In A Reversal, Feds Say Outsourced Programmers Are Eligible For AssistanceIn A Reversal, Feds Say Outsourced Programmers Are Eligible For Assistance

The federal government appears to have reversed a long standing policy that prevented thousands of "outsourced" computer programmers from collecting the same employment benefits routinely extended to factory workers who've seen their jobs disappear amid a flood of cheap, manufactured imports.

In a turnabout from earlier decisions, the Department of Labor—in a note published this month in the Federal Register—said that four employees of IT services vendor Computer Sciences Corp. that were laid off in 2003 from a facility in East Hartford, Conn., are eligible to apply for benefits under the Trade Adjustment Act. The act provides a number of relief measures for workers who've lost their jobs to cut-rate foreign competition, including extended unemployment payments, federally funded retraining, and relocation allowances.

The department has long held that programmers who've lost jobs to cheaper, foreign workers aren't eligible for the TAA program because their employers, or employer's customers, are not importing a physical good in the same way as, say, steel manufacturers. A number of federal and state lawmakers have introduced bills that would automatically grant eligibility under the act to IT workers and other white collar professionals, but none has become law.

The labor department initially said that although CSC moved production of its Vantage-One insurance software from East Hartford to CSC India, the software was not an imported "article" as defined by the act. In a lawsuit, the workers asked the U.S. Court of International Trade to overturn the department's ruling. In January, trade court judge Nicholas Tsoucalas ordered the department to revisit the case, noting that, "Labor's interpretation of the law, that software code must be embodied on a physical medium to be an article under the Trade Act, is arbitrary and capricious."

In a Federal Register note published April 11, the Labor Department conceded the point and ruled that the four CSC workers would be eligible to apply for TAA assistance. In ruling, the department said it would henceforth look upon software, whether shipped into the U.S. on a disc or transmitted into the country via telecommunications networks, as a physical product.

"Software and similar intangible goods that would have been considered articles for the purposes of the Trade Act if embodied in a physical medium will now be considered articles regardless of their method of transfer," the department wrote.

The ruling could ultimately affect thousands of U.S. IT workers who claim they're out of work due to the outsourcing of hi-tech jobs to India, China, and other emerging countries where programmers are paid as much as 80% less than their American counterparts. "We think this case will have wider implications," says attorney Neil Ellis, who represented the CSC workers.

Indeed, a number of U.S. tech services vendors, including IBM, EDS and CSC, have been quietly trimming domestic manpower while ramping up operations in India. In March, IBM said it would move all business solutions development to the country and add tens of thousands of new positions there over the next several years. Also in March, CSC—which is priming itself for a sale—said it would cut 5,000 jobs in the West over the next two years. At the same time, CSC said it plans to add between 5,000 and 7,000 workers in India over the same period. EDS says it wants a ten-fold increase in its Indian staff-from the current 3,000 to more than 30,000 by 2008.