TCS to cough up $29.8 million to settle US lawsuit

Written by fe Bureau | Bangalore | Updated: Feb 27 2013, 09:17am hrs
Tata Consultancy Services, Indias largest software services exporter, has agreed to settle a suit filed by two former employees alleging violation of certain rights of its non-American workers in the United States. The company has agreed to pay a sum of $29.8 million for settling the matter.

The case against TCS was filed by two of its former employees Gopi Vedachalam and Kangana Beri who were sent from India to the US. In 2006, the two accused TCS of forcing all non-US workers to sign over their US tax refund cheques back to the company and also that TCS deducted Indian salaries from their compensation.

The terms of the settlement are described in a February 21 filing with US District Judge Claudia Wilken in Oakland, California. The California Federal Court in April last year had permitted the class-action suit, which alleged that TCS and its holding company Tata Sons breached employee contracts by wrongfully withholding wages and violating the labour laws of California between 2002 and 2005.

The employees claimed that the firm had promised to pay them their gross salary in dollar terms and a separate Indian salary during their stay in the country.

In an email response on the settlement, a TCS spokesperson said, TCS believes that it always acted appropriately notwithstanding the allegations in this case. The company has admitted no wrongdoing and none has been found by the court. It agreed to settle this matter to eliminate any on-going distraction to its associates and management.

The North America market accounts for 52.6% of TCS revenue according to its third quarter results data and has over 18,000 employees working in the US.

Meanwhile, the TCS scrip closed at R1,494.30 on Tuesday on BSE with a gain of 1.56%, which is a 52 week high.

The over $100-billion Indian IT industry, which counts US as its largest outsourcing market, has received a lot of flak for alleged violations in the use of visas and other labour regulations.

Infosys, the countrys second-largest IT services exporter, was under public spotlight till recently for alleged abuse of visas and employee harassment in the US.

In one of the cases filed by its US citizen employee Jack Palmer, the court ruled in favour of the company, though in a second case, the company opted for an out-of-court settlement.

In December last year, Infosys said that it has amicably settled the harassment case filed by a former employee Satya Dev Tripuraneni, who had alleged that the management retaliated against him for complaining against the companys visa practices in the US.

After the settlement of the case, Infosys said, The Dev Tripuraneni lawsuit has been withdrawn following successful mediation of the dispute. We can confirm that we reached an amicable settlement, without any admission of liability. This enables us to avoid the costs and distraction associated with protracted litigation.