Businessweek: America's High-Tech Sweatshops
Businessweek: America's High-Tech Sweatshops
Date: Friday, October 02, 2009 1:53 AM
<<<<< JOB DESTRUCTION NEWSLETTER No. 2060 -- 10/01/2009 >>>>>
A new Businessweek article and a sidebar that accompanies it describe some of
the fraudulent activities that occur in the H-1B program. Unfortunately the
article never explains that fraud isn't the worst problem with H-1B because
most companies can use legal loopholes in the law to exploit workers. Fraud
represents a very small percentage of the H-1B program but articles like this
one make fraud seem like the only problem.
It is my observation that focusing narrowly on fraud is favored by the cheap
labor lobby because they can make the following argument: "give us more H-1Bs
and in return we will give you more enforcement". How about if instead of
enforcement of a program we didn't ask for, they gave us our jobs back?
H-1B is a relatively small guest worker visa program and yet our government
shows an inability to manage it. The program should be used as an example
whenever employers ask for larger guest worker visa programs. One thing you
can count on -- fraud and government ineptitude will only get worse as the
programs get bigger.
Overall the article has some good investigative journalism, but there are two
pieces of misinformation that need to be discussed.
The first one tries to exonerate employers by implying that they don't know
what their contractors do, and therefore bear no responsibility for the fraud.
Don't believe it for a second -- employers know exactly what is going on but
they choose to give it a nod and a wink as long as salaries are kept low.
U.S. executives often have little visibility into the treatment
of contract employees because several layers of companies are
involved. One recruiter for a major U.S. outsourcing firm says
there's no way his clients know how body shop workers are
treated because, until recently, even he didn't know.
The second myth repeated by Businessweek is perpetrated by those who want to
continue to flood the labor market with cheap foreign labor. They argue that
H-1B is an indentured labor program (which is true) and that all the problems
would be solved just by handing out green cards so that guest workers can
become instant citizens. The "freedom" Businessweek espouses for these workers
just means they will be as equally undesirable as American citizens because
"Today's immigrant will be tommorow's victim"
(Richard Tax, American Engineers Association, 1996).
Businessweek ignores the law of supply and demand which in this case means
that salaries will go down as more workers enter the labor market. BW
obviously understands these basic laws of the economy but they choose to
ignore them in order to hide their real purpose which is to cater to the needs
of their executive readership.
While American companies may overlook the treatment of contract
workers in their midst, the workers are vulnerable because of
government policies. When a foreign worker comes into the
country on an H-1B visa, the visa is held by the employer, not
the worker. If an employee complains, the company can terminate
its visa sponsorship, forcing the worker to leave the U.S.
Workers can't shift jobs unless they find another sponsor, which
can be difficult. And while workers can gain their freedom with
permanent citizenship, the wait even for high-skilled visa
holders can be 5 to 10 years.
Be sure to go to the main article because there is a video report worth
America's High-Tech Sweatshops
How the System Works
October 1, 2009, 5:00PM EST text size: TT America's High-Tech Sweatshops U.S.
companies may be contributing unwittingly to the exploitation of workers
imported from India and elsewhere by tech-services outfits
By Steve Hamm and Moira Herbst
Vimal Patel was studying for a master's in business administration in London
when he saw an advertisement for work in the U.S. The ad offered a job in the
tech industry, as well as sponsorship for the kind of work visa that allows
foreign nationals to take professional-level jobs in the country. So Patel
applied and paid his prospective employer, Cygate Software & Consulting, in
Edison, N.J., thousands of dollars in up-front fees. But when Patel arrived,
Cygate had no tech job for him. He ended up working at a gas station, and
Cygate nevertheless took a chunk of his wages for years, according to
documents in a criminal case against Cygate.
After a federal investigation into Cygate, Patel and five other natives of
India recruited by the company pled guilty to visa violations in June. They
were sentenced to 12 to 18 months of probation, assessed fines of $2,000 each,
and now face deportation. But at Patel's sentencing in the federal courthouse
in Newark, N.J., his lawyer said the slim 36-year-old, with a mop of brown
hair spilling over his forehead, was more victim than villain.
