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Middlemen thriving in lucrative industry while foreign workers complain of abuse

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    Middlemen thriving in lucrative industry while foreign workers complain of abuse

    hi all... i got this thru email.. just wanted to share it with ppl.. so that they are aware of this in case they wanna go to north america and fall into this kind of situation.


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    Middlemen thriving in lucrative industry while foreign workers complain of abuse
    BY SARAH LUBMAN
    Mercury News

    The high-tech industry's voracious demand for workers has spawned a lucrative new middleman industry, complete with its own hierarchy, opportunity and abuse.

    The creation of such an industry was hardly the aim of the H-1B. But by now, among the visa's biggest users are the hundreds of contractors, ranging from large public companies to tiny job shops, that obtain visas and find work for foreign engineers.

    While many middlemen have good reputations, others, often smaller ones, treat their foreign workers as cheap commodities and have become known derisively as ``body shops.'' Such shops, whose names are circulated among workers on e-mailed blacklists, are reviled for illegally underpaying workers, holding their passports, and intimidating them with contracts that demand tens of thousands of dollars if they leave for another employer too soon.

    These contractors say they are defending themselves against H-1B workers who otherwise want to jump ship for better opportunities. But the foreign workers quickly see that middlemen often make promises they don't keep.

    Shailesh Grover, 31, who is now director of intranet services at Next Card Inc. in San Francisco, was promised a $42,000 annual salary by a labor contractor who then tried to pay him just half. Grover came to California in 1996 as an H-1B worker, sponsored by Ravel Software Inc., a now-bankrupt contractor. Ravel brought Grover here and put him up in a two-room apartment with six other H-1B workers.

    But Ravel didn't have a specific job for Grover, or for many of its other H-1B engineers. It shopped them to other placement firms, which in turn farmed them out to large clients.

    Along the way, each firm would get a commission, which was added on to the hourly rate charged to companies.

    Ravel documents show that it charged commissions of as much as 70 percent over the base cost it paid for a
    programmer. While that's how job contractors make their money, workers
    often resent it.

    Worse yet, while Grover waited for work, Ravel tried to pay him half of their agreed upon rate. More aggressive than many other workers, Grover refused to accept that. He demanded -- and received -- his full salary, and urged others to do the same. Ravel Chairman Bhutendra Patel said he wasn't aware of people being underpaid.

    ``It's worse than a pimp situation,'' Grover said. ``It's embarrassing sitting in a room, your résumé is going from one body shop to the next, and you don't know until the 10th interview who the end client is.''

    Visas belong to job, not worker

    The H-1B visa opens the door for middlemen. That's because, like all temporary work visas, it belongs to the job and only secondarily to the worker. Some workers are employed directly by major corporations. But many are brought
    over and hired as full-time employees
    of middlemen.

    The H-1B contracting industry blossomed in the 1990s. The U.S. computer industry was increasingly shifting to using temporary staff and outside contractors. At the same time, qualified engineers were emerging from other countries, especially India, which was rapidly developing its software technology sector. While some middlemen specialize in Chinese and Russian H-1B workers, about 75 percent of H-1B programmers and systems analysts are from India, according to a recent Congressional Research Service study.

    A recent study by Georgetown University found that based on surnames, the ``likely ethnicity'' of the chief executives of nearly two-thirds of the top 100 companies that hired H-1B workers in 1998 was South Asian: Indian and Pakistani.

    For the H-1B job contractor, the pipeline starts overseas, where middlemen ``shop for bodies'' by advertising in newspapers and on billboards. The contractor applies for the H-1B visa in the name of a specific worker for a job requiring certain skills. Usually, the contractor pays for the visa application, processing fees and the cost of transportation to the United States, and some provide initial housing in the United States. Others charge their H-1B workers rent for lodging in crowded apartments and for daily transportation to and from the contractor's office.

    A worker is hired as a full-time employee of the middleman, which generally pays salary and benefits. Once here, he is assigned quickly to the specific job the middleman had contracted to fill, from programming for a high-tech client
    to data processing for a bank.

    Sometimes he becomes part of a roving army of foreign temps, his life controlled by the middleman. The contractor may send him to any state for any length of time, on demand for jobs ranging from systems integration to data entry. When a given project ends, the ``bodies'' return to the body shop, which places them with the next client. If a worker wants to hire on with a different company -- for example, a client that offers a better job -- that new employer needs to apply for a new H-1B visa.

    Some contracting firms collect standard headhunting fees from their corporate clients. Mostly, though, a middleman makes money by charging corporate clients an hourly rate for its workers and then paying the workers much less. Court documents show that middlemen charge $70 an hour for an H-1B programmer or systems analyst with four to five years of experience. In Silicon Valley, people in the industry say it can range from $90 to more than $100 an hour. Of that, the worker typically is paid based on an annual salary of $60,000 to $70,000 -- a rate that works out to about $35 an hour.

