A loophole in immigration law is costing thousands of American jobs

Imagine getting a layoff notice, then being ordered to train your replacement.

That’s what has happened to hundreds of information technology employees at Southern California Edison. Since last summer, Edison, which serves nearly 14 million customers, has been firing its domestic IT workers and replacing them with outsourced employees from India.

In doing so, the utility is exploiting a gaping loophole in immigration law, which Congress has failed to close despite years of warnings that it’s costing thousands of American jobs.

The Indian workers are brought in on H-1B visas, which are temporary work permits for “specialty occupations” — those requiring “highly specialized knowledge” and a bachelor’s degree.

The purpose is to allow employers to fill slots for which adequately trained Americans aren’t available, not to replace existing workers with cheap foreign labor. That’s why employers such as Google and Microsoft, which say they’re short of highly trained software engineers, have lobbied hard to expand the program beyond the 65,000 visas available annually. These high-tech companies say they can’t meet their needs from the pool of U.S. graduates in STEM specialties — science, technology, engineering and math.

But Edison is using the program for a different purpose — to cut its wage costs, possibly by as much as 40%, according to data compiled by Ron Hira, a public policy expert at Howard University.

The pay for Edison’s domestic IT specialists is about $80,000 to $160,000 not including benefits, with the average at about $120,000 for experienced personnel, according to records Edison submitted to the state Public Utilities Commission. The two Indian outsourcing firms providing workers to Edison, Tata Consultancy Services and Infosys, pay their recruits an average of about $65,000 to $71,000, according to their federal filings.

“They told us they could replace one of us with three, four, or five Indian personnel and still save money,” one laid-off Edison worker told me, recounting a group meeting with supervisors last year. “They said, ‘We can get four Indian guys for cheaper than the price of you.’ You could hear a pin drop in the room.”

This worker and the half-dozen others I interviewed asked to remain anonymous because their severance packages forbid them to speak disparagingly about the company.

These employees perform the crucial work of installing, maintaining and managing Edison’s computer hardware and software for functions as varied as payroll and billing, dispatching and electrical load management across Edison’s vast power generating and electric transmission network. The workers I interviewed are in their 50s or 60s and have spent decades serving as loyal Edison employees.

They’re not the sort of uniquely creative engineering aces that high-tech companies say they need H-1B visas to hire from abroad, or foreign students with master’s degrees or doctorates from U.S. universities who also can be employed under the H-1B program. They’re experienced systems analysts and technicians for whom these jobs have been stairways from the working class to five- or six-figure middle-class incomes. Many got their training at technical institutes or from Edison itself.

Some laid-off Edison employees say the transition is not going well.

Some report that Tata was unable to recruit enough workers in time to replace — or get training from — the domestic workers ushered out the door. Edison delayed some layoffs scheduled for November and December until as late as March. Sources say the utility may now even be considering recalling some laid-off employees to fill the gaps.

Meanwhile, important IT projects have been delayed and complaints from Edison offices about poor tech support are rising, according to some workers and sources at the International Brotherhood of Electrical Workers, which represents thousands of Edison employees (though not the laid-off IT workers).

Edison acknowledges that the transition “has not been seamless but it is also not complete.” The firm says the outsourcing will be completed early this year, and that once the transition reaches “a mature state,” its IT operating costs will fall 20%.

Thus far, the PUC’s interest in this affair has been to demand that any savings get passed on to ratepayers. The commission should be more concerned about potential problems: The consequences a botched transition could have for Edison’s service and emergency response could be dire.

Edison has been less than forthright about the outsourcing, which it says will cost the jobs of 500 IT employees — 400 laid off and an additional 100 “leaving voluntarily.”

Edison relies on a loophole to skate around rules forbidding the use of cheap H-1B labor to replace existing domestic employees. Technically, Edison isn’t the H-1B employer; Tata and Infosys are. This sleight of hand allows Edison to say, as it told The Times, that it is “not hiring H-1B visa workers to replace displaced employees.” The contractors, Tata and Infosys, are doing the hiring. Edison says those firms “determine the composition of their own workforce.” Because the outsourcing firms employ minimal American staffs themselves, the thousands of Indian workers they import aren’t technically replacing Americans.

What’s even more disgraceful is how Tata and Infosys are alleged to treat their employees. In 2013, Tata paid $29.8 million to settle a federal class action brought by 12,800 outsource workers. The employees alleged that Tata cheated them of wages they were due and forced them to sign over their U.S. tax refund checks to the firm. Tata didn’t admit wrongdoing.

The same year, Infosys paid $34 million — a record penalty in an immigration case — to settle federal charges that it had systematically defrauded immigration authorities.

Infosys told Edison the settlement was related to “paperwork administrative issues.”

The Department of Justice put it differently. When federal prosecutors announced the settlement, they specified that Infosys was alleged to have deliberately submitted falsified documents to U.S. immigration authorities, and even instructed visa holders how to deceive consular officials. Infosys denied wrongdoing.

Tata and Infosys declined to comment.

It has long been an open secret that the H-1B program has gone off the rails.

“The reality is that what’s going on at Southern California Edison is the most common usage,” Hira says. Last year, for instance, Minnesota-based agribusiness behemoth Cargill said it would outsource as many as 900 IT jobs to Tata.

Tata and Infosys have become two of the largest recipients of H-1B visas, receiving more than 12,400 new visas in fiscal 2013. A report last year from the Federal Reserve Bank of Boston observed that a majority of firms requesting and receiving H-1B visas “specialize in offshore outsourcing and rarely sponsor H-1B workers for permanent residency.”

That conforms to Hira’s findings that Tata filed only seven applications for permanent residency in fiscal 2013 despite receiving 6,163 H-1B visas; Infosys received 6,269 visas and filed no applications for permanent residency.

The H-1B system turns the Indian workers virtually into indentured servants, Hira says. The visas are held in the employer’s name, and are canceled if the worker loses the job. That gives the employer immense power to keep its workforce docile. “If you speak out, they’ll terminate you and you’ll have to leave the country,” Hira says.

The H-1B program has turned into a scam for outsourcing firms and their U.S. clients. Congress must fix it so it serves its original purpose. Instead, a measure introduced by Sen. Orrin Hatch (R-Utah) would increase the number of available H-1B visas to 115,000 per year. Democrats Amy Klobuchar (D-Minn.), whose state is home to Cargill, and Richard Blumenthal of Connecticut, where Northeast Utilities announced plans last year to outsource some 200 IT jobs, have signed on as co-sponsors. But critics say the bill would do almost nothing to stem the abuses.

Some pushback is coming from legislators such as Sens. Dick Durbin (D-Ill.); Chuck Grassley (R-Iowa); and Jeff Sessions (R-Ala.).

Sessions asked, in a “primer” for his GOP colleagues last month, why Congress should ever consider “advancing legislation that provides jobs for the citizens of other countries at the expense of our own.”

As it stands now, the H-1B program works chiefly for employers looking for new ways to fire older, experienced workers. One laid-off Edison worker put it best: “When you are referred to as a commodity or a cost, not even treated as a human being, it’s pretty degrading.”

Michael Hiltzik’s column appears Sundays and Wednesdays. Read his blog, the Economy Hub, at latimes.com/business/hiltzik, reach him at mhiltzik@latimes.com, check out facebook.com/hiltzik and follow @hiltzikm on Twitter.