Like many ambitious workers from abroad, he came to the country seeking his
fortune, and he suffered for the effort. "It's a sad day," said Anthony
Thomas, the public defender assigned to represent Patel. "He always dreamed of
coming to the U.S."
Cygate, which changed its name to Sterling System after the lawsuit, is one of
thousands of low-profile companies that have come to play a central role in
the U.S. tech industry in recent years. These companies, many with just 10 to
50 employees, recruit workers from abroad and, when possible, place them at
U.S. corporations to provide tech support, software programming, and other
services. While many outfits operate legally and provide high-quality talent,
there is growing evidence that others violate U.S.
laws and mistreat their recruits.
Several types of fraud have become common, according to documents from recent
lawsuits and interviews with foreign workers, employers, lawyers, and
consultants. In some cases companies target young men and women hungry to get
well-paid tech jobs in the U.S. and charge them exorbitant fees for visas,
which is not allowed under American immigration laws. Even after paying, some
workers never get a visa; those who do may find the company they paid has no
job for them, as Patel did. This violates U.S. law because companies are
supposed to have an open position before they apply for a work visa.
Workers who land tech jobs may face other kinds of trouble. Some companies
place foreign workers at client sites and then siphon off part of their pay or
charge ongoing fees, which violates U.S. law. Many workers allege they're not
paid in between jobs at client sites, though such "benching"
without pay isn't allowed either. In other cases, companies claim they're
employing people in low-salary regions when they're actually working in high-
wage areas, in violation of rules requiring payment of the region's prevailing
Sterling President Nilesh Dasondi was charged with multiple counts of visa
violations in the case filed by the U.S. attorney in New Jersey. The
government says he collected fees of up to $15,000 from the six workers, left
them to find jobs on their own, and extracted more fees to launder their pay
through his company. The workers acquiesced because Dasondi, like all
employers of visa recipients, held their visa documents and could have revoked
the papers if they objected. "This is a microcosm of a big issue that's facing
our country visa fraud," said Sandra L. Moser, the assistant U.S. attorney
prosecuting the case in an interview after Patel's sentencing.
Dasondi greeted a reporter at the doorway to his offices in Edison one summer
day. From a glass door on the parking lot side of a beige one-story building,
he led the way through a warren of cramped rooms, with half a dozen people
pecking away at computer keyboards. "My life is such a mess right now," he
confided once he was seated in a small conference room. He wouldn't discuss
details of the cases against him or Patel, but he promised to talk after it is
resolved. Dasondi's lawyer, Eric R. Breslin, says his client "has been an
asset to his community" and that Sterling "performs legitimate services for
Tech service outfits such as Sterling have thrived in recent years because of
shifts in the U.S. economy. As cost-cutting pressures have increased,
companies turned over management of tech systems and other back-office
operations to outsourcing firms, including many that bring workers from India
and other countries into the U.S. on temporary visas such as the H-1B.
One important way outsourcers hold down costs is by keeping a lean workforce
at each client site then turning to smaller companies, such as Sterling, when
they need to increase staff for specific projects, such as installing new
software or building a new Web site. These companies are known as "body shops"
because of their role, and often rely heavily on foreign workers who come into
the country on H-1Bs and other visas. "This is where a lot of the shenanigans
take place," says Ron Hira, an assistant professor of public policy at the
Rochester Institute of Technology who has written extensively on work visas. A
study by the federal government last year estimated that 54% of visa rule
violations were committed by companies with fewer than 25 employees.
U.S. companies usually don't know and don't press to find out which body shops
are tapped to support their tech operations. The result is that prominent
American companies can easily end up doing business with tech service outfits
that violate visa laws. Breslin wouldn't identify specific Sterling clients,
but he says they include "significant companies." Dasondi named Computer
Sciences (CSC) as one customer in a 2006 lawsuit: Dasondi wanted the
technology giant to pay him for hiring away one of his employees. Computer
Sciences would not comment on the case beyond saying it had been settled.
