How Indian Recruiters Can Steal 30 Days of Earnings If Consultants Don’t Give 30 Days Notice

Executive Summary

• Indians have developed a horrendous reputation in IT recruiting.
• This article shows one typical clause in an Indian subcontract agreement.

Introduction to Indian Recruiters

The rise of Indian recruitment agencies into the US and European IT markets has led to significant dislocations for domestic US IT workers. Indian recruiters are changing everything from rates to terms and conditions in contracts to refashion the IT contract market entirely around Indian ethics and labor standards. This article will focus on the terrible contract clauses that only Indian recruiters and consulting firms put in their contracts.

About Our References

See our references for this article and other articles on Indian IT recruiters at this link.

Indian Subcontract Agreement

I was recently was close to taking a project with a consulting company as a subcontractor. I received a subcontractor agreement via email, which is the standard practice. The email that introduces these types of documents is typically relatively innocuous and says something like, “please complete these steps.” The general feeling presented by the recruiter or consulting firm that offers these agreements is that everything is standard. However, my experience has been that there can be hidden tripwires in the subcontractor agreement, and in this recent agreement I was sent, I found the most outrageous clauses I had ever seen. This, I felt, could not go without an article. Here are some of the provisions that caught my eye and asked to be changed.

TERM AND TERMINATION
a)   This Agreement shall continue indefinitely until canceled by either of the parties hereto upon thirty(30) days written notice to the other.

SUBCONTRACTOR agrees to provide THE PRIME CONTRACTOR 30 days written and verbal notice of intent to abandon any and all projects outlined in this agreement if that date is before the “end date” indicated in Supplement B – Statement of Work included within this document.  If SUBCONTRACTOR fails to provide 30 days written and verbal notice (with the exception of issues related specific to H1Visa requirements outside of the SUBCONTRACTORS control) , SUBCONTRACTOR acknowledges that payment for all applicable unpaid time and expenses may be forfeited by SUBCONTRACTOR as deemed reasonable by THE PRIME CONTRACTOR.

In addition, THE PRIME CONTRACTOR shall have the right to immediately cancel this Agreement upon written notice to SUBCONTRACTOR, in the event THE PRIME CONTRACTOR, in its sole discretion, determines SUBCONTRACTOR’S performance to be unsatisfactory or in the event of any breach of the obligations of this Agreement by SUBCONTRACTOR, or in the event SUBCONTRACTOR fails to submit proper invoices in a timely manner.

Upon receipt of such termination notice, SUBCONTRACTOR will stop all activities associated with the terminated Statement of Notification as of the cancellation date on the notice. THE PRIME CONTRACTOR will pay SUBCONTRACTOR for acceptable Services performed up to the effective date of such cancellation when THE PRIME CONTRACTOR receives all Deliverables and Materials related to such Services.

Our Analysis

This clause requires that the SUBCONTRACTOR provide 30 days’ written notice to the PRIME. This duration is unusual, as two weeks is the generally expected notification for permanent employees. If the SUBCONTRACTOR does not do this, they agree to forfeit both their expenses and their billings. However, this contract has 30-day terms on payment. Therefore, what is undoubtedly possible is that if an emergency or other reason were to prevent the SUBCONTRACTOR from performing their duties, the PRIME could keep up to 30 days of billings and expenses. However, the PRIME holds the invoiced amount for 30 days. There is the potential for the PRIME to keep a maximum of 60 days of billings and expenses. This is completely outrageous. However, it gets worse. While the SUBCONTRACTOR agrees to provide 30 days’ notice, the PRIME has the right to cancel the contract on the spot. They have no notice requirement whatsoever. An additional clause described further in this article states that if the PRIME is unhappy with the work, they can also keep billings and expenses invoiced by the SUBCONTRACTOR.

“PERFORMANCE OF SERVICES

SUBCONTRACTOR represents and warrants that the Services shall be performed in a good, professional workmanlike manner.  If the client rejects the Services required hereunder, because the Services provided by SUBCONTRACTOR or its workers were of poor quality so as not to be within industry standards, SUBCONTRACTOR shall promptly correct the work for acceptance by the client.  SUBCONTRACTOR shall not charge (THE PRIME CONTRACTOR) nor shall (THE PRIME CONTRACTOR) be required to pay for those Services.”

Our Analysis

Here the SUBCONTRACTOR is required, not the PRIME, to correct the work free of charge. There is no limit listed here regarding when the client will be satisfied, and this is an open-ended liability of the SUBCONTRACTOR. So the PRIME takes the profile off of the difference between the rate charged and what it pays the SUBCONTRACTOR but assumes no risk because the risk has been delegated to the SUBCONTRACTORS, even though most of the easy money is being taken by the PRIME.

“Code-of-conduct

SUBCONTRACTOR will acknowledge and adhere to THE PRIME CONTRACTOR’s Code of Conduct per both verbal discussions as well as that which is defined within Supplement C. SUBCONTRACTOR’s services and associated manner in which services are to be delivered are not limited solely to Supplement C. SUBCONTRACTOR is to continually represent (THE PRIME CONTRACTOR)’s best-interest including representing THE PRIME CONTRACTOR and THE PRIME CONTRACTOR’s interest throughout the duration of the contract as well as after the contract/engagement has concluded. Failure to represent (THE PRIME CONTRACTOR) in the most professional manner and/or jeopardize or compromise THE PRIME CONTRACTOR’s best interests will result in violation of this entire contract and could result in forfeiting monies invoiced.”

Our Analysis

This is entirely arbitrary and solely at the discretion of the PRIME. What range of activities or behaviors could qualify as “not representing the PRIME’s best interest”? Well, who knows. This is highly subjective. If the SUBCONTRACTOR is not sufficiently flattering in a discussion, this could be considered not in the PRIME’s best interests and could result in forfeiting monies invoiced. Again, the PRIME shows a repeated obsession with holding billed time and expenses as a hostage in the event of disputes with the SUBCONTRACTOR. This has enormous potential for abuse. There is no intermediary here.

