Permatemps prevail in bid for Microsoft stock options

A court deems Redmond's long-term temp workers "common-law employees" and says the software giant owes some palimony.

By Andrew Leonard
May 14, 1999 8:00PM (UTC)
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On Wednesday, a federal appeals court handed Microsoft a major setback when it ruled that thousands of Microsoft's temporary workers and independent contractors must be treated as regular employees -- with access to stock options, 401(k) plans and other staff perks.

This isn't the first time the 9th Circuit Court of Appeals has slapped Microsoft around for its treatment of temps. In October 1996, the court made a similar ruling -- one that sent shock waves through the entire software industry, which relies heavily on the long-term employment of temp workers and independent contractors, often called "permatemps." But when the '96 ruling was sent back to district court for implementation, a judge decided that only a few hundred Microsoft temps stood to benefit. Wednesday's ruling was a reversal of that lower court decision, again broadening the pool of potential beneficiaries to thousands.


Two years ago, Salon examined the potential implications of the October '96 ruling from the point of view of independent contractors who actually did not want to be considered full-time employees. These contractors voiced concern that the ruling would have a chilling effect -- that companies, uneasy about the cost of benefits, would become reluctant to hire independent contractors. Already, they said, many companies were requiring that independent contractors sign up first with temp agencies.

But Steven Festor, an attorney at Bendich, Stobaugh & Strong, the law firm that represented the Microsoft temp workers, says that "true independent workers have nothing to worry about. They will always be able to be independent contractors. What this ruling does is limit an employer's ability to misclassify an employee as a temp worker."

In other words, simply shifting the responsibility for worker benefits to a temp agency won't fly. If an employee fits the profile of a "common-law employee" -- that is, if he or she works exclusively at one company, on that company's premises, just like any other regular employee -- then he or she should be treated just the same as any salaried employee. Temp workers of the world unite -- you have nothing to lose but your lack of stock options!

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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