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California Legislator Wants To Bar Offshore Outsourcing Of Medical And Financial Records

The chair of the state Senate's trade commission says she's concerned that a growing number of medical and financial-services firms are shipping information processing to countries that lack strong privacy laws.
The chair of the California Senate's trade commission said Wednesday that she's considering introducing legislation that would bar the offshore outsourcing of administrative and IT work that involves the medical or financial records of California residents.

State Sen. Liz Figueroa, who chairs California's International Trade Policy Committee, says she's concerned that a growing number of large U.S. medical and financial-services firms are shifting information-processing work to countries that lack strong privacy laws, leaving consumers vulnerable to identity theft and other crimes. "We have no ability to enforce our own privacy laws outside our own borders, and that worries me," she says. Figueroa, who authored California's medical-records privacy law--considered by many to be the strongest in the nation--also chairs the California Senate's Business and Professions Committee.

On Tuesday, Figueroa presided over an open hearing on offshore outsourcing that drew representatives from across the public and private sector. In an interview Wednesday, she said the hearing did little to ease her fears. "Everything was sanitized; people are measuring their words on this subject very carefully," she said. Unless outsourcing companies can prove to her that they're meeting stringent privacy guidelines, Figueroa said she would introduce legislation that would ban the offshore outsourcing of Californians' medical and financial records. Figueroa said she would add such language to California Senate Bill 1451, currently in draft form. Figueroa is also sponsoring bills that would require California employers to notify the state and employees in the event they plan to move 20 or more jobs overseas and prohibit state contracts from being fulfilled offshore.

To date, most government efforts to restrict offshore outsourcing have focused on prohibiting the movement of federal or state contracts overseas in order to protect public-sector jobs. Figueroa's proposal would be among the first to significantly affect the private sector while at the same time introducing the issue of consumer protection into the growing outsourcing debate. The sales of offshore business-process-outsourcing services--which to a great extent involve the type of work Figueroa is targeting--grew 38% last year to just under $2 billion, according to Gartner. The research firm says most of that work was performed in India.

Representatives from Computer Sciences Corp., the largest California-based provider of offshore BPO services and the nation's third-largest IT services firm, declined to comment on Figueroa's proposal. "At this point, what the law will be is only a matter of speculation," a CSC spokesman says. In a telephone interview Tuesday, officials at the Information Technology Association of America expressed concern that legislation aimed at restricting offshore outsourcing could spark retaliatory measures from countries like India. Said ITAA president Harris Miller, "It's a sure way to get a trade war going."