Imagine the power the PRIME would have over the SUBCONTRACTOR with this clause. It, in effect, utterly controls and censors the SUBCONTRACTOR. If the SUBCONTRACTOR were to make a recommendation that did not maximize the PRIME’s income, they could have their invoiced monies forfeited. This clause is obvious, and honesty on the part of the SUBCONTRACTOR is not tolerated.

Furthermore, while the end client may be given the impression that the SUBCONTRACTOR works for them and their interests (they are, after all, the source of income), the agreement states in no uncertain terms that the real client is, in fact, the PRIME, who is simply an intermediary between the end client and the SUBCONTRACTOR. The PRIME is, in effect, lying to the client. These consultants arrive on the project as if they are free to provide their expertise unrestrictedly, but in reality, the PRIME controls them like marionettes.

The Implications of The Lost Agency And Indian Subcontracts

Project managers managing SAP projects need to evaluate the subcontract agreements that the companies they hire ask subcontractors to sign. If they are similar to this contract, the implementing company is paying for the consultants, but legally, the consultants are entirely beholden to the PRIME. You can imagine that you will not receive honest opinions if the subcontract consultants can lose a month or more of billings and expenses in addition to having their contracts canceled.

This is another reason why hiring a consulting company decreases value over hiring independent contractors directly or through recruiters (recruiters less frequently have these clauses, but consultants are least burdened when they are hired directly with no intermediaries). Consultants working for companies generally have no legal standing to voice their views, and the consultants themselves are the ones with the answers, not their handlers, the partners, etc…

The fact that more IT consultants are working under Indian contracts makes the situation even worse. This is part of the abusive system that Indians are imposing on the US IT market that is covered in the article How the Awful and Abusive Indian Employment System Works.

“COMPLIANCE WITH THE LAW

SUBCONTRACTOR agrees that it will comply with all applicable laws, statutes, rules, regulations or orders of any country, state or political subdivision thereof, and upon request of THE PRIME CONTRACTOR, will furnish satisfactory evidence or compliance therewith.”

Our Analysis

This clause is ironic because the agreement that the PRIME demands the SUBCONTRACTOR to sign is, in fact, not only does not comply with US civil law but is, in fact, hostile to US civil law. I explained this to the PRIME in this email response.

“I have come to a final conclusion on this topic and I am passing on this project. The reason is the subcontractor contract was so punitive towards the subcontractor that it undermined my trust in the relationship. I have shared this contract with a number of family friends who are familiar with contracts, and there is a unanimous opinion that the contract attempts to supersede US law in several areas. With this contract, THE PRIME CONTRACTOR is claiming special privileges that would never be granted in a US court. The US civil code is designed to protect both sides of transactions, and it works reasonably well. US laws are determined through a somewhat democratic process, which is why it’s dangerous to allow companies like THE PRIME CONTRACTOR to sneak in punitive and self-centered clauses that disadvantage the other contracting party. Ms X has been very accommodating in adjusting punitive clauses, but in truth, I should not have to negotiate simply to obtain reciprocity. Ms X, you say the contract is standard. However, after a number of years of signing subcontractor agreements I have never seen a contract like this. So I would say it is not standard. The individual responsible for crafting or commissioning the contract has a concerning disregard for US law and for the rights of workers vis-a-vis intermediaries like THE PRIME CONTRACTOR.

No subcontractor should be required to forfeit any monies invoiced. If the main contractor has a problem with the subcontractor, they need to inform the subcontractor, and if necessary terminate the relationship. THE PRIME CONTRACTOR already has the ability to cancel the contract on the spot. There is absolutely no reason for THE PRIME CONTRACTOR to keep monies that have been invoiced. Disputed services and payment go to civil court, they do not simply stay with the prime contractor. That is the dispute resolution system under US law.

Through THE PRIME CONTRACTOR’s multiple clauses the subcontract agreement puts all the power in the hands of THE PRIME CONTRACTOR, which sets up scenarios that can be interpreted in a way in that in every case are entirely at the discretion of THE PRIME CONTRACTOR. I am offended by this contract and find the contract unreasonable. Even if this clause is removed, I don’t trust the person who would put such a contract together. That is a problem.

Ms X, both of us have put a lot of time into going over the contract. I must be up to 6 to 7 hours of time investment all together. But sometimes it’s better to cut one’s losses even after a significant investment. THE PRIME CONTRACTOR wants a very docile subcontractor who follows THE PRIME CONTRACTOR’s rules and signs a one-sided contract where THE PRIME CONTRACTOR has all the power. That is not me. We will both be better served if I pass, and you find someone who is not so offended by THE PRIME CONTRACTOR subcontract agreement.”

When the H1-B program began to import large numbers of Indian workers, it was not understood that Indians would come to dominate IT recruiting. And that they would interfere with US domestic workers getting jobs or that they would lower the labor standards for US domestic workers.

Conclusion

The contract I was asked to sign is unethical, underhanded, and contradictory to US law concerning dispute resolution. It is also bad for both the subcontractor and the end client. If I were managing a project and hiring a consulting firm, I would inspect their subcontractor agreement to ensure that it provides freedom of expression to the subcontractors and that no punitive clauses exist. The existence of such a subcontract agreement as a prime contractor would lead me to instantly question the ethics of the company’s directors that would create such a contract.

The Threat of Indians To US Domestic IT Workers

It says something very dark about the Indians that would create such a contract, and it also shows how Indians behave when they can set the terms of a contract. It is just one of many examples we have documented of how Indians pose a threat to any US domestic worker that must interact with them.