In recent months workers have alleged mistreatment while working for body
shops in the offices of Qualcomm (QCOMM) and JPMorgan Chase (JPM). In a civil
suit filed in May and a complaint to the U.S. Labor Dept., Prasad Nair charged
that Unified Business Technologies got him an H-1B visa in
2007 by saying he would work in the company's Troy (Mich.) offices and receive
$60,000 a year as a programmer and analyst. Instead, UBT sent him to work at
chipmaker Qualcomm's offices in San Diego, where the cost of living and
prevailing wage for such a position are much higher. The 32-year-old alleged
UBT made unlawful pay deductions, delayed payments, failed to pay overtime,
and postponed health benefits for his family. David Blanchard, Nair's
attorney, says he struggled "paycheck to paycheck" to take care of his wife
and 9-month-old daughter and regularly ate at Burger King to save money.
AN OPAQUE SYSTEM
UBT's lawyer, John G. Coutilish, says Nair's charges are "baseless."
Coutilish says UBT agreed to make a "nuisance" payment of $2,500 to end the
civil suit, though the Labor Dept. investigation is continuing. UBT has filed
its own suit against Nair alleging he quit without giving proper notice and
defamed the company with his accusations. Qualcomm declined to comment on the
case, but a spokeswoman says the company requires vendors it works with to
"explicitly acknowledge that they must comply with all applicable laws and
regulations, including employment and immigration laws."
In another complaint to the Labor Dept., Benly Ebenezer alleges he was
underpaid or not paid at all while working in the Manhattan offices of
JPMorgan. In the complaint, Ebenezer, who has two master's degrees in computer
science, was brought to the U.S. on an H-1B visa by Itek Consulting in 2005.
Ebenezer says Itek paid him about 10% less than the promised $50,000 a year
while he worked at the bank, and then stopped paying him altogether between
December 2006 and February 2007. The Labor Dept. ruled in Ebenezer's favor in
May. He declined to be interviewed because his situation remains "sensitive."
The phone number for Itek is now disconnected. JPMorgan declined to comment on
U.S. executives often have little visibility into the treatment of contract
employees because several layers of companies are involved. One recruiter for
a major U.S. outsourcing firm says there's no way his clients know how body
shop workers are treated because, until recently, even he didn't know.
He discovered that some of the firms he was hiring for short-term projects
weren't using their own people but instead bringing in subcontractors, which
often underpaid workers. He just put in place new policies so he knows when a
firm he hires is using a subcontractor, but he still can't find out how much
workers are paid or in which state they're supposed to be working. "We don't
like it," he says. "The agreements seem almost criminal."
RIT professor Hira says the situation is similar to what happened years ago
when Western companies began using sweatshops in China for manufacturing.
Companies such as Nike (NKE) sought to lower costs by using overseas
manufacturers, which in turn squeezed workers with low pay and poor working
conditions. After a public outcry, Nike, Disney (DIS), and others started to
monitor labor standards abroad. American companies may know little about the
tech contractors who work for them in the U.S. now, but Hira says companies
should take steps to track the situation more closely. "I don't know of any
[top executives] who have made an issue of this," he says. "We haven't had a
public discussion of what the clients' responsibility is."
MOVING AGAINST CORRUPTION
While American companies may overlook the treatment of contract workers in
their midst, the workers are vulnerable because of government policies.
When a foreign worker comes into the country on an H-1B visa, the visa is held
by the employer, not the worker. If an employee complains, the company can
terminate its visa sponsorship, forcing the worker to leave the U.S.
Workers can't shift jobs unless they find another sponsor, which can be
difficult. And while workers can gain their freedom with permanent
citizenship, the wait even for high-skilled visa holders can be 5 to 10 years.
"Many of these people don't know their rights," says Michael F.
Brown, an attorney in Appleton, Wis., who handles immigration cases.
"They're essentially captives."
Most of the discussion of U.S. work visas in recent years has focused on the
effect of visas, when used legally, on the American workforce. Some U.S. tech
workers contend that bringing in foreign workers drives down their salaries
and makes it easier to move jobs overseas. Senators Richard Durbin (D-Ill.)
and Charles Grassley (R-Iowa) have introduced a bill to overhaul the visa
program aimed at protecting U.S. workers. But they also want to boost
enforcement to combat the mistreatment of foreign visa holders. "We want to
stop corruption of [all types in] the [H-1B] program,"
Grassley said in an interview.
