Contract Clauses to Watch Out for In Indian Professional Service Agreements

Executive Summary

• Professional service agreements or independent contractor subcontractor agreements are tools in the consulting trade.
• With the entry of low quality and almost entirely Indian recruiting companies, the clauses in these contracts are increasingly out of synch with US and European standards and practices.

Video Introduction

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Text Introduction (Skip If You Watched the Video)

This article will focus specifically on the termination clauses within professional service agreements and the way a deal was presented by the prime contractor to the individual, or the subcontractor. This is a shocking story that is 100% true and a first-hand experience on the part of the author. The experience was so shocking that it prompted me to write this article to get the word out. It should serve as a wake-up call for people who work in IT as independent contractors, but do not realize what Indian companies are bringing to non-Indian countries in terms of contract standards.

Our References for This Article

If you want to see our references for this article and related Brightwork articles, visit this link.

History on This Topic

In a previous article, I discussed the narcissistic personality disorder that causes consulting companies to offer completely one-sided contracts (master professional service agreements) to their subcontractors. Interestingly I came across a similar arrangement, and this time from a recruiting company called Systechi. This is a company with such a bad reputation they had to change their name from ACS Systech Inc.

Systechi is entirely run by Indians and Indians who are intent on bringing “Bangalore” to the US. Both of them lied through the process, and I show this in their comments below.

This contract is one example, but these types of arrangements are common among Indian recruiters. As part of Brightwork, we have reviewed many deals and have never seen any of the items listed in this article in non-Indian recruiters.

Understanding Master Professional Service Agreements

This is also known as the subcontract agreement. It outlines the contract between the prime contractor and the subcontractor. It is used in conjunction with the Statement of Work and is the primary document that is reviewed during a dispute. It outlines things such as when each party is required to provide notice of termination, what the subcontractor is responsible for (having a laptop, performing bi-weekly invoicing, etc..), and what happens if the subcontractor does not fulfill their duties. Subcontract agreements used to be shorter, but there has been a trend to make these agreements more aggressive types of documents. This is not limited to consulting, extends to other industries as well.

A legal website that focuses on construction disputes has the following to say on this matter.

“In the distant past, a subcontract documented the business relationship between the parties without any extraordinary attempt to shift risk from one party to the other. Subcontracts were commonly one page long. Beginning around the early 1970’s, a trend commenced to shift many of the risks on construction projects to the subcontractor. Around the early to mid-1980’s, this trend accelerated to the point where currently, some subcontracts are over one hundred pages long! Risk shifting became the norm in the industry. Under that trend, the vast majority of risks were transferred to subcontractors.”

The Problem with Many Master Professional Service Agreements

Some of the contract clauses that they contain are abusive and are quite contrary to the various state civil codes. (legal disputes on contracts are handled by the state, which is why contracts describe the state where the contract will be adjudicated. Contract clauses can be adjusted by the prime contractor, and how much they are changed often depends upon how much the prime contractor requires the services of the subcontractor. However, many of the contract clauses within a professional services agreement exist to gain rights that do not exist under the state’s civil code.

How Private Companies Attempt to Privatized Legal Arrangements to Keep Them Out of Public Legal Scrutiny

In this way, these consulting clauses are essentially an attempt to privatize legal arrangements. The advantage, of course, always resides with the party that crafts the professional services agreement, which is the prime contractor. They hire an attorney and may spend weeks on the contract part-time, and then expect the subcontractor to sign the deal, often under time constraints.

Also, as described in the Lies Told by HR Resources RegardingEmployment and Subcontractor Agreements, the contract clauses that are disputed by the subcontractor are often sugar-coated-in phone conversations.

This is specifically done to prevent a paper trail that could be admitted in court. And this causes some subcontractors to sign the professional service agreements under the illusion that the contract clause is not as bad as it sounds.

In fact, in the negotiation that you will see below, this is precisely what the prime contractor attempted to do to me.

