Outsourced and fired, IT workers fight back

Workers charge discrimination prompted 2010 Molina Healthcare IT layoff; file suit against employer and its outsourcer

On the day they were fired early last year, about 40 IT employees at Molina Healthcare Inc. had been gathered in a conference room for what they were told would be a planning meeting. At the same time, laptop computers were being collected from the assembled workers' desks.

During the meeting, Molina's then-CIO, Amir Desai, informed the workers that they were being laid off for financial reasons, "not because of [their] performance."

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The layoffs came amid rising tensions over a number of issues, including the expanding role of an offshore IT contractor at Molina.

The workers raised the concerns with Desai during the meeting.

"I felt they were expecting us to be asking questions about Cobra and unemployment and all that," said Bonita Shok, one of the laid-off IT employees. "Instead, we were being quite confrontational about why they are laying us off and keeping all these H-1B workers."

"I have never experienced a group of employees who were so angry," said a human resources manager who was in the meeting to answer questions from employees about benefits. The HR manager asked not to be identified.

"They felt their work was being offshored -- they were angry at the H-1B employees that were being hired," said the longtime HR industry veteran who had been hired to execute the IT layoffs at Molina, a managed health care provider that serves Medicaid and Medicare recipients. "I [had] never felt the backlash that I felt from Molina employees."

The employees, who lost their jobs in January 2010, never got answers to their questions about the company's IT outsourcing strategy.

Instead, 18 of them filed a lawsuit in California state court earlier this year against Molina, its CIO at the time and its outsourcing contractor, Cognizant Technology Solutions.

The HR employee, who was later laid off as well, is a witness for the plaintiffs in the case.

The plaintiffs contend, among other things, that they are victims of discrimination due to national origin. The lawsuit charges that the employees were fired because the companies sought to employ people "whose national origin, race and/or ethnicity was exclusively Indian," and didn't want to employ Americans or green-card holders.

Molina contends that the lawsuit is grounded in "falsehoods and malicious gossip." Cognizant has said that the lawsuit is without merit and that it "will vigorously contest it."

Desai, through his attorney, says the lawsuit is itself guilty of "an unfair discriminatory bias." Desai himself has since left Molina.

Of the workers who are part of this suit, 10 brought an earlier claim against Molina that was settled in mediation before this case was filed. The mediation agreements did not settle the case for all the workers and did not include current lawsuit defendants Cognizant and Desai.

While what happened at Molina is still in dispute, job displacement because of offshore outsourcing is a fact of life in today's IT workplace. While there are no government numbers that detail its extent, the broad outlines of the story told by the Molina workers should be familiar to other IT workers.

Outsourcing engagements often start when offshore IT services companies bring in workers, typically on H-1B or L-1 visas, to learn a company's IT processes. Then the work is moved overseas. Molina employees contend that's what happened to them.

James Otto, the attorney representing the Molina employees in the lawsuit, claims that about 200 visa-holding workers have been brought into the company.

Otto has told the former Molina IT workers that such activity is a form of segregation. "Today you're being segregated based on your national origin," he said.

Several years before the layoff, there were about 70 or 80 IT employees at Molina, according to a group of more than a dozen former Molina IT workers who met with Computerworld late last month. Many of the former Molina workers asked that their names not be published.

At that time, Cognizant had a small presence at the firm, mostly to supplement internal work. The employees said they felt no threat at the time. In fact, said Shok, "there was a feeling of camaraderie on the team."

But beginning around 2007 things started to change.

Most of the immediate IT managers were either laid off or quit, according to the employees. At the same time, the number of contractors increased. The lawsuit alleges that Desai and his management team "hire[d] and promote[d] only Indian nationals to management positions."

Desai, through his attorney, says the allegation is false. Of the six IT managers reporting to him, two were of Indian descent, he said.

"My client is dismayed both at the false allegations in Mr. Otto's lawsuit and its ethnically inflammatory undertone suggesting that Mr. Desai is biased against Americans and favors Indians solely because he is 'of Indian descent,' " wrote Desai's attorney, Edward Raskin in an email to Computerworld.

Raskin also points out that Desai was born in the U.S. and graduated from a U.S. university. He says the lawsuit avoids certain facts. "For example, some of the employees who lost their jobs at Molina were 'of Indian descent,' which contradicts Mr. Otto's suggestion that Mr. Desai and the company only favored Indians," he said.

But from the perspective of the employees, the workplace was changing.

The IT staff had been diverse, and represented seemingly every nationality, much like the population of Long Beach, Calif., where Molina is based.

The employees said they liked working at Molina, and felt they were recognized for their work, supported on the job, and were also part of a friendly environment that marked holidays with events like potluck dinners.

But the corporate culture changed as the contractors were added. The holiday potluck dinners ended while Indian workers were taken out to lunch on a major India holiday, the former Molina employees said.

Some meetings became so dominated by Indian workers that the discussions would sometimes shift to an Indian language, which added to a growing sense of isolation among the other Molina IT employees, the workers said.

