Indian IT firms are heading for a fall

India's IT firms understand software, but not America.

It is the American character not to back down, and to fight for what is right. Our children are taught this from their earliest ages. Even new arrivals, immigrants or people on work visas are quick to grasp this essential truth.

America's institutions reflect the national character. Our political system encourages sharp and hard contests. Our legal system facilitates a fight, as India's IT companies are now learning.

Three of India's largest IT outsourcing firms, Infosys Technologies, Larsen & Toubro InfoTech and Tata Consultancy Services, are involved in lawsuits filed against them by current and former employees.

The lawsuits are a problem for each of the companies. But taken together, the cases are a major threat to the Indian IT industry in America.

India's IT firms are dependent on American businesses for about half of their revenue. They can't operate in this country without work visas, such as H-1B and L-1 visas.

Thus the allegations by employees of visa misuse and harassment have broad implications and are attracting federal investigators and congressional oversight.

Infosys Technologies

Infosys Technologies was sued early last year by employee, Jay Palmer, who contended he was harassed after refusing to participate in what he alleged was a scheme to use B-1 visas, a business visitor visa, for work requiring an H-1B visa.

The visa claims raised by Palmer attracted the attention of federal investigators, and led to a grand jury investigation, with subpoenas issued by the U.S. District Court for the Eastern District of Texas.

The grand jury report has not been released.

The lawsuit also attracted the attention of U.S. Sen. Chuck Grassley (R-Iowa), who is always on the hunt for new ammunition for his longstanding efforts to get restrictions on work visas.

Meanwhile, Palmer's civil case is continuing through a discovery process.

Larsen & Toubro InfoTech

IT services firm Larsen & Toubro faces discrimination claims in lawsuits filed by two former employees, each of whom claim that their pregnancies led to harassment on the job and loss of employment.

One of the people who joined in the class action lawsuit, Nanda Pai, worked in the human resources department.

Pai's lawsuit, filed this week, alleges that there was large scale visa fraud and a subsequent cover-up at the company. In the suit, she said a particular concern was the forging of her signature on visa-related documents. Pai was worried that she was being set up as a fall guy if something went wrong.

If the U.S. government is interested in Infosys, it's probably not a reach to expect that federal investigators will also take a look at the allegations against Larsen & Toubro.

Tata Consultancy Services

Since 2006, Tata Consultancy Services and its parent corporation, Tata Sons, have been in court battling complaints from non-U.S. citizens that the company made deductions from their wages in breach of their contract while they were working in the U.S.

This week, a U.S. District Court for the Northern District of California granted class action status to the people who brought the lawsuit.

One of the plaintiffs in this case was on an L-1 visa, according to court records. The L-1, which is used for intra company transfers, has been getting much more attention lately in Washington, and that could intensify with these lawsuits.

Business groups, including Indian outsourcing firms, are urging the U.S. to makes changes to the L-1 visa that may make it easier to use the visa.

Opponents, including the AFL-CIO, call the L-1 visa "a black box" because policymakers know little about it, such as where L-1 visa workers are and what they earn.

The Tata case may provide insights.

In the Tata case, employees complained about a practice that required them to turn over their tax refund to Tata. The lawsuit argues that this practice is against the law.

Sum is greater than the parts

Infosys, Tata and Larsen & Toubro are among five top users of H-1B visas. Each needs L-1 visas as well.

The business models of each company are completely dependent on the work visa models.

In each of the cases, employees are challenging a practice or behavior.

That's how the American system works. Someone takes action in court, and then Congress and regulators step in. That's what will happen here.

The still unfolding legal cases are giving, or have the potential of giving, ammunition to regulators and policy makers that could hurt the ability of these firms to get visas.

At the same time, it is completely possible that the Indian companies may win each of the cases.

The grand jury threat may disappear. Federal investigations may evaporate. But it is the sum and not any one case, that is greater than the parts.

The Indian IT industry, as it operates in the U.S., and not any individual company, is being and will be held to account. Unless the industry realizes that, it's headed for a fall.


Copyright © 2012 IDG Communications, Inc.

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