The Problem with Many Master Professional Service Agreements

Many of the most problematic areas of the professional service agreement are related to the termination clause. While both parties are given normal rights to terminate under state law, the professional service agreement will often provide the prime contractor immediate cancellation rights, while making the subcontractor give notice. These termination clauses are even less necessary than initially thought because the subcontractor typically relies upon the prime contractor for references. Therefore, there is already a strong incentive not to cancel the contract on short notice or without giving advice.

*My First Email to the Prime Contractor

After hearing about a potential contract opportunity, I began reviewing the professional services agreement. After my review, I wrote the following email.

I have a few issues with the professional services agreement. I have provided analysis of my concerns of each clause.

Clause 1

“Consultant shall be required to complete the services required under this Agreement for the full duration of the Term. Failure of Consultant to complete all services through the full duration specified therein shall entitle (THE PRIME CONTRACTOR) to recover from Consultant all costs and damages (including, without limitation, lost profits) arising out of Consultant’s failure to complete the services through the full duration specified therein.”

My Comment

“This term is very open-ended. Essentially, this professional services agreement needs to have a termination clause. I may leave the project for any number of reasons, including having a health issue. The client can terminate the contract as well based upon their prerogatives. This contract appears to say that I have no right to termination. I must either complete the entire 3 month duration or (THE PRIME CONTRACTOR) can recover all costs and damages. What are “all costs,” all of my billings? The hours I bill are all my hours and are essentially my property as soon as the client signs the approval of my billing. If there is a dispute, the state of California civil code applies. I will not accept (THE PRIME CONTRACTOR) superseding the civil code with any clause in a contract. This is an unreasonable clause and put the subcontractor at enormous liability. I need it removed completely. I am a subcontractor to (THE PRIME CONTRACTOR), not a slave to (THE PRIME CONTRACTOR). This is a slave clause.”

Clause 2

“Without limiting the generality of anything set forth herein, Consultant will provide an initial 5-day performance guarantee. If Consultant is notified by (THE PRIME CONTRACTOR) of unsatisfactory performance within five (5) business days after the end of such performance guarantee time period, (THE PRIME CONTRACTOR) will not be charged and will not be liable for paying for the hours worked during the applicable guarantee period.

This clause gives (THE PRIME CONTRACTOR) nice protection. I am going to allow this clause in an unchanged form. However, I want it noted that this is ample protection for (THE PRIME CONTRACTOR). And no other extra protection should be necessary. I also note that the clause says nothing about (THE PRIME CONTRACTOR) not charging the client. Does this clause allow (THE PRIME CONTRACTOR) to charge hours and to in effect keep the money for the 5 days without paying the subcontractor? It would be interesting to know. Nothing in this clause prevents (THE PRIME CONTRACTOR) from doing this, which would seem unethical to me.”

Clause 3

“(THE PRIME CONTRACTOR) may terminate this Agreement at any time without cause or reason and without any further liability, obligation or responsibility hereunder to Consultant or any third-party.

So (THE PRIME CONTRACTOR) has instant termination rights, with no repercussions. These are not only superior to the subcontractor’s rights, but extraordinarily superior termination rights over Supply Chain Planning LLC, which are in contradiction with California civil law. I expect reciprocity. If (THE PRIME CONTRACTOR) has instant termination rights, then Supply Chain Planning LLC needs instant termination rights. Both companies have equal protection under the California civil code. That is state law, and I expect (THE PRIME CONTRACTOR) to respect the laws of the state.”

*The Email Response from the Prime Contractor

“Tried reaching out to you. Please give me a call when you get this!”

Notice that the HR representative from the prime is seeking to move the conversation to the phone. However, I am asking for specific contract clauses and termination clauses to be adjusted. A phone conversation is not going to do the trick. The prime needs to communicate what changes they will make by email so that they can eventually be included in the professional services agreement.

