The First Appellate District Court of Appeal in San Francisco dismissed an appeal Wednesday from Compubahn, a company that finds foreign programmers and places them at contract jobs in the United States. Previously, a judge ruled that Compubahn could not include restrictive, non-compete clauses in its employment contracts. The company appealed the decision.
The dismissal of the appeal means that the company can no longer include certain restrictions in work contracts with foreign professionals with H-1B visas. Compubahn required some skilled workers to pay US$25,000 "finder's fees," and prohibited programmers from working directly for a corporate client or having "a meeting to discuss the possibility" of doing so for a year after quitting Compubahn.
The court, which rejected the appeal because Compubahn missed a filing deadline, did not include a judge's opinion. That means that the case does not provide official legal precedent for other H-1B visa holders who are suing their employers and former employers.
But Michael Papuc, the San Francisco-based attorney for defendant Dipen Joshi, said the case could still wield influence. Lawyers in similar cases could ask their judges to take "judicial notice" of the Compubahn case, thereby giving it "persuasive authority".
"It's not binding on any trial or appellate judge," Papuc said in a phone interview Monday. "However, the mere fact that this issue was resolved in favor of an H-1B (holder) at the trial level gives other H-1Bs hope that they too may fight recruitment firms that try to hold them to restrictive covenants in California."
Lawyers at The Chugh Firm, which represents Compubahn and other recruitment companies, did not respond to calls or email seeking comment.
The growing H-1B visa community has been closely following Joshi's case. According to government estimates, there are nearly 500,000 H-1B workers living in the United States.
Congress created the H-1B program as part of the 1990 Immigration Act. It started as a means of importing workers to US hospitals, universities and companies specializing in cancer research, plastics, computer programming and other occupations. By the mid-1990s, when technology surrounding the Internet caused an unprecedented economic boom, the H-1B program became a conduit for computer programmers and engineers, mainly from India and Taiwan.
The program became so popular that it spawned a cottage industry of recruitment firms that specialize in finding and placing foreign workers at tech firms such as Sun Microsystems, Oracle or Microsoft. The so-called body shops often require workers to sign restrictive contracts--in some cases in violation of US labor laws.
The controversial companies typically take a cut of the worker's salary--as much as one-half--and often levy hefty finder's fees and harsh penalties if workers quit. With little knowledge of the US legal system and unable to afford expensive lawyers, few foreigners question the contracts or sue their employers.
The US Department of Labor has tried to investigate "H-1B dependent" businesses. Last fall, it ordered TEJ Technologies, of Scotch Plains, NJ, to pay three workers US$52,224 in back wages. But aside from that case, agents say they don't have enough staff members to enforce labor laws on all body shops.
Many immigrants were hopeful that Joshi's case could pave the way for other lawsuits against body shops.
Joshi is still awaiting an appeals decision on another crucial aspect of the case. In April, San Mateo County Superior Court Judge Phrasel Shelton ordered Compubahn to pay Joshi US$215,050.61 in legal fees and other expenses. Compubahn appealed the decision, and the court is still considering it.
If the court reverses the decision or lowers Joshi's award, it could erase a key financial incentive for lawyers who represent H-1B visa holders. Papuc originally hoped to file a class-action suit against body shops, but he says the prospect has become less likely as costs surrounding the Joshi case mount and the prospect of a lucrative settlement decreases.
Papuc originally demanded that Compubahn pay double his usual fee because of the complexity and the risk he assumed in taking the case, but the judge denied his "multiplier" request and ordered Compubahn to pay the regular fees. Papuc has spent more than 800 hours on the case.
"These people can't afford to pay my fees, so the only way I can get paid is if there's a fee settlement at the end," Papuc said. "Even though there's this victory that's outstanding, there really isn't a whole lot of hope for these people. The trial court could have given a big incentive by doubling the fee award, but it didn't. Instead it only awarded actual time by the attorney's hourly rate. If you're going to do actual time undertaking a risk where you're not going to get paid, what's the point?"