US court dismisses suit against Infosys

New Delhi: Shares of Infosys Ltd rose the most in 10 months after a US court dismissed a harassment suit filed by a former employee, bringing some cheer to the Bangalore-based software exporter that has been paring its revenue growth estimates.

Infosys stock gained as much as 3.7% to ₹ 2,439, the steepest intraday advance since 12 October. It ended the day at ₹ 2,407.05, up 2.37%, while the benchmark Sensex gained 1.1% to 17,885.26 points. The stock has still fallen 13% this year after the company cut its annual sales forecast, according to Bloomberg.

In February last year, Jack Palmer, a former Infosys employee in the US, filed suit in an Alabama court alleging that Infosys had been retaliating against him after he reported instances of business visa fraud at the company, India’s second-largest software exporter.

The company stands vindicated, chief executive S.D. Shibulal said after the court verdict. “We are very pleased that the judge has found no basis to support any of the charges filed by Palmer and dismissed the case entirely,” he said.

US district judge Myron H. Thompson said in a ruling on Monday that the judgement was entered in favour of Infosys as the allegations made by Palmer do not merit legal action under Alabama law.

The judgement vindicates the stand that Indian information technology (IT) organizations have good governance structures, according to Som Mittal, president of lobby group Nasscom. “As an industry which has been hiring more and more local people abroad, this sort of a decision builds the confidence in local judicial systems there in Indian enterprises,” Mittal said.

Palmer has also reported the alleged business visa misuse at Infosys to US federal authorities, prompting an investigation by the US department of homeland security and a federal grand jury.

Shibulal declined to comment on this. “There are no further updates on this,” he said on a conference call.

“While Palmer and I obviously are disappointed in the results, we certainly respect judge Thompson’s decision,” Mendelsohn said in an emailed response. “It is important for the public to understand that judge Thompson did not condone Infosys’ conduct. He merely concluded that ‘under current Alabama law, Palmer has no right to recover from Infosys’,” Mendelsohn said.

Considering that Infosys never made a big deal out of this case, it will not have any material impact, either positive or negative, on the company’s business, said Sudin Apte, chief executive and principal analyst at Offshore Insights, a consultancy. “However, it is surely one thing off their (Infosys’) head,” Apte said.

Infosys still faces a similar lawsuit from another former employee.

Former employee Satya Dev Tripuraneni alleged he was harassed by his supervisor after he accused Infosys of visa fraud, according to a lawsuit filed on 2 August in a federal court in California.

Shibulal rubbished the claims of Tripuraneni, saying the company had investigated the matter internally and the claims were unfounded. “Our lawyers are finalizing the defence,” he said

In April this year, Infosys said in a filing to the US Securities and Exchange Commission that the US department of homeland security was reviewing the company’s employer eligibility verifications after it found a “significant percentage of errors in Forms I-9 of some of its employees working in the country”.

Forms I-9 is used by an employer to verify an employee’s identity and establish that the worker is eligible to accept employment in the US. Every employee has to complete Forms I-9 at the time of being hired.

If the US department of homeland security “ultimately concludes that our Forms I-9 contained errors, the department would likely impose fines and penalties on us”, Infosys said in a statement in April.

Infosys’s clients were not really worried about the Palmer lawsuit, so there is not much impact there, according to Apte. “The bigger issues here are the DHS (department of homeland security) and the grand jury investigation into the visa issues, as they not only have higher ramifications for Infosys but also for the entire outsourcing industry,” he said.

Reuters and Bloomberg contributed to this story.