The jury trial in a lawsuit against TCS, filed by US workers alleging discrimination against US-born workers, opened this week. The suit claims TCS shows a preference for hiring Indian workers through H-1B visas when hiring locally in the US, even when trained US citizens were available. I believe this lawsuit is hugely important for the entire service provider industry, not just TCS, but not because of a possible settlement or the amount of damages. In fact, I believe whether TCS wins or loses the lawsuit is almost irrelevant. There’s a bigger implication: the services firms are in a no-win situation that they must now address. Let’s look at why this case is so significant.
Today’s US Workplace Environment
First, let me point out that TCS is not the only service provider firm to be sued for discrimination. In US companies, diversity is not only desired, but it is increasingly unacceptable to have a non-diverse workplace. Therefore, it’s perfectly understandable that the service provider firms, which have historically organizations which heavily utilize Indian talent, are easy targets for lawsuits claiming discrimination.
Litigants may not need to show specific examples of discrimination – only the results from a pattern of hiring or promotion. It really doesn’t even matter whether the lack of diversity was intentional or not. It’s just a fact of today’s US workplace that non-diverse hiring practices (for employees, middle managers and leadership) are now problematic. And the scrutiny that the service provider firms face is growing because of the difficult political environment.
It is quite understandable how services firms came to be in this position, and that they got into this situation honestly. They are great firms that were built with integrity with large work forces in India. As they grew, it was natural for the service firms to use H-1B and L1 visas to bring their own employees to the United States for the following reasons:
- They trust these employees
- The employees do high-quality work
- The employees have a strong cultural affinity and are thus comfortable in an Indian environment transported to the US operations
- They have the connections back into the talent factories in India and elsewhere
- It costs less than having to hire in the US.
The natural advantages combined with the economic advantages of importing Indian labor and hiring H-1B workers, resulted in a demographic dominated by Indian labor – but not necessarily a result of discrimination. However, this is a difficult argument to make when the statistics clearly show a skewed labor force.
Clearly, the service firms are at risk and, in all likelihood, will need to address these issues. The demands both ethnic and gender diversity in workplaces. Given the US political environment that now exists, the third-party service industry will likely face increasing demands to change the status quo.
They face a difficult set of choices, since they don’t want to discriminate against their current work force, yet they may need to take significant action to address the appearance of favoritism as well as change parts of their corporate culture, employment policies and benefits structure to bring them more in line with US expectations. If the service firms don’t address these issues, they run an increasing risk that a growing number of companies won’t do business with them.
But it will be difficult and expensive to address the issues. It likely will cause rising costs in the US. The cost to remedy the demographic makeup of the work force is quite high and likely will adversely affect competitiveness and margins. Addressing the issues is also likely to create additional morale and legal issues. They can’t fire people to bring about a more diverse workplace. They must take the interests of existing employees in mind while they move to diversity. Moreover, addressing these changes will take time.
And then there’s the reputation factor. At this time of great sensitivity to discrimination and jobs moving offshore, service provider firms face the prospect of increasing pressure to address these issues. But while doing so, they are still open to lawsuits, and these lawsuits would be expensive to litigate or settle. They can afford the litigation and possible judgments and settlements, however high the costs are. But they can’t afford damage to their reputations, brand and public image.