Infosys: Alabama judge denies arbitration request in visa case

A district court judge in Alabama, US, has denied a request for arbitration by Infosys Ltd in a case in which one of the company’s former employees—Jack Palmer—accused the company of visa fraud. On Wednesday, justice Myron H. Thompson denied Infosys’ request for arbitration on the grounds of “unconscionability”, in a ruling that will force Infosys to resolve the case in a public trial.

A spokesperson for Infosys declined comment because “the matter is sub judice”.

In February, Palmer, a US-based consultant for Infosys, filed a lawsuit in an Alabama court alleging that the company was sending Indian employees to the US to work on projects on short-term, non-employment visas (B-1). Palmer alleged that Infosys was doing this to circumvent increased restrictions around work visas, especially the H-1B category.

Since then, Infosys has been trying to convince Palmer to resolve the suit through arbitration, which is generally faster than a public trial and in which proceedings generally remain private, while Palmer has been pushing for a public trial. A public trail may prove more damaging for the company, which beat analyst expectations and its own guidance to deliver a 8.2% increase in revenue (to Rs8,099 crore) for the three months ending September against the previous three months.

For Infosys, “this means visa records will be dragged into the court, and it will all become part of the public domain”, said an immigration lawyer familiar with the case. “If there is anything negative, it’s going to be exposed.” If the case had remained in arbitration, such exposure would have been minimized, the lawyer added, requesting not to be named given the sensitivity of the matter.

In May, Infosys was served a federal grand jury subpoena requesting that it submit all documents and correspondence related to its use of B-1 visas. Infosys is cooperating with the investigation. Since then, at least one other Infosys employee has submitted documents to Infosys’ internal whistleblower email ID regarding other instances of Indian employees “working” on B1 visas, according to internal emails obtained by Mint earlier this year.

“This is potentially very serious,” said Peter Bendor-Samuel, founder and chief executive of consultancy firm Everest Group, speaking about the implications of the probe against Infosys. Talking to Mint for an earlier article on the same issue, Bendor-Samuel had said that what is worrying was not just the changes in immigration policy that could take place following the probe against Infosys, “but if the ongoing investigation finds Infosys or other IT (information technology) companies to be bending the law or fall under the cloud of suspicion, they could have a hard time getting any visas approved”.

In an analyst meet held in New York last week, Infosys co-founder and chief executive S.D. Shibulal did not directly comment on the current visa situation, but said the company’s current focus on consulting and system integration requires it to hire global talent. “Over the last one year and even in the current year, there has been a lot of push in recruiting local talent.” He added that the company is recruiting 1,500 people in the US and 500 people in Europe, among others. “We have applied for visas even this year and we are not seeing any material change in the rejection rates.”

The company’s shares were trading at zzz (update later) up/down zz percent on Thursday at Nasdaq. The Bombay Stock Exchange was closed on Thursday due to a public holiday.

Malia Politzer & Surabhi Agarwal