The Real Cost of Outsourcing

Friday marks the last day of work for dozens of Abbot Labs employees. They are the latest victims of a growing trend in which large corporations force their U.S.-based workforce to train foreign replacements as a condition of severance.

Abbot Labs laid off between 150 and 180 employees in California and Illinois. Many them will gather at a Chicago restaurant after their last day on the job for an event that will feature remarks by a Florida employment lawyer, the authors of the best-selling book “Sold Out,” and others. The attorney, Sara Blackwell, said she gets 10 to 15 calls a day from people with similar accounts. She estimated that 50 to 100 companies at any one time are in the process of following the same script.

“It’s happening all over the country,” she said. “I basically hear the same story … It’s a cookie-cutter business model.”

Blackwell represents former Walt Disney World technology workers in a pair of civil actions. Those layoffs in 2014 and an ensuing front-page story in The New York Times shed a spotlight on a practice that worker advocates contend has been simmering for years.

Disney, Abbot Labs, and other companies have made use of a guest worker program known as the H-1B visa. That program allows up to 65,000 foreigners to enter the United States each year. Originally designed to give companies flexibility to import workers with highly specialized skills and address labor shortages in critical areas, the program amounts to little more than a tool for keeping wages low, critics contend.

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At Disney, American workers who had been with the company for years had to train replacement workers from India for 90 days or risk losing severance payments. Blackwell is pursuing claims on statutes barring discrimination based on age, national origin, and citizenship, and also has a separate lawsuit under the Racketeer Influenced and Corrupt Organizations Act. But New Jersey lawyer John Miano said the companies have a strong defense when it comes to the visa program itself.

“Under the H-1B program, it’s explicitly legal,” said Miano, who co-wrote “Sold Out” with journalist Michelle Malkin. “Congress changed the law to make it legal.”

Miano said the House Judiciary Committee passed a version of the H-1B law in 1998 that included a provision barring companies from using it to replace American workers.

[lz_table title=”Recent H-1B Outsourcing Cases” source=”News accounts”]Company,Affected Workers
Disney,Up to 300
So. Calif. Edison,400-500
New York Life,300
Toys ‘R’ Us,67
EmblemHealth,several hundred
[/lz_table]

“The industry guys went wild,” and the House Republican leadership replaced the entire 21-page bill with a 42-page, business-friendly law, Miano said.

This month, EmblemHealth became the latest company to use H-1B workers to replace Americans. The firm announced that it had hired Cognizant — the same firm Disney used — and would lay off several hundred information technology and operations workers. An employee of the firm said American workers would stay on for 90 days to train foreign replacements, according to Computerworld.

Chris Chmielenski, director of content and activism at NumbersUSA, said a lack of media coverage and use of confidentiality agreements make it impossible to determine how widespread the practice is. But he said anecdotal evidence suggests that it is growing more common.

“It is difficult to track, because you have to rely on the workers to go public,” he said.

Chmielenski said a bill sponsored by Sens. Ted Cruz and Jeff Sessions that would set a minimum wage of $110,000 for H-1B workers would remove the financial incentive for companies trying to cut labor costs with foreign workers. Currently, there is a four-tier wage system; a majority of H-1B workers are paid at the lowest “prevailing wage,” which is in the 17th percentile for the industry.

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Another bill by Sen. Bill Nelson (D-Fl.) would require the Department of Homeland Security to give priority for H-1B visas to companies paying the highest wages.

Ron Hira, a Howard University professor who has testified on the issue in front of Congress, argued that Obama administration could do more to crack down on abuses without new laws.

“The Labor Department has a lot more authority than they claim.” he said. “I think that’s a real contrast (with an aggressive interpretation of executive power in other areas). The Obama administration hasn’t been shy … The administration has taken significant action.”

Blackwell said that even if Congress eliminated the H-1B program, it would likely only slow down the outsourcing of jobs. She said Congress should require that Americans’ personal information be handled under the more stringent standards set in U.S. law, regardless of where the information is kept. She said that medical records, Social Security numbers, and other sensitive information often follows the jobs to other countries.

“The customers aren’t even aware their data is overseas,” she said.