 CALIFORNIA COURT VOIDS PENALTY CLAUSE IN H-1B VISA HOLDER’S CONTRACT
In a surprising decision, a state court judge in California ruled this week that employers cannot enforce contract provisions penalizing nonimmigrant workers who move to a new employer. The ruling, which voided a provision requiring the employee to pay $ 25,000 if he changed jobs, offers hope to many people working in the US on H-1B visas.
The employer, Compubahn, which is appealing the decision, is a “body shop” that recruited foreign software programmers and placed them on projects with US businesses. Compubahn inserted a clause requiring the payment of a $ 25,000 fine is the worker wanted to work for anyone else, including the business to which they are contracted. In many cases, the workers are forced to sign these contracts shortly after arriving in the US and before being allowed to work.
Dipen Joshi, a software engineer from India, filed the lawsuit. He was recruited in March 1998, but did not begin work until September of that year. In June 1999, before the expiration of his contract with Compubahn, Joshi went to work for Oracle. Compubahn sent him a letter demanding that he pay $ 77,085 in damages for breach of contract, including the $ 25,000 fine. Joshi was determined to not pay such a sum, and decided to fight it. He filed suit in January 2000, claiming that his contract violated a California statute prohibiting unfair competition.
Earlier this year, a judge ruled that three provisions of the contract Joshi signed with Compubahn were unenforceable. The first provision prohibited employees from working for both current Compubahn clients and businesses that might be clients in the future. The second required the $ 25,000 fine. The third required employees who left within 18 months of arrival to reimburse Compubahn for relocation and immigration expenses.
Attorneys say that such a contract is unenforceable in California because of the state’s law against unfair competition.
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