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Microsoft has agreed to pay nearly $97 million and Time Warner has agreed to pay $5.5 million to settle lawsuits filed by workers claiming they were misclassified as temporary staff.
If the Microsoft settlement, given preliminary approval in federal court in December, gets final approval, it would end an eight-year battle waged by the so-called "permatemps" seeking recognition of employee status and the right to participate in the company's benefit plans, including the employee stock purchase plan. Between 8,000 and 12,000 people who worked for the company after December 1986 could receive payments from the settlement.
The Time Warner settlement, approved in federal court in November, puts to rest a case filed in 1998 and affects hundreds of workers. The lawsuit, filed by the U.S. Department of Labor, claimed Time Warner misclassified workers employed by Time Inc. and its divisions and subsidiaries as independent contractors or temporary employees, denying them company health and pension plan coverage.
The lawsuit challenging software giant Microsoft was filed in 1992 on behalf of "common-law Microsoft employees who were attorneys Bendich, Stobaugh and Strong of Seattle.
In 1996 and again in 1997, the 9th Circuit Court of Appeals ruled in favor of the class, making it eligible to participate in Microsoft's stock plan. In January 2000, the U.S. Supreme Court declined to review the 9th Circuit's decision.
According to the law firm, the settlement recognizes "important changes" made by Microsoft in its staffing and worker classification practices. In the most recent fiscal year, the company hired more than 3,000 class members as employees, and it adopted practices to ensure proper classification of temporary or contingent workers.
Microsoft spokesman Dan Leach says Microsoft is pleased to reach an agreement acceptable to all sides and to bring the case to an end.
Under the agreement reached in the Time Warner case in November, three funds are to be established: a $2.5 million fund for workers who were classified as independent contractors and a $500,000 fund for misclassified temporary employees or independent contractors who had unisured and unreimbursed medical expenses exceeding $10,000 per year, which would have been covered by the medical plan Time Inc. provided for regular employees.
According to a written statement provided by Time Warner, "The DOL and Time Warner agree that the settlement is not an admission of any liability or wrongdoing by Time Warner or its publishing unit, Time Inc. The case has been dismissed with prejudice."
Andrew Schultz, president of PrO Unlimited, which provides consulting on contingency staffing issues, says the settlements are a "wake-up call" for employers. Independent contractors, he says, should be paid for completing a project or task and should have multiple clients.
Marvin Weinberg, a partner in the labor and employment law department of Philadelphia-based law firm Fox Rothschild O'Brien & Frankel, says the settlement of these cases means "the old way of doing business is over." Companies can no longer classify an employee as a temporary contractor of hire through a temporary staffing firm as a shield, he says.
Jessic Pollock, an associate with the same firm, says employers should conduct an audit of their workforce to determine whether some of those workers have been wrongly classified. "Do they have an office, do they use company supplies and company support staff? Does the company have control over what they do?" she asks.
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