*My Email Response

My Email Response to the Prime Contractor on the Termination Clause

“In the contract review stage I think it’s better to communicate by email. Everything stated orally at this point will not matter because it’s the contract that counts. I have sent the specific clauses I need adjusted and or removed (that is for the portion of the contract I read). So I need to know that (THE PRIME CONTRACTOR) will do in this regard. This means emailing me which clauses are removed, and which will be adjusted and what are the new clauses. I don’t want to be orally pressured or given assurances in a phone conversation. I want the contract to be changed.”

*The Email Response from the Prime Contractor on the Contract Clause

“I feel it will be better if we can discuss over the phone. I feel some of your concerns can be addressed and they will all be entered in the contract before sending your profile to the client. This is a MSA (master professional services agreement) and not a SOW (statement of work) and MSA can be terminated by either party at will by giving sufficient notice. I cannot list all the changes so I will really appreciate if you could give us a time for us to connect today. Thank you.”

Again, the HR representative for the prime contractor insists on moving the discussion to the phone. There is no other interpretation other than his desire to reassure me without having anything in writing. The email above is an attempt at misdirection and falsely states that the master professional services agreement is not the statement of work, which is quite a ridiculous statement, as I point out in this email below.

*My Email Response to the Prime Contractor

“Alright I can give you a call. However, the MSA does not state what you just wrote. The termination clause states very clearly that (THE PRIME CONTRACTOR) can cancel the contract immediately, but I can’t cancel it at any time. This clause is clear that the subcontractor must complete the contract.

Consultant shall be required to complete the services required under this Agreement for the full duration of the Term. Failure of Consultant to complete all services through the full duration specified therein shall entitle (THE PRIME CONTRACTOR) to recover from Consultant all costs and damages (including, without limitation…..

That is a funny way to say that I can give notice.

Also you said that either party can cancel the contract with notice. However, this is not really accurate either. The contract in fact does not require (THE PRIME CONTRACTOR) to give notice. It states plainly….

(THE PRIME CONTRACTOR) may terminate this Agreement at any time without cause or reason and without any further liability, obligation or responsibility hereunder to Consultant or any third-party.

How is that notice? Its states “at any time.” That means at anytime during a day in fact.

Also, the SOW will probably not be a concern to me unless it states something I can’t do. The MSA / subcontract agreement is far more important to get ironed out. I don’t know what the statement “it’s not the SOW” means. I don’t think the statement makes sense. These clauses disadvantage Supply Chain Planning LLC in a very obvious manner and they are in a critical document, probably the most important document between these two companies. How can you diminish the importance of the subcontract agreement? It’s the primary document that is referenced during a dispute. The SOW does not address the issues covered in the subcontract agreement. I can’t tell a judge “well judge, I know its in the subcontract agreement, it’s not the SOW.” The judge would tell me I was bananas.

I will give you a call after you have had time to digest this email.”

*The Email Response from the Prime Contractor

“Do let me know when would you like to speak. Here is the amendment we can add to the clause in question.”

Again after misrepresenting the contract, the HR representative wants to speak again. Here is his amendment, which makes little sense in light of the termination clause it is adjusting.

“Amendment to Section 3 C of Consulting Agreement– Will remain intact with the exception of interruptions and terminations related to unforeseeable, non predetermined and non business related circumstances beyond the control and discretion of the Consultant. As a professional courtesy the Consultant is expected to give sufficient notice, (15 days’ notice).

As far as (THE PRIME CONTRACTOR) terminating the contract-we do not have any control over it if the client decides the scrap the project or run out of budget. I think this is very common in this industry and comes with being a contractor rather than a full time employee.”

After all the talk, the contract clause 3C related to the prime being able to sue the subcontractor if the subcontractor does not finish the term is changed to 15 days’ notice. However, most of the clause remains in effect. Therefore if the consultant does not give 15 days’ notice, then the prime can sue them for lost profits and all previous billings?

