie was produced related to the scandal called Casino Jack starring Kevin Spacey. See, https://www.imdb.com/title/tt1194417/
17Tom DeLay had a colorful career. He was convicted on the corruption charges in 2006, but the conviction was reversed on appeal. Known as “The Hammer” when he led the Majority in the House, after his political career