"I've been to several meetings where it started off in English and then one of the Indian directors would start talking in Hindi, and then all the other Indians will start talking in the same language," said a plaintiff who asked to remain anonymous. "And then you would have to say 'hello, hello, we don't understand.'"

The HR manager who had been hired to manage the IT layoffs recalled an initial visit to the IT department. "When I walked in the IT department, all I saw were Indians. It was very difficult to find anybody in the immediate environment that was of non-Indian descent."

The former HR manager said the makeup of the department "was also a reflection of the leadership team ... the majority of [Desai's] direct reports were Indian."

The Molina workers said they trained Cognizant workers on the company's IT processes over time prior to the layoffs. They were told that the contractors were taking over all the production and their role would shift to new developments and technologies.

That explanation did little to lessen fears that they were being pushed aside. "There was a point where I felt we were just being written off," said David de Hilster, one of the laid-off IT professionals.

In the weeks leading up to the layoff, Molina employees began spending more and more time training Cognizant workers. The process became increasingly "urgent" and rushed, he said.

Another laid-off employee, Charles, said that "one person came into our department to learn all of our processes, which is impossible. We're multiple types of employees doing deployments, doing development work. No one person could possibly gather all that much knowledge in two weeks' time."

Charles asked that his last name not be used.

Desai's attorney, Raskin, wrote that his client "was trying to maintain quality and keep IT costs down at the direction of his superiors. To accomplish this, Mr. Desai worked with his managers to identify processes and projects that could be outsourced at a lower cost.

"The question was not: 'Whose job can we eliminate and replace with a contractor?' The question was: What processes are being done in-house that could be outsourced at a lower overall cost without sacrificing quality of efficiency?" he added.

Otto has assembled witnesses to support the lawsuit.

Among them is Laura Onufrock, Molina's former IT department budget manager.

In lawsuit filings, Molina said it compared the cost of imported labor to the cost of U.S. workers at the company and found that the average pay for U. S. workers was $50 per hour versus $72 per hour for the Indian contractors and $26 an hour for offshore workers, according to the lawsuit. Based on Onufrock's analysis, the lawsuit claims that after the mass layoff last year, the IT department exceeded its annual budget by over $5.5 million three months into 2010.

Onufrock isn't a plaintiff. Asked why she was acting as a witness in this case, she said, "they've done a lot of damage to people and I'm hoping I can help."

Molina disputes the contention that the outsourcing efforts didn't cut IT costs.

"American taxpayers are demanding that health care companies reduce administrative costs in order to provide better benefits at a lower price," the company said in a statement.

"Like most leading health care companies, Molina has put in place a variety of measures to reduce costs, including the outsourcing of labor-intensive administrative tasks to specialized firms. Working with Cognizant, an established leader in outsourcing, Molina embarked on a successful program to reduce its overhead so it could focus on what it does best: providing America's underserved communities with access to the best possible health care," the company said.

It is unclear how many Molina contractors were on either H-1B or L-1 visas, which are used for company transfers. The distinction is important.

Companies can hire H-1B workers without first trying to hire U.S. workers, unless they are considered "H-1B dependent" -- a status that applies to companies where more than 15% of the people in the workforce hold H-1B visas. Cognizant is in that category, but it doesn't have to prove that it tried to hire U.S. citizens before hiring H-1B visa holders for jobs that pay more than $60,000 and/or require master's degrees.

"I don't think the H-1B dependent provisions are strong enough to protect U.S. workers," said Daniel Costa, an immigration policy analyst at the Economic Policy Institute.

Molina, which employs 4,200 people, said it has less than 50 H-1B employees "and they were hired only in cases when it was necessary to cast a wider net for particular skills."

A Cognizant spokesperson said that the company has never had an employer-employee relationship "between the plaintiffs and Cognizant, and therefore the plaintiffs have no grounds for, among other things, the employment discrimination or wrongful termination claims against Cognizant."

Cognizant employs 118,000 people worldwide -- 20,000 in the U.S. The outsourcer doesn't disclose how many of its workers hold visas.

But the company did note that it has more than 60 full-time recruiters in the U.S., and that it recruited at 17 colleges and universities last year. It said it has 500 job openings in the U.S.

"Cognizant is a job creator that strives to provide our clients with the best talent available anywhere," the company spokesperson said.

A week after the layoffs at Molina, one of the fired employees said she was told by someone still working there that about 30 H-1B hiring notifications had been posted on a lunchroom bulletin board at the company. The posting indicated that U.S. workers couldn't be found for these positions. It is unclear what company was trying to fill the positions. But this wasn't the first time such notices had appeared, and it reminded this employee of what she had said earlier to someone in HR who was involved in recruitment.

"How dare you hire H-1Bs when there are so many unemployed Americans out there that fit the job description better?" the IT worker said.

This story, "Outsourced and fired, IT workers fight back" was originally published by Computerworld.

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