*My Email Response to the Prime Contractor

“Even with the amendment, Section 3C is still perplexing and too risky for me to sign. It provides too much undue unprecedented and unnecessary leverage to (THE PRIME CONTRACTOR). Under no circumstances does (THE PRIME CONTRACTOR) have the right to previous billings or lost profit in the event that I walk from the contract. (THE PRIME CONTRACTOR) does not have it legally, or ethically. I am not guaranteeing the project for $xxx per hour. (THE PRIME CONTRACTOR) seems to be demanding a guarantee, but is not paying a guarantee premium. (THE PRIME CONTRACTOR) wants the profits of a prime contractor, while delegating all risk to the subcontractor. This is the same rate I get on any project without having to agree to any clause like this.

Here is a termination clause from a company I have worked with in the past:

4.  TERMINATION.  Regardless of the term of the Agreement expressed in Section 2 or in the applicable Statement of Work, (THE PRIME CONTRACTOR) may terminate this Agreement with or without cause and for any or no reason upon providing written notice to Consultant. Consultant may terminate this Agreement with or without cause and for any or no reason upon providing written notice to (THE PRIME CONTRACTOR).

In the event that (THE PRIME CONTRACTOR) terminates this Agreement, such termination will release (THE PRIME CONTRACTOR) from any and all obligations under this Agreement except for payment for approved Services rendered prior to termination, but such termination will not terminate Consultant’s obligation to honor the post-engagement covenants and agreements contained herein.

Notice that the termination clause is completely reciprocal. (THE PRIME CONTRACTOR) has been doing business for quite a while and has no problem making money having fair termination agreements. There are punative clauses as there are in the (THE PRIME CONTRACTOR) contract. (THE PRIME CONTRACTOR) has no “5 day guarantee” which is essentially a one way clause with no reciprocal consideration, its simply 100% in favor of (THE PRIME CONTRACTOR).

I have to ask if you need 3C clause. (THE PRIME CONTRACTOR) will make quite a good profit off of my work without these clauses. I have a feeling I am not getting through and that both of you don’t see how ripe for abuse these clauses are. I keep pointing out that they are in contradiction to the civil code of California, but this seems to have no effect. States have a rules for a reason regarding contracts for a reason. My company has a right to protection under the civil code. That is an important right, a right you are plan to strip away with these predatory clauses.

I am back to square one. I need 3C removed. I will certainly accept a 15 day notice written into the contract, something I always give in any case. I will even allow (THE PRIME CONTRACTOR) to terminate immediately. That is already unreciprocal and is something I did not have to deal with when working with Titan or anyone else.

The clause related to the 5 day guarantee allows (THE PRIME CONTRACTOR) to essentially terminate with -5 days notice. I will accept this clause, but only if (THE PRIME CONTRACTOR)can show me that it also exists in the prime contract with the end client.”

*The Email Response from the Systechi

“Thank you for your time but I do not think this will work out between the two companies. I do not think that either companies expectations are unreasonable-they are just different and are in disagreement. Systech has hundreds of consultants billing under the same contractual terms and we do not change our contracts for anyone. I know there are companies that would draft a contract based on a consultants demand just to get a closure and gain revenue- we will not. I would have really liked to work with you but I do not think this is a match. Once again thank you for your time and I wish you all the best.”

At this point, the HR representative from the prime sees that we are too far apart. He then makes the argument that his highly one-sided contract is standard, as many others work under those terms. He then takes the ridiculous position of standing for principle and not profit. That is, he is principled is making subcontractors sign one-sided contracts. He also states that there are just different expectations at work here. What I notice from these emails is that this HR representative makes a lot of false statements, and this is just another in a line of them.

*Final Email to Systechi

Here is my final email to Systechi.

“Mr X, I am not going to read the rest of the contract until you respond with adjustments to what I have listed above. I don’t want to invest time into a contract if s intends to keep the clauses I need changed as is, or simply intends to make minor changes. I expect you need to get approval or for these adjustments to take some time. So if we need to put off the interview to get this right, then let’s do that. Also, I prefer to work this out by email, phone conversations are not good communication methods for working out specific details in contracts.

