It may not make a big difference to Bill Gates' net worth, but
on December 12 Microsoft agreed to pay $97 million to settle a lawsuit
brought by a group of "permatemps"--employees who often worked for
many years at the company but were classified as temporary and denied
a range of benefits. At one point, more than one-third of workers
at the company's headquarters in Redmond, Washington, including
most employees in several key areas, were classified as permatemps.
Microsoft had fought in court for eight years, but a federal appeals
court ruled in May 1999 that the employees should have been permitted
to buy stock at a discount just like other employees, but it did
not decide that permatemps were entitled to health insurance or
participation in the 401(k) plan.
In a key ruling, the court decided that the permatemps were clearly
employees like those with a permanent status--and different colored
badge--who worked alongside them. "Simply calling a person a contractor
or temporary employee does not change his status," says Stephen
Strong, one of the permatemps' attorneys. "Employers have been trying
to overcome facts with labels, but labels do not have control over
"It's a clear vindication for the long-term contractors at Microsoft,"
says Mike Blain, a former Microsoft permatemp who participated in
the lawsuit and is now president of WashTech,
the Washington Alliance of Technology Workers. WashTech, a Communications
Workers local that is currently organizing Amazon.com customer service
representatives, was not a party to the lawsuit, but it has carried
on low-key efforts to recruit support among Microsoft workers.
The settlement is the largest, though not the first, class-action
lawsuit victory against abuse of permatemps, but it helped to give
the issue a high profile. Other suits are pending against both public
and private employers. In Los Angeles, a lawsuit against the office
of the county counsel, the county's civil lawyers, incorporates
charges of sexual discrimination, since the nonprofit subsidiary
set up by the counsel's office to employ roughly half its work force
as permatemps at reduced pay disproportionately included women workers,
both clerical staff and lawyers.
Over the past two years, Democrats have introduced two different
bills in Congress to limit employers' ability to deprive workers
of benefits by mislabeling them, to prohibit requirements that employees'
sign waivers of their rights before getting hired, and to establish
a simple test of whether a worker is really an independent contractor.
Meanwhile, Republicans have introduced legislation that would essentially
legalize permatemping through employment agencies.
The lawsuit undoubtedly contributed to a change in policies at
Microsoft, which has converted about 3,000 contract employees to
regular status but has also established new requirements for its
roughly 5,000 remaining temps in the Seattle area, requiring a 90-day
break after one contract before they can be rehired. WashTech speculates
that Microsoft may be reducing its reliance on permatemps in part
because it is having more difficulty attracting employees, but clearly
contract and temp work continues to be widespread at Microsoft and
many other firms. "By no means has the settlement or Microsoft's
modified behavior fixed everything or addressed the real, legitimate
needs faced by contract or regular employees at Microsoft," Blain
says. "It's different and better than it was, and it was due to
the lawsuit and organizing that WashTech has done."
Strong agreed that despite the victory, businesses continue to
find ways to deprive workers of pay, benefits and other rights by
using employment agencies or setting up discriminatory classifications.
"This could be just another round in a long battle," Strong says.
But it was, nonetheless, a welcome victory.
Read more about WashTech's struggle with Amazon.com in "Amazon
Workers on the Move," (January 8, 2001).