Skilled Workers -- or Indentured Servants?

Once confined to lower rungs of the workforce, abusive treatment of workers on visas is spreading to legions of white-collar employees

In 1998, Mohan Kutty, a Malaysian-born doctor who has practiced medicine in Hudson, Fla., since he immigrated to the U.S. more than 20 years ago, decided to open five clinics in rural Tennessee. To find physicians to take such hard-to-fill posts, he sponsored work visas for 17 doctors from a variety of countries, including India, Pakistan, and Romania. But when they showed up for work, Kutty paid them just half the $80,000 a year he had promised -- and fired several after they hired a lawyer to help them out.

Last fall, a Labor Dept. judge ordered Kutty to pay the doctors a total of $1.04 million in unpaid wages. The clinics have since closed, and some of the doctors have found work at other Tennessee health-care providers. "The violations were serious and pervasive, and there is little evidence of good-faith efforts to comply with the law on the part of Dr. Kutty," the judge said in her ruling. Kutty has appealed the decision, saying the law was unclear, but was unavailable for comment. Through their lawyer, the doctors declined comment.


  Such stories have become increasingly commonplace these days. Immigrants have long complained about employers who cheat or abuse them and threaten to have them deported if they protest. Generally, the problem has been confined to the lowest rungs of the workforce, such as Mexican farm hands who enter the country illegally.

Nowadays, however, the weak economy has sparked an outbreak of abusive treatment among the legions of white-collar employees who flocked to the U.S. on perfectly valid visas during the late-1990s boom. Usually, theirs are cases of employers who don't pay full salary or benefits. Often, like Kutty, the employers are immigrants, too, so they know how the system works.

Indeed, labor law violations involving workers on H1-B visas, which are designed for skilled employees, have jumped more than fivefold since 1998, according to the Labor Dept. Back-pay awards for such employees have soared by more than ten times.


  In response, agency officials have stepped up H1-B investigations. They agree there could be thousands of H1-B workers who don't file complaints because they fear the loss of their visa. "We take very seriously this fear about coming to the government to complain," says D. Mark Wilson, deputy head of the Labor Dept.'s Employment Standards Administration, which enforces labor laws.

The spreading problems stem from the stagnant economy, officials say, which is driving some companies to cut costs by unscrupulous means. At the same time, the scarcity of jobs has left many skilled immigrants more dependent on their employers and less willing to quit if trouble starts.

The abuses have been particularly widespread in high tech, which used H1-Bs to bring in tens of thousands of programmers and other professionals when companies were desperate for help during the boom. But with the jobless rate among computer scientists and mathematicians at 6%, vs. a mere 0.7% in early 1998, many workers are more vulnerable.


  Experts point out that the U.S. work-visa system gives employers tremendous power over immigrants. More than a million people are employed in the U.S. under visas for skilled workers. While the rules for each visa type differ, all require immigrants to get a U.S. employer to sponsor them. So if employers yank their sponsorship -- which they can do for almost any reason imaginable -- the immigrant often must return home and try to find another sponsor -- an arduous task.

"They don't have the usual rights that U.S. workers have," says Eileen Appelbaum, a professor of labor economics at Rutgers University. "You're essentially an indentured servant."

That's pretty much how Ekambar Rao Kodali felt when he ran into problems with his job as a systems analyst. The Hyderabad (India) native felt lucky to score an H1-B visa in 1997 that allowed him to move to the U.S. and work for Atlanta-based Softpros Inc. The high-tech consulting firm paid him $4,400 a month, but by the time the economy soured in 2001, his paychecks had already started to come in late, and Softpros didn't keep up its payments on his health insurance, Kodali says. He finally quit in frustration late that year but was forced to move back to India with his wife and three-year-old when the job he had been offered at another company fell through.


  In February, Kodali returned to the U.S. after finding work with yet another high-tech consultancy. But the new position -- and his H1-B visa -- expire at the end of the year. He left his family in India, where he will have to return unless something else turns up. "I worked for [Softpros CEO Chand Akkineni] as hard as possible, but he took advantage of me," says Kodali. Akkineni, also a Hyderabad native, concedes that he sent out paychecks late, but he denies that he failed to keep up insurance payments.

An H1-B worker's options are few. For example, federal law prohibits employers from forcing H1-B workers to take unpaid leave, yet experts say the practice has become widespread. "You're told, 'If you don't want to do it, fine. You're going back,"' says John W. Steadman, president-elect of the Institute of Electrical & Electronics Engineers. Vigorous law enforcement would help, but until the job market improves, skilled immigrants will remain at the mercy of their sponsors.

Note: This story originally appeared in the June 16, 2003 issue of BusinessWeek

By Brian Grow in Ocala, Fla.