There is a problem with this negotiation from beginning to end. I have enumerated the following issues below:”

Recruiter Lies Explaining Clauses on Subcontractor Agreements

The statements used by HR representatives that will be analyzed are the following:

“Excuse #1. It is Standard”

“Excuse #2. We Are Just Protecting Ourselves”

“Excuse #3. I Am Not Addressing Your Concern, but Look as if I Am”

“Excuse #4. Look, I am Helping You Out”

“Excuse #5. We Would you to Start on Monday, so Please Get the Subcontractor Agreement back to us as Soon as Possible.”

“Excuse #1: It is Standard”

To get you to sign a contract, HR resources will say that everything is standard. This was even used in a ridiculous subcontractor agreement I had ever seen where multiple clauses contradicted US civil law. What the HR representative from the company was saying was genuinely and demonstrably false. Firstly, I had never seen provisions that set up scenarios where the prime contractor would keep the billings and expenses of the subcontractor. But when this contract was shared with other recruiters, they also had never heard of these clauses before. Therefore the clauses were anything but standard, and yet they were described in that way. HR resources will say anything to get you to sign the contract. Here is the email response to when I protested against the clause that set up an utterly unequal relationship with regards to how much notice the subcontractor was required to provide for the contract, and how much notice the prime contractor could give.

“Also, thank you for the feedback re: contracts.  We generally require a 30 day notice as you pointed; however I trust that you do not leave projects early as you mentioned and that we won’t encounter any issues.  As a result, please find attached a revised MSA_SOW with the Term and Termination clause reduced from 30 days to 15 which is fairly standard.  Please let me know if you have any additional questions.”

So, the contract stated that the prime could cancel the agreement on the spot, while the subcontractor must provide 30 days? This is standard? Why the discrepancy between the notice that must be provided by the sub-contractor versus the prime contractor? Furthermore, if the sub-contractor did not offer 30 days, or in the negotiated duration 15 days, the prime could keep the invoiced amounts. I am unsure if this would be just for the 30-day or 15-day period, or for the period that had not yet been paid (the contract was under net 30 days terms). I use this example to describe the fact that the term “is pretty much standard,” means absolutely nothing and is a term of propaganda—just a boilerplate statement used to justify whatever the HR resource wants the individual to sign.

“Excuse #2: We Are Just Protecting Ourselves”

This is an old argument that is often used to justify aggression. The US has been using for quite some time, that we have to keep bombing oil-rich counties or else all these powerless people will come and invade our Starbucks. The argument was used in ancient Rome to justify their expansion, and by aggressive entities too numerous to count between then and now. This argument was proposed by the HR resource in this email excerpt below.

“We include certain clauses in our contract in order to prevent losses both form a financial as well as a reputation stand point.  There is always the potential, especially with those we’ve never worked with before, of a consultant joining a project and ultimately under-delivering and/or leaving the project early and incomplete.  Ultimately, we try to cover all of our bases with this contract and I understand you are trying to the same from your perspective.  Based on your experience in the industry and the few conversations I’ve had with you, I assume we will not encounter these issues with you during this or any future engagements that may take place between us.”

This email sounds reasonable, but, given the clauses that were in the contract, including the delegation of all project risk to the subcontractor, the email is completely bananas. A prime contractor must assume the main project risk as they are receiving almost all the unearned or easy money on the project. The prime contractor does little more than selling the work, and assemble a team. For that, they generally receive at least 1/3 of every dollar that is billed on the contract. The email assumes that the prime has no other protections. However, this is false. Firstly, the prime can withhold references, which are a powerful incentive for the subcontractor to produce. Secondly, the prime can cancel any sub-contractors’ contract on the spot. The sub-contractor agreement they crafted has the prime taking income, but both doing extremely little work, and assume close to zero risks. That is unreasonable, and far from being merely protective or defensive, the sub-contract is offensive, victimizing other parties. The falsehood inherent in the email above is demonstrated by the fact that the contract contradicts the standard US civil code with regards to contract disputes. When your agreement contradicts US law, perhaps you are not merely protecting yourself after all.

“Excuse #3: I Am Not Addressing Your Concern, but Look as if I Am”

The HR representative wants to keep you engaged and feeling like your concerns are being addressed. Here is an email response that you have seen above, but I will analyze it from another perspective.