    Given that kind of return and the assurance of steady demand for the foreseeable future, the number of middlemen has grown rapidly. ``Anyone in this industry has seen this is
    a very lucrative industry,'' said Sanjeev Sahani, who used to work at an Indian placement agency and now works at
    Oracle as a senior product manager.
    ``It has no entry values; I can set up a shop tomorrow.''

    Contractors are supposed to have jobs waiting for their H-1B workers, and workers are supposed to be continuously employed by a client of the middleman. Often, though, that's not the way it works.

    Some contractors obtain H-1Bs for workers by claiming to be a final employer, rather than the middlemen they really are. Others have an initial job for their worker, but when it ends, keep him waiting for another assignment -- a practice known as ``benching,'' which the Immigration and Naturalization Service discourages.

    The Mercury News spoke with more than a dozen engineers and programmers across the country on H-1B visas who'd received less pay than their contract had stated while benched or while working full time. Anu Gupta, an immigration attorney in Fremont, said she receives two to three calls a week from workers complaining of exploitation. The Mercury News also interviewed six programmers who have fought attempts by job shops to collect as much as $75,000 in compensation for leaving. Most didn't want to be publicly identified for fear their employers would retaliate and jeopardize their efforts to become permanent U.S. residents.

    The Department of Labor is well aware of problems in the growing middleman industry. Complaints from H-1B workers about wages have increased, totaling 103 in the first eight months of fiscal 2000, compared with about 50 a year in recent years.

    The department has closed 75 cases in the high tech industry, finding a total of $1 million in back wages due to 326 high-tech workers. A 1996 audit by the department's inspector general found that 19 percent of H-1B employers were paying less than they had promised.

    To determine the current extent of misrepresentation of wages by middlemen, the INS in July began a study of a random sampling of H-1B applications.

    But naivete and fear leave foreign workers reluctant to challenge their employers, and the labor department can't investigate unless people complain, said John Fraser, deputy administrator of the department's wage and hour division. ``It's a considerable concern to us.''

    Tech workers from the Indian subcontinent who haven't had any problems with their employers tend to regard reports of body shop abuses as exaggerated, and are more concerned about the difficulty of getting permanent residency in the United States.

    ``If you ask a thousand people, maybe you'll find 10 people who were treated that way,'' said Shailesh Gala, a senior software engineer with CDI Corp. in New Jersey who came to the country on an H-1B visa and worked for a year at a job-contracting firm.

    Some job contractors say benching happens mainly because tech skills wax and wane with the market: Y2K repair skills were urgently needed, for example, but are now passe. Now, it's Java and Web skills that are hot. Some recruiters on the receiving end of contract tech labor marketing say the programmers may not measure up in other ways.

    ``Our experience was that people were technically competent, all right, but not experienced in the ways of U.S. business or any business to be able to go in, meet with users and design a solution,'' said Gary Partridge, president of Partridge & Associates, a Glendale firm that places information-technology temps with Fortune 1000 companies.

    To Rahul Roy, president and chief executive officer of MirrorPlus Technologies, a Sunnyvale software startup, it's all relative. ``People who come here are a million times better off than in India,'' he said.

    Even programmers who have had good experiences, though, describe a general pattern: Indian tech workers come to the United States thrilled to make far more than they could ever hope to earn at home. But they quickly realize how big a cut the middleman is taking. ``Once you've spent a certain number of years in the U.S. your needs change, you realize you're worth three times more,'' said one programmer who came here in 1998 and declined to be named.

    Restrictions stall careers

    Middlemen often include restrictive clauses in contracts to keep H-1B tech workers from seeking better-paying jobs. One software engineer said his contract required him to pay 30 percent of his annual salary if he joined a client within six months of leaving his employer.

    In California, such restrictions often fly in the face of state labor law and don't stand up in court. Robert Merges, a University of California-Berkeley law professor who teaches courses on employee mobility, said middlemen may throw restrictions in anyway to intimidate workers into staying.

    ``That could explain why consulting companies put it in standard agreements with people working on foreign-worker visas who aren't as sophisticated, don't know it's a useless piece of verbiage and may actually believe it,'' he said.

    Other middlemen have learned that contracts that demand large payments from workers who leave before a certain period of time are easier to defend in court if they're claimed as compensation for ``liquidated damages.''

    That's what happened with Kavyananda Sidbatte. A San Jose software-training and consulting company named Software Technology Group Inc., or STG, offered him a job in March 1997 and asked for his passport and original degree certificate for visa processing. Two months later, STG told Sidbatte that his visa had come through and that he would be traveling to San Jose.

