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 facts."

"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).