“As a result, please find attached a revised MSA_SOW with the Term and Termination clause reduced from 30 days to 15 which is fairly standard.  Please let me know if you have any additional questions.”

The blue shows that the HR resource is receptive to my concerns. However, it’s a misdirection. This is because the orange portion discusses the reduction in the notice that is required by the subcontractor but, just as importantly, leaves out the fact that the prime still can cancel the contract on the spot. In a previous email, I asked for reciprocity. Here is how I phrased it.

“I am accustomed to equal termination terms. That is I can terminate or you can terminate in one week or two weeks. The combination of the 30 day notice, with the withholding of payment is what makes the clause so difficult to accept. Therefore, I am requesting an adjustment to this clause which makes it so both parties have equal requirements for notice.”

I also stated this in another previous email.

“The termination notice must be the same for both parties. If you want 2 weeks notice, then I need 2 weeks notice. If you want to make it 1 week on each side, then that is fine as well.”

I could not have been more clear. Pick the termination notice period that you want, but it must be equal for both parties. The HR representative reduced the notice period but did not make it reciprocal. Secondly, she did not address the fact that the contract allows for the prime to keep invoiced amounts. This is an old trick. The HR representative is addressing the parts of the complaint that they want to, and not addressing those portions of the clause they have no interest in changing. However, the response is sugarcoated, again with the use of the term ‘its standard.”

“Excuse #4: Look, I am Helping You Out”

The email then continues with a change in the subject.

“In addition, I have attached a quick reference guide for booking travel.  Please feel free to make arrangements immediately for this Sunday.  Looking forward to working with you.”

See…….she is now helping me out. Helping me out in this way is designed to get the recipient of this information (I am sure she has used these tactics hundreds of times) is design to get me to sub-consciously trust her and sign the contract that could end up getting me placed at the mercy of the prime contract. We had not agreed to terms yet, so it’s a bit early to be exchanging pleasantries about travel arrangements. She is screwing me mercilessly in the contract, which is what counts, but is helpful in some inconsequential way. There is a lot of research on how to gain compliance from people. They have found that in an interrogation, you can get quite a lot of information from people with a minimal demonstration of kindness, such as a Pepsi. This psychological feature called reciprocity works almost every time, to some degree, and is why salespeople are regularly buying people drinks. The drink is just the door opener.

“Excuse #5: We Would you to Start on Monday, so Please Get the Subcontractor Agreement back to us as Soon as Possible.”

Contracts are often signed under some type of deadline. Now the company offering the contract has had a great deal of time to consider and to work out every possible angle when they develop the agreement. They form the same commitment at one point and then use the same contract over and over. However, every person who is presented with the contract must review it anew. The prime may have postponed the hiring of the subcontractor, and time may have been consumed in rate negotiation. It is in the HR resource’s best interests to make the subcontractor review the contract for the shortest possible time so that they ask for the fewest changes to the agreement so that the prime contractor gets their terms accepted. After having seen this several times, I have concluded that those that offer contracts deliberately engineer situations where the recipient has the least amount of time to review the contract. One way around this is to request the contract before agreement on the rate so that there is more time to review and ask for changes to the subcontract agreement. Every item in the subcontract agreement is negotiable, and the prime contractor’s willingness to negotiate is simply based upon how much they want that particular subcontractor. Or whether they think they can get another similar subcontractor to sign the one-sided contract as is.

Who Originates the Scam?

The point of origin of one-sided contracts is an owner or executive with a narcissistic personality disorder that has screwed over many people in their lives. They live in a big house, have beautiful hair, love status, and are highly successful because of continuing and long-term theft. They vote Republican, talk about hard work (although rarely work hard), discuss the importance of protecting private property rights (while they steal other people’s property), and pick up various awards at the Rotary Club. Think of Mr. Lebowski in the movie “The Big Lebowski,” and you can get a proper appreciation of the psychological profile.

 Who Is In on the Scam?

