H-1B loophole may help California utility offshore IT jobs

It is the second major utility in a year to announce IT outsourcing

Southern California Edison is outsourcing part of its IT operations, and the jobs may be going overseas.

Edison (SCE) is working with Infosys, which is based in India, and iGate, a New Jersey-based company with major offshore centers, as it prepares to lay off workers, according to U.S. government records.

SCE said it is still actively evaluating outsourcing vendors, "and expects to select vendor partners by mid-year." It didn't say which vendors are in consideration.

Northeast Utilities, last fall, announced it was outsourcing part of its IT operations to Infosys and another Indian-based IT services giant, Tata Consultancy Services, and cut about 200 jobs. SCE isn't disclosing how many jobs may be cut, but the Los Angeles Times reports the number is in the hundreds.

NU employees have been training their replacements as a condition of their severance, a process that will likely occur at SCE, if it goes forward with its plan.

Edison said it expects to pick a vendor by mid-year.

The evidence pointing to offshore outsourcing, and to Infosys and iGate as at least two of the vendors, is based on government records. Edison runs some of its IT operations in Irwindale, Calif. As part of the hiring process for H-1B visa-holding workers, outsourcing vendors file a Labor Condition Application (LCA), a U.S. document with salary information and the address of the visa workers' worksite. There were as many as 130 LCAs filed by Infosys alone in the past year for the Irwindale address associated with SCE's offices, according to a large sampling of those filings collected by visa data analysis firm MyVisaJobs.

H-1B rules make it relatively easy for offshore outsourcing companies to replace U.S. workers, despite a rule to curb it.

If H-1B workers comprise 15% or more of an employer's workforce, the employer is classified as "H-1B dependent" by the U.S. government and subject to additional requirements. All the major offshore firms, including Infosys and iGate, are H-1B dependent.

H-1B dependent firms are required to take "good faith steps to recruit U.S. workers for the job for which the alien worker is sought" as well as to "offer the job to any U.S. worker who applies and is equally or better qualified than the H-1B worker," according to the government rules. But there's an easy workaround.

H-1B-dependent employers are exempted from U.S. worker protection rules if the H-1B worker is paid at least $60,000 or has a master's degree.

An annual salary of $60,000 is low for an IT professional, especially in the high-wage region of Southern California. The National Association of Colleges and Employers reported this month that the average starting salary for new college graduates -- nationally -- in computer science was $61,741.

The offshore companies, iGate and Infosys, both pay wages of more than $60,000 a year and therefore aren't obligated to meet the H-1B dependent rules.

Ron Hira, a public policy professor at the Rochester Institute of Technology, said H-1B-dependent firms are required to make three attestations: They must make a good faith recruitment of American workers prior to filing an LCA; they can't replace their American workers with H-1B workers; and they can't replace American workers employed with a client's company.

But Hira calls the $60,000 threshold and master's degree exemptions "a huge loophole."

The H-1B dependency rules were put into law about 15 years ago, and were "part of the quid pro quo of the major increase in the H-1B quota," Hira said.

Companies that fell below the 15% threshold for H-1B workers could avoid good faith recruiting and could also legally displace their American workers with H-1Bs, Hira said. "The rationale was that the only employers that abused the H-1B program were 'dependent' upon them," he said.

Hira said there has been no effort by the government to enforce the dependency rules. "This is remarkable given the hundreds of thousands of visas that have been granted to H-1B dependent firms since the regulations took effect," he said.

IT services firm iGate employs about 30,000 people. At the end of last year, it had more than 4,000 professionals in the U.S., nearly 50% on H-1B visas. Infosys employs more than 160,000 globally. It doesn't provide a specific U.S. headcount.

In a statement, Edison said its outsourcing efforts and assessment are at different stages in select business units across the company, "and various alternatives are being explored to achieve operational and service excellence. SCE's Information Technology (IT) unit is one example."

The utility said it "has yet to finalize employee reduction numbers or percentages at this time. However, SCE is exploring several ways to support impacted employees including career development workshops that feature interviewing and resume writing, job fairs with SCE vendors, and other transition opportunities with SCE."

In 2011, two IT managers at SCE were fatally shot by an employee who took his own life.

Following the shooting, there was an audit of internal operations by an outside risk management firm, Incident Management Team, which looked at conditions in the IT organization ( PDF report).

One observation in the report was that "employees perceive managers to be more concerned about how they 'look' from above, and less concerned about how they are viewed by their subordinates. This fosters an unhealthy culture and climate by sending a message to employees that it is more important to focus on how things look from the top than how they actually are down below."

Mari Keefe, Computerworld's editorial project manager, contributed research to this report.

This article, H-1B loophole may help California utility offshore IT jobs , was originally published at Computerworld.com.

Patrick Thibodeau covers cloud computing and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed. His e-mail address is pthibodeau@computerworld.com.

See more by Patrick Thibodeau on Computerworld.com.

Read more about it outsourcing in Computerworld's IT Outsourcing Topic Center.

This story, "H-1B loophole may help California utility offshore IT jobs" was originally published by Computerworld.

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