Tech firm once moved California jobs overseas. The state just offered them a tax break

After UC San Francisco terminated dozens of information-technology employees in 2016, sending their jobs overseas through a contract with a software company from India, the uproar was immediate.

Prominent members of Congress urged UCSF to reverse the move. Thirteen of the employees sued the University of California, claiming they were victims of discrimination. The following year, then-Gov. Jerry Brown signed legislation prohibiting the UC and CSU systems from essentially doing what UCSF had done — using a contractor to move jobs offshore.

Now the state is offering the India-based company a tax break — to hire Californians.

Under a deal designed to create hundreds of tech jobs in Sacramento, the Governor’s Office of Business and Economic Development last week approved a $1.3 million tax credit for HCL America Inc., the subsidiary of an Indian tech company that’s known for offshoring jobs from the U.S. to less-costly locations.

The agreement calls for HCL to hire 663 workers over five years, and the company says it plans to do most of the hiring in Sacramento. The tax credit is rescinded if HCL fails to meet the hiring target or terminates the employees within three years of hiring them.

While the jobs would pay above-average wages by Sacramento standards, some critics say the state may be chasing jobs that will eventually vanish.

“I question ... how long they’d stay here. I feel like it’s temporary,” said Jamie McDole, president of University Professional and Technical Employees, CWA 9119, the union that sponsored the legislation banning the outsourcing practices. “They’ll be here for the minimum and then they’ll outsource it.”

State officials defended the decision.

“We are charged with providing incentives to business that have choices about where they want to expand,” said Chris Dombrowski, spokesman for the economic development office. “It’s high-wage tech jobs and it’s a significant number of jobs.”

HCL would pay the average worker $78,220 a year, according to the agreement.

HCL’s decision to expand in Sacramento isn’t final. The Greater Sacramento Economic Council, the region’s main business recruiter, said HCL is in discussions with cities in two other states. City officials said they are talking with the company about an incentive package to nail down the jobs.

HCL employs 2,000 workers in California, including 50 already in Sacramento, said company spokesman Meenakshi Benjwal.

“With respect to job growth in Sacramento, HCL is excited to add hundreds of jobs in the coming years due to our recent expansion in the area,” Benjwal said in an email. “We have engaged with the state of California to meet its requirements for an incentive and look forward to bringing these jobs to the Sacramento region and elsewhere.

“Our commitment with the state is designed to spur job growth over the next few years (and) we are confident that we will meet the job numbers set forth in our agreement.”

A history of outsourcing jobs

When Vice President Kamala Harris went to Pennsylvania recently, to promote the Biden administration’s tax policies, she made sure to meet with three employees of HCL who work in Pittsburgh.

The meeting wasn’t an accident; the White House told the Pittsburgh Post-Gazette that Harris was wanting to show solidarity with HCL employees.

In 2019 the National Labor Relations Board accused the company of harassing and threatening workers who’d been involved in unionizing HCL’s Pittsburgh workforce. Among other things, the federal agency said HCL began shipping some of the Pittsburgh jobs to Krakow, Poland, after the workers voted to join the United Steelworkers.

The company, in responding to the complaint, denied moving the jobs offshore — or doing anything that wasn’t “legally permissible.” The case is still pending.

Harris’ visit was likely an uncomfortable moment for HCL’s parent company in India, HCL Technologies Ltd. A $10 billion-a-year company with offices in 50 countries, HCL provides software services for companies in aerospace, telecommunications, banking and other industries.

HCL maintains a U.S. headquarters in Sunnyvale and employs 20,000 American workers, but has found itself immersed in multiple controversies over its hiring and offshoring practices. In particular, it has been accused of abusing the H-1B system — which is designed to provide visas to immigrants with specialized skills — to displace American workers.

In 2014, for instance, workers sued HCL and Walt Disney after they were laid off by Disney World in Florida to make room for HCL employees. The suit was dismissed.

“Typically, they don’t create jobs; they move them away,” said Randy Strauss, a lawyer who represented the UCSF workers.

The UCSF outsourcing generated enormous controversy. Not only did approximately 80 employees lose their jobs, some of them had to train their replacements — HCL workers who were brought in under the H-1B system.

Rep. Nancy Pelosi, who was then the House minority leader, said “this misuse of the H-1B visa program is deeply troubling.” Sen. Dianne Feinstein said UC was violating “a deep civic responsibility to ensure that these high-quality jobs remain in California.”

UCSF defended the contract with HCL, saying it would save the university $30 million over five years. But Chancellor Sam Hawgood apologized for one aspect of the move: “We regret that they were directed to train HCL America employees and UCSF intends for this to never happen again.”

Thirteen of the terminated workers sued the university. Strauss said they settled for a total of about $2 million.

“HCL sent over folks from India to map and learn and study from the people whose jobs were eliminated,” Strauss said. “It left a bitter taste in their mouths.”

Sacramento says jobs would diversify economy

With the area economy still struggling to recover from the effects of COVID-19, officials say they’re excited about the possibility of doing business with HCL.

“HCL is a global technology leader with a substantial workforce in the U.S.,” said city spokesman Tim Swanson in an emailed statement. “Its presence and investment in Sacramento will help to strengthen and diversify our local economy and create more jobs for our residents.”

Swanson said the city is in the early stages of discussions with HCL about incentives to finalize the company’s decision. While he didn’t go into specifics, the city has used cash incentives in the past to land major employers, including a $13.5 million package to convince health insurer Centene Corp. to build a West Coast headquarters in Natomas. The Centene deal works out to $9,000 per employee.

Any incentive plan would require City Council approval.

The average pay of $78,220 that HCL is offering would be about 25% higher than the average wage in the Sacramento area, said Michelle Willard, a spokeswoman for the Greater Sacramento Economic Council.

“It’s a great company,” said Barry Broome, president of the Economic Council. “The fact that people didn’t like the outsourcing at UCSF doesn’t have anything to do with the company.”

The company is pledging to hire an employee base with a mix of job and educational experience, including some through a city-funded program called Digital Upskill Sacramento, which trains young people from disadvantaged communities for tech jobs.

“They’re interested in hiring and training people out of high school and they pay a living wage,” Broome said.

Scott Powell, the Economic Council’s executive vice president, said having HCL in town would put Sacramento on the front lines of the global information technology sector.

“These jobs that are going to be created are going to be creating IT solutions for companies around the country, if not the world,” Powell said.

“They could put these jobs anywhere; they’re potentially choosing to create these jobs in Sacramento,” Powell added. “It’s a net positive. We need to be creating more of these jobs.”

And the legislator who wrote the law prohibiting UC and CSU campuses from moving jobs offshore doesn’t mind the state awarding HCL a tax credit.

“I’m comfortable with the actions,” said Assemblyman Kevin McCarty, D-Sacramento, the author of AB 848.

McCarty acknowledged “it’s a bit of an irony” that the state is making deals with the company connected to UCSF’s offshoring controversy. But he added: “What this entity is pledging to do, create jobs, is good for California.”

This story was originally published June 29, 2021 at 5:00 AM.