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(Reuters)—Employees of Tata Sons Ltd. who were deployed from India to work in information technology jobs in the United States won the right on Monday to proceed with a class action lawsuit against the Indian corporate giant over unpaid wages.
California federal judge Claudia Wilken granted class action status to the suit that accuses Mumbai-based Tata and its subsidiary, Tata Consultancy Services, India's largest IT services exporter, of breaching employee contracts and violating California labor laws.
Tata Sons Ltd. is the holding company for salt-to-software conglomerate Tata Group, India's biggest corporate house.
"TCS continues to believe that when this matter concludes, the court will find that the plaintiff's claims are without any merit," the company said in an e-mailed statement on Tuesday.
"This is an order only on one procedural matter and does not address the merits of this case," it said.
Two former employees accused the company in 2006 of forcing all non-U.S.-citizen workers to sign over their U.S. federal and state tax refund checks to the company. Tata also deducted their Indian wages from their compensation, the suit alleged.
The judge authorized one national class of plaintiffs, comprised of non-U.S. citizens who worked at the company between 2002 and 2005, to sue for contract violations. The court certified a separate class of employees to bring claims under California labor laws.
"More than 10,000 current and former Indian nationals working for Tata in America now may have their day in court," Kelly Dermody, a lead attorney for the employees, said in a statement.
TCS shares provisionally ended 1.6% lower on Tuesday in Mumbai, underperforming the broader market, which rose 0.6%.
A combination of "profit booking, as shares were up yesterday," and the "negative sentiment from the court order" might have pushed the shares lower, said Harit Shah, an analyst at brokerage Nirmal Bang Institutional Equities.
Tata Consultancy Services and second-ranked Infosys Ltd. are part of India's $100 billion information technology and business process outsourcing industry that earns close to 70% of its revenue from exports to the United States and Britain.
TCS, whose roughly 227,000 employees serve customers such as Citigroup and BP P.L.C., earned 45% of its December-quarter revenue from work done at clients' own facilities, the company has said.
The company employs local recruits and employees brought in from India on short-term work permits for such work.
Robert Steiner, a lawyer for Tata America International Corp. with Kelley Drye & Warren, did not respond immediately to a request for comment.