A California backlash rises over foreign IT worker replacements

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State lawmakers want to use regulatory power to keep utilities from offshoring jobs, and ask feds for broader investigation

California lawmakers have taken steps to attack the use of foreign labor to replace U.S. workers. One effort seeks to use the state's regulatory powers to prohibit utilities from shifting jobs overseas. Another legislative attack calls on federal agencies to investigate the H-1B visa program.

Both measures were approved this month by the California State Assembly.

This legislative interest stems from the decision by Southern California Edison (SCE) to lay off IT staffers as it shifted work overseas.

One bill prohibits state-regulated utilities from outsourcing any work associated with the "design, engineering and operation" of nuclear, electrical and gas infrastructure, unless they first obtain the approval of the state utility regulator.

That piece of legislation, Assembly Bill 853, says that protecting energy systems and protecting ratepayers' personal information are matters of "paramount state interest." It was approved by a 50-25 vote, with five members not voting, and now awaits state Senate action.

This bill may be one of the more significant legislative actions against offshore outsourcing in the U.S., and it could inspire lawmakers in other states. Connecticut recently saw the layoff of utility workers, but lawmakers there took no legislative action to stop it -- despite complaining about it.

A related California measure, approved Monday by the State Assembly, is a resolution asking the U.S. Department of Labor and Congress "to investigate the alleged misuse of the H-1B program." That measure, Assembly Joint Resolution 12, passed 49-20, with 11 lawmakers not voting. It also awaits Senate action.

SCE cut about 500 IT workers over the past year after hiring two India-based IT service providers. Some of the laid-off workers said that they had to train their temporary visa-holding replacements as a condition of their severance packages.

Since then, at least 11 U.S. senators have asked for an investigation into the use of H-1B visas in offshore outsourcing.

The push for legislation in California is coming, in part, from SCE's union, the International Brotherhood of Electrical Workers, Local 47. The union doesn't represent IT workers, but it believes that its members are directly affected by changes in IT operations.

Patrick Lavin, the business manager of the IBEW local, said that state legislation is needed to get SCE to change its business practices. "The way Edison is, they don't do anything or pay attention to anything unless somebody has some authority over them," said Lavin, in an interview.

The state's public utility commission, which approves rates, has authority over utilities. If the state legislature enacts a law declaring that regulated utilities "cannot outsource to India jobs, well, then that's going to be the law," said Lavin.

Asked for comment, SCE provided a letter it sent to California lawmakers detailing its opposition to the bill, and broadly said the measure “impacts hundreds of California businesses that are currently on contract with utilities and jeopardizes supplier diversity.”

Specifically, SCE said that the bill requires a utility to go through a public hearing with state regulators before it can employ a contract worker for tasks associated with design, engineering and operations. That requirement could lead to delays lasting between several months and two years, and it could bring some utility projects to a standstill, SCE argued.

The bill “has the potential to jeopardize the safe, reliable operation of electric service and thousands of California jobs,” SCE told lawmakers. The utility went on to note that the vast majority of its contract workers are in California.

It's not clear whether California's anti-offshoring bill will force SCE or any other utility that has previously offshored work to bring that work back to U.S. soil. But California lawmakers are applying heat in other ways.

The resolution seeking a federal investigation into H-1B use is broader and goes beyond utilities. It is sponsored by California assemblyman Eduardo Garcia (D-Coachella). "It is unfortunate that a program aimed at spurring economic growth and job creation may be used to lay off our U.S. workers," said Garcia in a statement.

Garcia's bill doesn't name SCE specifically, although the statement is clear about the bill's motivation. It cites the SCE layoffs as well as layoffs at Disney.

Assemblyman Donald Wagner (R-Irvine), who opposed the resolution, said the measure cited SCE without offering proof about what occurred.

"I think it's a really bad form for us to start calling out some of our own employers when we aren't a court and don't take evidence," said Wagner in an interview.

The California legislation could hurt offshore IT service providers.

“The public utilities market is an important and growing market for a number of the Indian service providers,” said Peter Bendor-Samuel, founder and CEO of Everest Group, an outsourcing consultancy and research group.

For IT service providers Tata Consultancy Services and Wipro, the public utilities market “has been consistently one of their fastest growing segments over the last two years,” said Bendor-Samuel. The importance of this segment is growing as activity in other markets slows, he added.

“This bill and the protectionist sentiment underlying it is concerning for the industry,” said Bendor-Samuel.

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