Tata agrees to pay $30 million to settle employees' lawsuit in the US

In a class-action lawsuit, the employees alleged that the outsourcer made unauthorized deductions in wages

Indian outsourcer Tata Consultancy Services has agreed to settle a class action lawsuit by paying US$30 million to employees deputed for work in the U.S. from India.

The lawsuit was allowed class-action status last year by a court in California after two employees, who were non-US citizens, complained that the company made unauthorized deductions in their wages.

The U.S. District Court for the Northern District of California certified in April a national class defined as "all non-U.S. citizens who were employed by Tata in the United States at any time from February 14, 2002, through June 30, 2005, and who were deputed to the United States after January 1, 2002." The court also certified a similar class for Tata employees in California during the period.

The settlement has been negotiated on behalf of about 12,800 class members who will receive a share of the settlement amount. If all class members participate, the average recovery for each employee after various deductions, including attorney fees and costs, and costs of claims administration will be about $1,600, according to court records.

Indian outsourcers send a large number of employees recruited in India to work on client projects in the U.S., leading potentially to allegations of misuse of visas and exploitation of workers.

The two former employees alleged seven years ago in a complaint against TCS and parent company Tata Sons, that the employer breached the standard employment contract for its employees by forcing all employees who were not U.S. citizens to sign over their federal and state tax refunds to Tata, and by deducting their Indian salary from their compensation. TCS claimed it was actually paying these employees their Indian salary in India, so their compensation remained unchanged.

TCS said it believes that it always acted appropriately notwithstanding the allegations in the 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," it added in an emailed statement on Wednesday.

The proposed settlement will have to be approved by the court.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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