Body shops have sprung up around major metropolitan areas to be close to their
clients. One cluster is in northern New Jersey, across the Hudson River from
Manhattan. Hundreds of small tech services firms operate in such towns as
Belleville, West Windsor, and Edison, where Sterling is headquartered.
At times, the region feels like a front in the battle between foreign and
domestic workers. U.S. tech workers in the area have lost thousands of jobs in
recent years with the decline of AT&T (T) and Lucent Technologies, and many
blame outsourcing firms for taking the remaining well-paid jobs in finance and
other sectors. Tech services companies say they're simply responding to
clients' needs and are being blamed unfairly for any loss of jobs. In this
heated debate, cases of visa abuse, like those alleged against Sterling, have
fueled passions on both sides.
John Miano, a 45-year-old software programmer and labor rights attorney, waits
for a reporter in a booth in the Summit Diner, a classic mid-20th century
eatery in tony Summit, N.J. Miano is the founder of the Programmers' Guild, an
association of U.S. software programmers. Over cheeseburgers, he argues that
the work visa program is hurting demand for American workers. "The job
situation for American tech workers in this area is horrible," he says. "The
consulting market has been wiped out. Now it's mostly Indian-owned companies,
and they're looking for people with H-1B visas."
He says the rise of body shops has made the situation worse: The companies are
usually so small they're overlooked by regulators and law enforcement, so they
can squeeze foreign workers and put Americans at even more of a disadvantage.
Miano clutches a list of companies in the Summit area that have applied for H-
1B visas. They are all over the place some tucked away in offices on the
second or third floors of buildings; one filling the entire first floor of a
white-columned brick building on a side street; two of them just mailboxes in
a UPS (UPS) Store. Venkateshwara Computers, in a modest home in nearby
Livingston, put in for two programmers. Ajay Pimpariya, the owner, complains
that his visa applications weren't approved because he followed the rules,
while other companies falsify documents. "If Homeland Security wants to take
the information," he says, "I'll tell them who's doing what."
Immigration authorities acknowledge that one reason it's difficult to stop
visa abuses is that checking on so many small companies is labor intensive.
"The cases are difficult to investigate and difficult to prove," says James
Spero, who heads Immigration & Customs Enforcement's fraud unit.
The Dasondi case illustrates how the visa system ties into a human supply
chain that reaches halfway around the world. According to court documents, the
New Jersey businessman recruited workers in Britain and India. In October
2001, he arranged through an intermediary to meet with Kishor Parikh, a
mechanical engineer in the western Indian city of Ahmadabad.
Dasondi allegedly instructed him to buy a fake university degree and coached
him on how to lie to interviewers in the U.S. Consulate. Parikh allegedly paid
$9,000 to Dasondi for sponsoring his H-1B application.
When Parikh arrived in the U.S., he learned that Dasondi didn't have a job for
him. Instead, Parikh found work at a greeting card shop. He lived in a one-
bedroom basement apartment with his wife, parents, and two children, according
to his lawyer, John McDonald. Parikh sent Dasondi about $4,000 per month in
money orders, which Dasondi ran through his payroll system as if the money
came from a corporate client to pay for Parikh's services, according to court
records. The payment scheme, which made it look like Parikh was a legitimate
tech worker, is a common strategy called "running the payroll."
"WE WERE LIKE PRISONERS"
A tech service firm called Vision Systems Group has been charged, in a
criminal suit filed in February, with taking another approach to visa fraud.
Under federal law, companies that apply for work visas need to pay the
prevailing wage for a specific occupation in a particular region. The rule is
aimed at preventing employers from reducing their costs by hiring foreign
workers to replace Americans.
Federal prosecutors say Vision Systems, based in New Jersey, set up an office
in low-wage Coon Rapids, Iowa, and claimed that up to 25 immigrant employees
worked there between August 2003 and December 2008, when they actually worked
in higher-wage regions. That would allow Vision Systems to pay a visa holder
the prevailing wage of $20.05 per hour in Coon Rapids for an entry-level
computer specialist instead of $30.43 at its headquarters in New Jersey.
