Remember -- back in June -- when Walt Disney (NYSE:DIS) almost shredded its typically sterling reputation? A New York Times article detailing the media giant's plan to replace 250 employees of its IT team with cheaper hires went viral, and Disney became the bad guy.
Well, the story is making the rounds again as a result of two of those that were let go suing Disney. Lawsuits were filed in Tampa federal court on Monday, alleging that Disney colluded with consulting companies HCL and Cognizant (NASDAQ: CTSH) to abuse the right to use H-1B visas to attract foreigners with advanced tech skills.
Cognizant responded that it complies with all U.S. regulations. Disney's statement is that the lawsuits misrepresent the facts.
I'm no legal eagle. I have no idea which way the federal court lawsuits will play out. However, it's easy to see how things will play out in the court of public opinion -- and that doesn't end well for Disney.
Cyberspace erupted last June after the New York Times article came out, even though the move actually took place in late 2014. Folks argued that they would be boycotting Disney,
Now we're just picking at the same scab, and folks will be reminded that Disney could be on the wrong end of a controversial decision. In fact, it could be worse this time. We're in the thick of primary presidential debates. It's no secret that at least one major candidate has been vocal in his disdain for foreigners taking U.S. jobs. It also wouldn't be a surprise if most of the other candidates from both parties take the side of the suing former employees here.
It now just became that much more likely that H-1B visas get brought up in the debates, and if so Disney is going to get slammed more than it gets praised -- even if the political back-and-forth is broadcast on ABC. Media will revisit some of the saucier elements of the original story including the nugget that some of those that were displaced were asked to stick around to train their cheaper replacements.
It doesn't matter that H-1B visas are perfectly legal. It doesn't matter that Cognizant and HCL are playing by the book. It doesn't matter that we're just talking about 250 employees that were cut loose two years ago for a company that provides roughly 74,000 jobs in central Florida alone. The story just makes Disney look bad, again, at the worst possible time. It places the brand in crosshairs, and that's never a good place to be.
Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Cognizant Technology Solutions and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.