However, far from being isolated, the scam originator has many accomplices. This includes the people who present and then justify the contract. Many companies are filled to the gills with mindless automatons that will offer an agreement, no matter how unethical because that is “their job.” They just don’t care. They want to do their job. (i.e., they are just following orders). They probably go to church, tuck their kids in at night and tell them to be ethical when they grow up. They see no inconsistency between what they do, perpetually lying to people and screwing them in contract negotiations, and how they see themselves personally. They drive BMW’s because they have heard good things about “German Engineering,” although they cannot name a single engineering principle. A good analogy would be Annette Bening as a vacuous real estate agent in the movie American Beauty.

HR resources, as the contract presenters, are a critical part of the scam. They are provided incentives to negotiate down the worker to the maximum degree. They have pleasant demeanors and have a kindly manner that makes the worker feel as if they are looking out for their interests. This takes me back to when I worked for consulting companies, and the HR hiring resources were so flattering, talking about the excellent bonus system that they had….the one that always seems to overestimate what was paid. It is amazingly easy to find HR resources who will lie; in fact, I have yet to meet an HR resource who had and concerns with honest whatsoever.

People that work in HR have a combination of moderate intelligence, the ability to be charming, a total slavish and unthinking devotion to hierarchy, and a complete disregard for workers’ rights. They are themselves workers, yet because their job description is to jam it to labor, they hold the values of the capital owners. I am not sure how many have enough mental horsepower to recognize that they are just doing dirty work for people with money. If they ever did and grew conscious, they would have to pick a new line of work. They have strong powers of self-delusion. In their mind, the company is perfect, and employees, or for this matter subcontractors, are just “marks” to be ruthlessly exploited. These contracts and the frequent lies told by HR resources demonstrates the utter disdain that many companies have for anyone that works for them, either full-time employees or subcontractors.

The Hostility to US Civil Law

Every year I work in this business my evaluation of the quality and ethics of people who work in this field. I think this contract was the first time I realized the hostility that many companies for US law, and the fact that much of sub-contract agreements is to remove the standard protections that the other contracting party has in a legal dispute. The prime contractor has so many advantages over the subcontractor. They get the money first (the subcontractor must go to the effort to use the prime contractor if the prime contractor withholds payment, not the other way around.

Secondly, the subcontractor relies upon the prime contractor for references, not the other way around. The prime contractor is already in the catbird seat and certainly does not require even more advantages and adjustments to US law that make it even more difficult for the subcontractor to recover legitimate fees. I believe this following paragraph covers the beliefs of many companies that engineer such one-sided contracts.

“Forget US law. We have no respect for laws that have some democratic input which are designed to provide protections for both parties in contracts. We want our way on as many of the contract terms as possible. We get our subcontractors to sign the agreement which puts us in the best possible position. Lie, cheat and mislead the subcontractor to sign the agreement by any means necessary. We need to make it as difficult for a subcontractor to recover any invoiced amounts from us, (regardless of the merit of the claim). Our subcontractors are nothing compare to us.”

When the H1-B program began to be used 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 worker.

Once You Get the Contract from an Indian Firm

All of these things are just the contract phase. Once you get the contract, things go further downhill. The following is a typical experience of working for Indians as is the explained in the following quotation provided to Brightwork Research & Analysis anonymously.

For personal reasons I had to move abroad and outsourced for a while. Which meant Indians. These were small operations jumping from technical project to technical project, with very little success, but we’re micro-funded by friends of friends. They did a great pitch, that we would make a lot of money together, etc. and I decided to buy it. Idiot that I was. I’m a white American.

The first projects were just low-level stuff and they paid on time, no problem. But this was the bait. As we moved deeper into the relationship, there were more challenging projects. In the first one, they cut the price in half midway through and it took three months longer than planned. Mostly delay in payment and approval process, so I wrote it off as just inefficiency, which you have to tolerate in non-Western contexts.

