In a verdict that will have major ramifications for the Indian IT services industry, Tata Consultancy Services (TCS) received a big win in a US lawsuit on Wednesday. A California jury unanimously rejected claims that TCS had discriminated against non-South Asian workers in the US.

The verdict will set a key precedence for the $120-billion IT outsourcing industry in the US, which has been time and again accused of body shopping and replacing American workers with cheaper Indian talent.

“This will set the precedent and stop future frivolous lawsuits on Indian IT firms,” said Pareek Jain, an independent IT outsourcing advisor. “This can help change the perception of Indian IT firms in the US and help them attract local talent.”

The trial began on November 5 over a class action lawsuit filed by three former TCS employees, Christopher Slaight, Seyed Amir Masoudi and Nobel Mandili, who claimed they were discriminated against by being given fewer work opportunities, and were eventually fired because of their races and nationalities.

The lawsuit had also alleged that the Mumbai-based firm fired 78 per cent of its non-South Asian workers who had been taken off job assignments, or “benched”, between 2011 and 2014, while only 22 per cent of benched South Asians were fired. The unanimous nine-member jury in a California court on Wednesday found no “pattern or practice” by TCS of intentionally discriminating against non-South Asian workers.

Infosys last year was similarly accused of discriminating against non-South Asian employees in a lawsuit filed by a former employee. In a 2016 lawsuit, HCL Technologies and Cognizant were sued by two Walt Disney World technology workers in Orlando for allegedly conspiring to replace them with less costly Indian employees using H-1B visas.

“This is a very important verdict for not just TCS but the entire IT services sector,” said Sachit Gogia, CEO at Greyhound Research. “There have been a series of investments made by Indian IT services companies in the US in the past couple of years. The question now that the industry needs to tackle is whether these investments are aligned to solve core issue of treating people equally or just to avoid bad press.”

Merit-based hiring

Commenting on the verdict, TCS on Thursday said its employee hiring and retention decisions are based purely on capabilities and not on background or national origin. “We have always maintained the claims made in this case were baseless and we are gratified that the jury agreed,” TCS said in a statement.

TCS asserted it will continue to invest in its people, impart digital training and empower them to succeed at TCS and enable customers’ success, irrespective of their background or national origin. The US, where it has been operating for over 40 years, is the world's business and technology leader and very important to TCS, it added.

All Indian IT services majors have been scaling up their acquisitions in the US while at the same time increasing their local hires in the past couple of years as the US government looks at tightening work visas. TCS is also investing in US academic institutions to bring them at pace with the requirements of the IT services industry and create a local talent pool that’s long been found lacking.