    When Sidbatte arrived in New Delhi, ready to fly to the United States, STG presented him -- for the first time -- with an employment agreement that said he would pay $25,000 to STG in liquidated damages if he left the firm before two years. Sidbatte had already quit his prior job and was 2,000 miles from his Bangalore home. So he signed, although he later said he hadn't really understood the implications of the contract. Only after he signed were his passport and degree returned. Six days later, he flew to San Jose.

    Two years later, the contract he had signed landed him in a breach-of-contract lawsuit with STG. Sidbatte had been hired at a base salary of $42,000 and left STG after 13 months to work for a client, who gave him a $20,000 raise.

    STG sued Sidbatte and another H-1B worker in a similar situation, Srinivas Gaddam, for $25,000 each plus legal costs. During the trial, STG justified the damages with rupee-denominated receipts for Indian newspaper advertisements, hotel bills and travel expenses from three 1997 recruiting trips, although Gaddam and Sidbatte were among hundreds of people interviewed.

    CEO Yogesh Vaidya said in a deposition that he had nothing to do with preparing the original offer letters that hadn't mentioned liquidated damages.

    In the end, the company won: in January of this year, the jury sided with STG. The two engineers recently reached a compromise with STG to pay back 60 percent of the damages.

    In a telephone interview later, Vaidya said STG held passports and diplomas to prevent applicants from applying for another visa through a different employer.

    Other companies have, in fact, lost money after prospective hires shopped around for duplicate H-1B visas.

    ``I burned my fingers on that,'' said Murthy Avvari, vice president of Ascendsoft, a medium-sized software projects consultant that uses H-1B workers in Fremont. Ascendsoft doesn't restrict its workers' freedom although up to half its prospective H-1B hires fail to show, Avvari said. Ascendsoft has applied for H-1B visas and waited months for them to come through, only to discover that candidates had found other jobs by applying through a different company that used a faster visa-processing center on the East Coast. ``I ended up wasting my time, my attorney money.''

    When restrictive clauses fail to keep programmers from straying, job contractors may seek compensation elsewhere. If a worker is hired by another recruiter or a high-tech company, it is a common job-shop tactic to charge a commission
    of tens of thousands of dollars in
    ``hiring fees.''

    ``It eats up any placement fee we'd get,'' said Elise Clark, president of Lloyd-Ritter Consulting in Mountain View, a unit of Personnel Group of America. ``We've been caught like that a few times. That was a red flag: Be careful when you work with these agencies, and find out what kind of contract the programmers are on.''

    Middlemen legally are required to pay workers on the bench at the prevailing wage rate even while they are waiting for work. And many do.

    But many others don't. In such cases, tech workers on the bench typically receive anywhere from half-pay to weekly stipends of $150 for months. In the worst cases, a worker receives nothing at all. One 24-year-old Punjabi programmer in New Jersey said he paid $400 to sleep on his employer's apartment floor for two months, was never paid or placed on a project and never even saw an office. The telephone at the New Jersey job shop for which he worked has been disconnected.

    The practice of benching contract programmers on half-pay or a small weekly stipend for weeks or months at a time
    is so common that many Indian tech workers know of someone, either directly or through friends and acquaintances, who has gone through it.

    Puneet Dik****, 32, came from Delhi to California in 1994, with a master's degree in computer science, two years of work experience and faith in his new employer. What he didn't turn out to have was a specific job.

    For the next three months, he waited for an assignment and received half the $145 average daily salary he had been promised.

    Even after he started working, he received only $60 to $70 a day for several weeks.

    ``They called it some sort of a transition, and there was ignorance on my part about the law,'' he said.

    After a few months, he wised up. He quit to join another Indian-run job contractor despite what he characterizes as ``harassment'' to stay on from the middleman company that hired him, ICIM International Inc.

    The chief executive of U.S. operations for ICIM at the time was Arun Tolani, who said he doesn't remember the case and never paid a transitional salary, and that the company has always complied with the law. (ICIM changed its name this year to Zensar Technologies Inc.)

    Dik**** stayed with his new employer until this year, when his visa ran out. Now he lives with his family in Alberta, Canada. Under the new legislation, he probably could have stayed.


    #2
    Body shops are everywhere but there are a few catches

    #1- these workers dont "have" to live in apartmentsd with many othersd and are free to get their own housing.

    #2- making 60-70K while the middlemen get more is nothing new, even in major consulting companies you get a fraction of your billing rate.

    The workers need to get their expectations as realistic ones. outsourcing industry is one where this type of practice has been going on for quite soem time.

    The greatest trick the devil ever pulled was convincing the world he did not exist. And like that... he is gone.

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      #3
      Its may be a "Pimp/Prostitute" business, but there are some good staffing agencies too.A person cannot realistically expect to get a salary in keeping with his billing rate , otherwise why would the agency be in business.You cannot eat the cake and have it too.........!!

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