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Tech Industry

Ruling could be a boon to H-1B workers

A California judge may order a recruiting firm to pay more than $200,000 in attorneys fees on behalf of an Indian computer programmer who sued over a restrictive work contract.

A California judge may be close to issuing a final ruling on behalf of an Indian computer programmer who sued over a restrictive work contract--a decision that could result in a flood of similar suits targeting labor practices that are pervasive in the tech industry.

According to a tentative ruling from San Mateo County Superior Court Judge Phrasel Shelton, contract recruitment firm Compubahn must pay a total of $215,050.61 in legal fees and other expenses to Indian computer programmer Dipen Joshi. The 33-year-old from Gujarat, India, originally sued Compubahn in January 2000 for fraud, misrepresentation and violation of a California statute against unfair competition.

The tentative ruling could become official as soon as Wednesday. If Shelton stands by his initial ruling, which is still under submission, it would mark 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.

The newest twist in Joshi's protracted legal battle may also give teeth to a previous order forbidding restrictive work contracts for temporary employees. Companies that specialize in finding and placing foreign programmers at U.S. companies--derisively dubbed "body shops"--may no longer force workers to sign non-compete agreements or penalize them for quitting, according to a February ruling against Compubahn.

The tentative ruling, if upheld, may also entice more H-1B visa contract workers to sue the growing ranks of contract recruitment businesses. San Francisco-based attorney Mike Papuc, who represents Joshi, said he has received at least a dozen phone calls from Indian programmers facing stiff penalties after breaking their severe contracts.

"This is the first ruling that will have a financial effect on the company, which hasn't had to pay anything out," said Papuc, who said he has logged 875 hours of work for Joshi.

Papuc calls contract recruitment a form of "indentured servitude" for foreign workers who don't necessarily understand English or the U.S. legal system. He says many foreign workers have paid large sums of money to settle their contract disputes out of court because they can't afford to hire American attorneys or are under the impression that a court battle could jeopardize their visa. Compubahn, for example, required Joshi to pay a $25,000 "finder's fee" and sign a contract that forbade him from working directly for clients.

"These are risky cases for attorneys to undertake because if you're going to do the case right, it takes a lot of time and requires a lot of money," Papuc said. "But these people don't necessarily have a lot of money. The other side has lots of resources, and they want to send the message to all their employees that it will cost you lots of money if you fight this and it's better just to submit and walk away. These people have to pay for their freedom, which is morally wrong and outrageous."

Compubahn representatives did not return phone calls Tuesday to offices in Union City, Calif., and Woodbridge, Va. Attorney Navneet Chugh of the Cerritos, Calif.-based Chugh Firm, which represents Compubahn and specializes in U.S. and Indian immigration and employment law, did not return phone calls Tuesday.

When Oracle beckoned
Joshi said he was happy with the tentative decision and hopes friends and colleagues working for body shops understand that they are no longer subject to restrictive work contracts.

"If it goes into effect for everyone, then it's OK," said Joshi, a Fremont, Calif., resident now working for Oracle. "But it's been tough. It's not worth years of this kind of legal stuff."

Joshi 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 per se 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 Tuesday. "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.

Trying to settle
Wary of entering the Byzantine U.S. legal system, Joshi tried to settle out of court--a routine tactic for many foreign workers. They often settle because it's cheaper to cave in to the former employer than to pay for an attorney. Many are unaware of right-to-work statutes and state codes forbidding some non-compete agreements.

Compubahn refused to settle out of court. 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 attorneys fees.

On Feb. 27, 2001, a judge ruled that Compubahn's contract was too strict and ordered the company to stop using it. On Tuesday, Shelton told all parties that Compubahn must pay $207,051.50 in attorneys fees and $7,999.11 in other costs to Joshi. After hearing arguments from attorneys on both sides, Shelton then took the case back under submission and is likely to release an official ruling later this week.

It's unclear whether Shelton will uphold the tentative ruling. Shelton did not return phone calls, and a clerk said the judge would not comment.

But the tentative ruling, if upheld, would be a major victory for H-1B visa holders. In 2001, 200,000 foreign workers are expected to come to the United States with H-1B visas, and the number of "body shops" in areas that require large numbers of computer programmers--including Detroit, Boston, Seattle and the Silicon Valley--is expected to mushroom.

Although the U.S. media have not given much attention to the issue, concern over restrictive contracts has become a big issue abroad--especially in India. According to an April 11 article in India's Business Line titled "Castaways' Nightmare," a growing number of career advisers are urging programmers to avoid recruiters and only accept H-1B visas directly from established employers such as Oracle, Cisco Systems, Intel and other large companies.

"Never ever pay a 'finder's fee' to a company claiming to place professionals," the report advised. "The real employers don't charge you because they need you if they are bothering to consider H visa applicants!"