Court Upholds Disney’s IT Outsourcing

By Scott M. Wich Dec 1, 2016
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Several months ago, the media reported on Disney's outsourcing of its IT staff—and the company's requirement that laid-off employees train their replacements, who were immigrants with H-1B visas.

One group of affected employees recently filed a challenge in the U.S. District Court for the Middle District of Florida, alleging that both Disney and contractor HCL America Inc. violated civil racketeering laws. The court, however, found that the allegations were not sufficient to demonstrate unlawful racketeering or conspiracy.

Leo Perrero was an IT worker employed by Walt Disney Parks and Resorts U.S. Inc. until he received a 90-day notice of his termination in January 2015. Perrero, along with several hundred other Disney IT workers, were allegedly told that they would be replaced by individuals employed by HCL America, who were foreign nationals holding H-1B visas.

[SHRM members-only toolkit: Understanding and Obtaining U.S. Employment Visas]

Perrero said that Disney told the fired workers that if they did not stay on to train HCL America employees during the 90-day notice period, they would be denied a bonus and severance pay.

Perrero filed a class-action lawsuit against HCL America and Disney, alleging that the actions to replace the IT workers with foreign nationals violated the Racketeer Influenced and Corrupt Organizations (RICO) Act and constituted common law conspiracy. The allegations challenged HCL America's statements on its Labor Condition Application (LCA) in support of the application for the H-1B visas.

The RICO Act establishes criminal and civil liability for racketeering activity, which has been interpreted to mean certain types of conduct that could result in a criminal indictment.

As related to Perrero's lawsuit, a predicate act can include a knowingly false statement made under penalty of perjury with respect to a material fact in any document required by immigration laws or regulations.

Perrero described three instances of alleged predicate acts related to the LCA and a related document purportedly filed by HCL America in support of its visa application.

First, Perrero asserted that HCL America was required to certify on its LCA that it would "[p]rovide working conditions for nonimmigrants which will not adversely affect the working conditions of workers similarly employed." Because the Disney employees were discharged, Perrero argued, their working conditions were adversely affected.

The court disagreed, finding that this LCA requirement applied only to an applicant's own employees. Because HCL America was making the visa application and it was Disney employees who were discharged, the court held that HCL America could not be found to have made a knowingly false statement.

Second, Perrero argued that HCL America was required to certify that it would not place any H-1B nonimmigrant for employment with any other employer absent a bona fide inquiry as to whether the other employer intended to displace similarly employed U.S. workers.

The court also dismissed this argument, finding that such a certification was required only for employees paid at least $60,000 per year and possessing at least a master's degree in a specialty related to the intended employment.

As all of the HCL America employees allegedly did not meet these requirements, the court found that the LCA would not have required the displacement certification.

Lastly, Perrero alleged that HCL America filed false ETA Form 750s. HCL America argued that it filed no such document. The court found that no such document was required for HCL America's H-1B application and dismissed this argument and the lawsuit in its entirety.

Perrero v. HCL America Inc., M.D. Fla., No. 6:16-cv-112 (Oct. 13, 2016).

Professional Pointer: At first glance, replacing existing employees with H-1B workers would appear to be a clear immigration law violation. However, the Perrero decision is a useful reminder that seemingly unattainable employment actions may be possible with careful and detailed planning.

Scott M. Wich is an attorney with Clifton Budd & DeMaria LLP in New York City.

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