Outsourcing controversy rattles RBC, supplier

The increasingly widespread use of outsourcing and the way in which Canada’s temporary foreign worker program could be used to facilitate the practice emerged as a key issue Tuesday in the controversy over the Royal Bank of Canada’s decision to outsource dozens of Toronto jobs.

TORONTO — The increasingly widespread use of outsourcing and the way in which Canada’s temporary foreign worker program could be used to facilitate the practice emerged as a key issue Tuesday in the controversy over the Royal Bank of Canada’s decision to outsource dozens of Toronto jobs.

Many Canucks have lambasted RBC after it came to light that Canada’s largest bank contracted an external supplier called iGate to provide certain technology services, a decision which ousts 45 employees from their current roles.

Questions have been raised about how iGate brought its own employees into Canada under the temporary foreign worker program so they could be trained at RBC branches for the services they’ll be providing to the bank.

The program itself has been criticized as a tool that allows companies to opt for temporary workers who can be paid up to 15 per cent less than Canadians. iGate told The Canadian Press on Tuesday that it operates with a “high level of integrity” and will “fully co-operate” with a government investigation into the situation.

“iGATE’s hiring practices are in full compliance with all Canadian laws,” said Jason Trussell, senior vice president and regional head of iGate Canada.

Human Resources Minister Diane Finley has asked officials to review documents submitted by iGate after apparent discrepancies appeared between public statements made by RBC and information previously provided to the government by iGate.

“We are very concerned with recent issues involving the Temporary Foreign Worker program,” Finley’s spokeswoman Alyson Queen said Tuesday.

“Officials are investigating recent reports concerning labour market opinions granted to iGate and will look into any evidence that the program is being misused.” To obtain permits for temporary foreign workers, companies need to apply for labour market opinions and show that a Canadian cannot be found to do the work.

iGate (NASDAQ: iGATE), headquartered in the U.S. with offices around the world, employs more than 28,000 people and counts RBC as one of its larger clients.

The company has run afoul of international laws involving temporary foreign workers in the past.

One immigration expert said iGate may have received a positive labour market opinion by demonstrating that the permits it was seeking were for jobs that were never going to remain in Canada over the long term.

“The work permits haven’t been issued with the intention of them doing work in Canada. These jobs are going to get outsourced to India, which is nothing illegal,” said Toronto immigration lawyer Chantal Desloges.

“I think the public outrage is being directed towards temporary foreign workers but it’s not actually about that. What people are really upset about is jobs going to India, China.”

Desloges added that the labour market opinion system runs on an honour-based system and could benefit from more oversight.

The practice of outsourcing, however, isn’t likely to disappear, said one expert with Western University’s Richard Ivey School of Business.

“Outsourcing is just international trade in the service sector and the rationale to support it is similar to the trade of manufactured goods,” said Shih-Fen Chen.

To explain the positives of the practice, Chen argued that outsourcing a Canadian company’s technical services could result in higher incomes for an overseas worker who might later choose to buy or invest in Canadian products. The tricky issue for corporations is to manage the impact of outsourcing on their existing employees.

“Can the person who works for a bank easily find a job after the bank outsourced the service to another country? That is the problem. But overall it should be good for both countries involved.”

In 2008, the U.S. Department of Justice ordered iGate to pay US$45,000 in civil penalties to settle allegations that the company had discriminated against American citizens in its employment practices.

The settlement also required iGate to train its recruitment staff and post a non-discrimination statement on its website.

The Justice Department found that between May and June of 2006, iGate placed 30 job announcements for computer programmers that “expressly favoured” people holding a temporary foreign worker visa, consequently discriminating against U.S. citizens, permanent residents and other legal U.S. workers.

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