H-1B Staffing Company Practices Revealed in Federal Court Cases

By David North on October 4, 2022

There are three layers of employers (each taking a chunk out of the workers’ salaries) in some H-1B situations, a fact revealed by a close reading of two federal court cases involving the communications giant AT&T.

We have known for a long time that big corporations often use staffing companies (often called "body shops") to hire H-1B workers, as well as hiring them directly.

But who knew that there were arrangements in which the corporations engaged one staffing company, which in turn used another staffing company to do the actual hiring? These court cases show the following structure:

  • The H-1B workers are employed, on paper, by subcontractor A,
  • Which rents the workers to contractor B,
  • Which rents them to the corporation where they actually do the high-tech work.

Meanwhile all three entities benefit financially from the fact that U.S. citizen and green card workers do not get the jobs involved; and each of the contractors takes a bite out of the foreign workers’ salaries.

All of this came to light when some workers for subcontractor A (in this case Tekway, a body shop based in Downers Grove, Ill.) wanted higher salaries by working directly for contractor B (Pinnacle), which colluded with AT&T to make the shift, causing Tekway to sue for damages and thus to bring these exploitative practices to light in a Law360 report.

Without getting into the complicated internal relations of the workers with the various levels of employers and the wondrously intricate relations among the subcontractor, the contractor, and the corporation (the subject of civil cases in the federal courts in Illinois and Texas), two things are clear: 1) there are needless levels of profits in this part of the H-1B business; and 2) corporate America will go to great lengths to hire docile aliens, rather than using U.S. workers.

Two Tekway H-1B workers with Indian names desired to keep their association with AT&T, but wanted higher salaries. AT&T did not object and manipulated matters to keep the workers by paying them better and moving them into different staffing arrangements, all of which cut off the profits to Tekway, which sued to preserve the status quo.

For the endless legal squabbles that this produced, see the PACER files for case 1-20-cv-04095 in the U.S. District Court for the Northern District of Illinois. Tekway lost a roughly similar court battle in Texas, and the one in Illinois is still undecided.