Visa case: Infosys settles lawsuit in US with payout of $800,000

Infosys has settled a case relating to allegations of non-payment of payroll taxes for some employees by agreeing to pay $800,000 (Rs 5.6 crore) to the American state of California. 

“The agreement concludes the California attorney general’s (AG’s) investigation into allegations related to the payment of state payroll taxes for some employees travelling on B-1 visas, dating back to 2006,” the Bengaluru-headquartered information technology (IT) major stated. “The agreement was reached to avoid the time, expense, and distraction of protracted litigation.”

In legal parlance, a settlement involves no formal admission of guilt. Around 500 of its employees were working in California during 2006 on B-1 visas. It was alleged by an ex-staffer there, Jack Palmer, that the classification of employees under B-1 visas, instead of on H-1B, was done to avoid payroll taxes under the state’s labour laws, including unemployment and disability insurance, and employment training.

“The settlement resolves the AG's claims that Infosys’ conduct violated California laws,” state AG Xavier Becerra confirmed. 

Infosys had constantly denied the allegations. In 2017, it had also settled another investigation into alleged visa rule violations by agreeing to pay $1 million to New York state. 

With tightening visa regulations and rising protectionist measures under the current US government, all Indian IT services companies are facing allegations on breach of labour laws. In November last year, Tata Consultancy Services won a class-action lawsuit which had alleged discrimination against non-South Asian workers in America. HCL Technologies and Cognizant had been sued by two workers from Walt Disney World workers in Orlando, Florida, in 2016 on charges of being replaced with less costly Indian employees using H-1B visas. 

"Just like the pharma industry getting observations from (the US sector regulator), the Indian IT industry is facing visa-related lawsuits. These are not debilitating to the business (in that sense) and are issues coming up in the normal course of business," said Shriram Subramanian, founder of corporate governance advisory entity InGovern.

What's the case

• Infosys staffers were working on B-1 visas, instead of H-1B, to evade payroll taxes, it was alleged  
• Though the alleged event was related to 2006, a case was filed by former Infosys employee Jack "Jay" Palmer in 2017
• Settlement was done to avoid time, expense and distraction of protracted litigation, according to Infosys