I’ve wondered about this story on at least two related fronts:
1. Is it typical to arrest, and to jail pretrial (rather than to release on O.R. or a small bond), ANYone suspected of underpaying employees? That sounds like a civil and/or regulatory matter, not a criminal one, at least not unless the alleged abuses are far more severe than underpayment. (This question is without regard to the foreign/ diplomatic status of the defendant.)
2. I thought any credentialed diplomat was diplomatically immune from prosecution, including arrest, period. All the host nation can do (I thought, apparently incorrectly?) is to declare the diplomat Persona Non Grata and give him/her 72 hours or so to GTFO.
And the State Department is saying that the woman wasn't high-ranking enough to have diplomatic immunity, even though India grants immunity to US diplomats of the same rank.