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'Body shop' must pay fees in H-1B lawsuit

A California judge rules that a consulting firm specializing in finding foreign technology workers must pay the attorney fees for a programmer who sued over his restrictive work contract.

A California judge has ruled that a consulting firm specializing in finding foreign technology workers must pay the attorney fees for an Indian programmer who sued over his restrictive work contract.

According to the original ruling, which the judge upheld April 18, recruitment agency Compubahn must pay $215,050.61 in legal fees and other expenses to Dipen Joshi. The 33-year-old from Gujarat, India, sued Compubahn in January 2000 for fraud, misrepresentation and violation of a California statute against unfair competition.

Joshi's attorney, Michael Papuc of San Francisco, originally demanded that Compubahn pay double his usual fee because of the complexity and the risk he assumed in taking the case. But the judge denied that request and ordered Compubahn to pay the regular fees. Papuc said he has spent more than 800 hours working on the case.

San Mateo County Superior Court Judge Phrasel Shelton's newest decision could result in a flood of similar suits targeting labor practices that are pervasive in the tech industry. The ruling marks a major victory for foreign professionals who work in the United States--mainly computer programmers and engineers from India, Russia and Taiwan who hold H-1B visas but may have been loath to sue their contractors because of exorbitant legal costs.

"The fact that this award came out sends a message to body shops: I'm on to you now, so watch out," Papuc said Wednesday. Papuc, who is compiling a list of H-1B visa holders who say their work contracts are overly harsh, hopes to file a class-action lawsuit against Compubahn and possibly other agencies.

In an interview last week with CNET News.com, Compubahn attorney Navneet S. Chugh said he plans to appeal the decision. He said that the ruling, based on a California code that forbids contracts that restrict an individual's right to pursue a career, should not necessarily apply to employment agencies.

"Employment agencies don't sell anything except this," said Chugh, founder of The Chugh Firm in Cerritos, Calif., which represents about 150 recruitment agencies. "All of the employment agencies in the country live on this clause. But for whatever reason the judge didn't see this.

"If we have to go to appeals court and supreme court, we'll do it," Chugh said. "It's simply not right to apply this to employment agencies. Imagine this: I go to India, put up advertisements, screen resumes, screen people, hire a person, do the H-1B visa and pay fees to the INS and my attorney. Then the person comes here and I pay for their airfare, rent an apartment for them, feed them for a few days, find a job for them. Then four days later they join Oracle, and that's legal?"

Joshi's case is one of the first regarding restrictive contracts for employment agencies. The programmer left Gujarat in March 1998 to work for Compubahn, which he thought was a computer programming company with clients such as Oracle and Sun Microsystems. The company's Web site says it provides "end-to-end solutions for its clients from database design and development through Dynamic Web-based applications."

Joshi said he soon realized that Compubahn was not a technology company, but instead a recruitment firm that placed foreign programmers in U.S. companies short of full-time, permanent workers. Soon after he arrived in the United States, he signed a contract requiring him to remain with Compubahn for at least 18 months--or else pay stiff fines.

One clause in Joshi's contract--which a judge has since found "void and unenforceable"--required him to pay a $25,000 "finder's fee" to Compubahn. Another clause forbade him from working directly for a client or having "a meeting to discuss the possibility" of doing so for a year after his departure from Compubahn. Another required him to pay all relocation and immigration costs if he left within 18 months.

In September 1998, Compubahn placed Joshi at Redwood Shores, Calif.-based database giant Oracle. He said his bosses at Compubahn actively encouraged him to get a full-time, permanent job with Oracle.

"They only asked me that if I was getting interviewed at Oracle, to say yes to it," the 33-year-old Joshi said last week. "They said, 'You'll always be asked this question, and always say yes.' That's what they're expecting."

In June 1999, when Oracle asked Joshi to join the company, he accepted. Compubahn then sent Joshi a letter demanding $77,085 for the finder's fee, a penalty for joining a Compubahn client and expenses that Compubahn incurred.

After brushing up on his state statutes, Joshi soon met Papuc, who decided to take the case on a contingency basis because Joshi didn't have enough money to cover attorney fees.

On Feb. 27, 2001, a judge ruled that Compubahn's contract was too strict and ordered the company to stop using it. Last week, Shelton told all parties that Compubahn must pay $207,051.50 in attorney fees and $7,999.11 in other costs to Joshi.