The second project was a lot more ambitious. I asked for an initial fee, which was cut by 1/3rd in exchange for 20% of future sales. Except, every time I got something done, the “manager” asked for more, and more, and more, with no end in sight. He realized he had a competent programmer on his hands and he squeezed out every drop. See, one trick they do when they have someone competent is that they take as much of their work as they can. They are aware that many of the people they hire from nepotism are useless.

Conclusion

I want to emphasize that the changes must be in the contract. Sometimes when I review the agreement, the company that I work with will say this or that does not happen very often, or that “we would not do that.” However, in a court, the contract will be the primary reference point. This is partially provided by US civil law unless the law is superseded by private contracts. Abusive companies want these contracts to be private because they want to, in effect, “beat up a midget in the closet.” Prime contractors don’t even want their clients to read their abusive subcontractor contracts, as the terms provide the telltale sign that the control over the subcontractor by the prime contractor is so complete, that the subcontractor cannot represent the interests of the end client. The apparent desire of many top contractors is for the end client to pay all the bills, but for the prime to maintain total control.

So to me, that is what matters.

Also, some companies that have offered similar clauses to me in the past have attempted to use the excuse that they are just protecting themselves. This is not a credible argument. (THE PRIME CONTRACTOR) is already protected under the California civil code for contracts. Clauses like this go beyond protecting the company into passing all risk to the subcontractor. (THE PRIME CONTRACTOR) must be willing to accept the average risk of being a prime contractor, and there is no logic why they should take less risk than a subcontractor. As (THE PRIME CONTRACTOR) is already paid for every hour that I work, while not doing any work (Except for the work to initially placed) should be willing to accept much more risk. Or put another way, being a broker is easier than going in every day to perform the work.

Overall, the communication on the part of the HR resources was both poor and deliberately misleading. They were both Indian, so English is a second language for them. It was ironic to have a contract misexplained to me by people who have an inferior understanding of English than I possess. However, HR resources tend to either sugarcoat the contract clauses that are of concern or simply lie about them to the subcontractor, as was done in this case. The attempt to make the professional services agreement seem unimportant was ridiculous and entirely deceptive. But they demonstrate how far HR resources will go to get a subcontractor to sign a one-sided deal.

The State of IT Recruiting and Indian Takeover of IT Recruiting

Indian recruiting companies have taken over the recruiting market with remarkable speed. Now the majority of recruiting contacts we receive are from Indian firms. The H1-B program was created for technical skills, so how did all of these Indians who are working in recruiting get into the country. Was the US short on recruiters so that we needed to bring in people with minimal English skills to run the US domestic recruiters out of their jobs and to make like hell for US contracts, making many of them leave the field or simply retire early?

The question is which Indian recruiting firms are not always lying is an important one. We have yet to have a report of an ethical or otherwise trustworthy recruiting or consulting firm if it is Indian run. This catches US domestic workers off guard, but India ranks far higher in corruption than the US, as tracked by various entities that rank corruption internationally.

When US domestic worker works with Indian recruiters, they are often taken off guard by the low ethical level on display. However, this behavior is considered standard in India. Indians never agreed to meet the US or European standards of ethics. They use their Indian ethics as an advantage against US and European domestic workers. This has dramatically decreased the efficiency of the US and European contract market.

The extent to which Indian immigration to the US has undermined US labor is not broadly understood or covered by IT media. We think this is because the only thing IT media is good for is taking money from vendors to publish what is appealing for them to read. The major vendors and consulting firms have gotten wealthy from H1-B programs and H1-B abuses.

The situation is bleak, Indian firms have brought bonded labor from India to the US and potentially other IT markets, as we covered in the article How Indian IT is Bringing Bonded Labor to the US.

For those interested in how Indian workers target US domestic workers to push them out of their jobs and replace them with other Indians, see the article How Indian IT Workers Discriminate Against Non-Indian Workers.

And this goes without being investigated. The abuses we see in the H1-B program are incredibly similar to those seen in the immigrant farming H2-A program. Secondly, it is clear that Indian recruiters prefer to place Indian IT workers over domestic workers.