Southfield, Mich.-based Computech will also be prohibited from participating in the H-1B visa program for 18 months under an agreement announced last week by the DOL.
The company, which is settling the dispute without admitting to any of the allegations, agreed to pay $2.25 million in back wages to employees in amounts ranging from less than $2,000 to more than $40,000.
Computech was founded in 1996, and the settlement covers violations alleged to have occurred between 1998 and 2000.
Within two years of its founding, the company had brought on more than 200 foreign workers. The company failed to pay these workers minimum required wage rates and "frequently" benched workers, the DOL said in a statement. Benching refers to the practice of not paying workers in between contracting jobs.
The settlement may be the largest back wage payment ordered under the H-1B program, according to Brad Mitchell, a DOL spokesman.
Computech today has about 400 to 500 employees, according to its president, Ram Kancharla. He said the company is less dependent on H-1B workers today, but in 1998, there was a shortage of workers with the technology skills in Java- and Web-related work. Kancharla would not disclose the number of H-1B workers the company now uses but said most of the employees involved in the settlement have since left.
The firm, which handles ERP implementations, application support and development, and remote database management, does its work in India and the U.S. and has more than 200 employees based in the U.S.
Kancharla, who refutes the DOL allegations, said the company decided to settle after looking "at the cost of litigation and how long it's going to take and the kind of distraction to the business."
Companies that hire large numbers of H-1B visa holders have been accused in the past of being "body shops" that underpay foreign workers and help U.S. firms move work overseas.
"The Department of Labor aggressively enforces the law to ensure that temporary foreign workers are compensated fully and fairly," Secretary of Labor Elaine L. Chao said in a statement. "Abuse of the temporary foreign worker program is not tolerated and violators, as this case shows, are vigorously pursued."
But Ron Hira, vice president of career activities at IEEE-USA and an assistant professor of public policy at the Rochester Institute of Technology in Rochester, N.Y., argued that the DOL's enforcement mechanism is weak because it relies on complaints from H-1B workers. The DOL doesn't have the power to make spot audits of companies, something Hira said the agency needs if it is to be proactive about such cases.
Hira sees the settlement as something of a disincentive for H-1B workers, because it took six or seven years to resolve and is no windfall for the workers affected.
H-1B worker visas are issued for up to six years.