Vision Systems CEO Viswa Mandalapu could not be reached for comment.
Vision Systems identifies JPMorgan Chase and insurance giant Cigna (CI) as two
of its clients on the reference site Hoovers.com. Both companies declined to
When Akhil Gupta heard about the Vision Systems bust, he celebrated. The
Mumbai native who now lives in London had paid the company nearly $3,000 in
2006 for an H-1B visa that never came through. "Vision Systems exploited my
dreams," he says. "All I see is a huge amount of money and time lost."
Even workers who land jobs in the U.S. can end up on the bench, without a
paycheck for weeks or months. Rajiv Dabhadkar, an Indian who was assigned to
such companies as AT&T and Merrill Lynch on guest worker visas, recalls that
when a staffing company replaced him with a new visa holder from India, he was
so short of cash he couldn't pay the electric bill for his Belleville
apartment. He and his wife and their 5-year-old daughter had to wear coats
indoors for a few days in the winter. Ultimately, he says, his wife returned
to India and filed for divorce. "I am a survivor and a witness," says
Dabhadkar, who now lives outside Mumbai and runs the National Organization for
Software & Technology Professionals, which publicizes abuses of guest workers.
One Brazilian worker originally came to the U.S. as a college student but was
unable to find work when he graduated. Desperate to stay in the country, he
took a job with a body shop in New Jersey that promised to sponsor his visa
application, train him, and place him in an IT position in a corporation.
Things didn't work out as he had hoped. The company put him up in a two-
bedroom apartment in West Windsor that he shared with half a dozen other
trainees. It was so cramped he slept in the closet, with his feet sticking out
the door. Not a fan of the curries favored by his roommates, he ate his meals
at a nearby Subway sandwich shop. At the office, he studied hard in his
training courses but was taken aback when the managers instructed him to write
up a risumi full of false claims about his skills and work experience. He
ended up working for $800 a month. "We were like prisoners," says the man, who
would not let his name be used because he is in the country illegally. He
ultimately quit and got a tech job in another state.
Foreign workers aren't waiting for American companies or the U.S.
government to address the issue of high-tech sweatshops. They've set up Web
sites to discuss their experiences with different companies. On sites such as
Desi Crunch and Goolti, they talk anonymously and steer one another away from
the worst employers. On Desi Crunch, one writer marvels that a company can
still attract any potential employees. The worker compares the firm to "an H-
1B prison camp" and says, "trust nothing they say or write."
Business Exchange: Read, save, and add content on BW's new Web 2.0 topic
network Guest Worker Rights
People who come to the U.S. on work visas include many engineers and computer
scientists, often with advanced degrees, but they frequently do not know their
rights as employees. Immigration Voice, an advocacy group for foreign workers,
has set up a Web site that spells out which visa fees an employer is supposed
to pay, what to do if wages aren't paid on time, and how to report problems.
To read Tips for Guest Workers on Avoiding Abuse, go to
How the System Works
American corporations may be unknowingly doing business with tech services
companies that underpay and otherwise mistreat workers. One example of alleged
Indian software programmer Prasad Nair moved to the U.S. in 2008 on a work
visa. He claims he was offered a job in Michigan at a salary of $60,000, plus
medical insurance and travel expenses.
United Business Technologies in Troy, Mich., sponsored Nair's visa, but, he
claims, forced him to sign a new contract requiring him to pay visa and travel
costs. UBT denies any wrongdoing.
THE STAFFING AGENCY
UBT sent Nair to a tech services outfit, Larsen & Toubro Infotech, to find him
a job. Larsen & Toubro, which is not accused of any wrongdoing, declined to
comment for this story.
Larsen & Toubro placed Nair in a job in the San Diego offices of tech giant
Qualcomm. He claims UBT, his official employer, paid him less than the
prevailing wage. UBT has countersued Nair for failure to give proper notice
when he quit and for defamation. Qualcomm and Larsen & Toubro are not accused
of any wrongdoing.
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