Story: ITAA Files Amicus Brief in Microsoft Temps Case, 6/4/99.

ITAA Files Amicus Brief in Microsoft Temporary Workers Case

(June 4, 1999) The Information Technology Association of America and other high tech industry groups filed a friend of the court brief on June 2 in the Microsoft temporary workers case. They support Microsoft's request for an en banc rehearing of the May 12 "dual employer" decision.

Definitions

amicus curiae
en banc

The Information Technology Association of America (ITAA), along with the American Electronics Association (AEA), Software & Information Industry Association (SIIA), U.S. Chamber of Commerce, National Association of Manufacturers, and other groups filed an amicus curiae brief with the Ninth Circuit Court of Appeals supporting Microsoft's request for an en banc review of the Court's May 12 decision.

Related Documents

"Vizcaino II", 7/24/97 9th Circuit En Banc Decision.

Vizcaino v. Microsoft, 5/12/99 9th Circuit Decision.

ITAA Amicus Brief, 6/2/99.

The case Vizcaino v. Microsoft has been in the court for years. It involves the benefits status of various temporary agency employees (temps) and independent contractors (freelancers) who have worked for the Microsoft Corporation, including their eligibility to participate in Microsoft's stock option plan and savings plan. However, the rulings have a major impact on al high-tech businesses which utilize temps and freelancers.

In the most recent ruling, a three judge panel of the Ninth Circuit held on May 12 that:

"Even if for some purposes a worker is considered an employee of the agency, that would not preclude his status of common-law employee of Microsoft. The two are not mutually exclusive."

Microsoft, and many high tech industry groups, now want the full Ninth Circuit to review and reverse this "dual employer" ruling.

"To let this decision stand would severely undermine the information economy. It flies in the face of how a growing number of Americans prefer to contract their professional skills to the marketplace," said ITAA President Harris Miller. "We can’t have it both ways. In order to remain the leader in the $2 trillion global IT marketplace, we need a legal system that allows flexibility and adaptability for workers and employers."

"The Ninth Circuit decision will seriously disrupt American businesses that rely on temporary staffing services to complete short-term projects," said Quentin Riegel, the NAM’s deputy general counsel. "Temporary staffers serve as a practical source of personnel when it appears unlikely that a new permanent employee can be retained after completion of a specific project."

The amicus curiae brief stated that "Temporary staffing is particularly common in the information technology ("IT") industry, where skilled workers may be brought into a business to address Y2K compliance, build or service computer networks, or assist in developing software. If a project has a limited time line or the client does not have sufficient work to keep skilled workers busy for the foreseeable future, temporary staffing firms may be the only practical source of personnel to accomplish the needed tasks."

"The decision of the three judge panel," the brief continued, "will have a significant, adverse impact on the businesses that provide temporary staffing services and those that are significant consumers of these services. The Opinion relies on a "dual employer" rationale that is entirely unprecedented and unworkable in the employee benefits context and fundamentally guts the common law test of employment status addressed by the Supreme Court in" the Darden case.

"Many employees of temporary staffing firms receive employee benefits from the staffing firm that places them. In holding that temporary staffing employees may simultaneously be employees of the temporary staffing firm and the client for purposes of providing employee benefits under the [Internal Revenue] Code, the Panel apparently creates a cause of action for such employees to recover duplicative benefits from both of the "dual employers" with respect to the same compensation stream." [Parentheses added.]

"This absurd result cannot be justified by the Code or, for that matter, by ERISA", the brief concluded.

The amicus brief was prepared by Fredric Singerman and Horace Green of the huge law firm of Seyfarth, Shaw, Fairweather & Geraldson. Mr. Singerman is a partner concentrating his practice in the area of employee benefits and ERISA law. Mr. Green is a partner concentrating his practice on commercial litigation matters.

Factual Background
Excerpt from the 9th Circuit's July 24, 1997 En Banc Opinion
Vizcaino v. Microsoft, 97 F.3d 1187 (9th Cir. 1995), aff'd, 120 F.3d 1006 (9th Cir. 1997) (en banc)

"At various times before 1990, Microsoft hired the Workers to perform services for it. They did perform those services over a continuous period, often exceeding two years. They were hired to work on specific projects and performed a number of different functions, such as production editing, proof-reading, formatting, indexing, and testing. "Microsoft fully integrated [the Workers] into its workforce: they often worked on teams along with regular employees, sharing the same supervisors, performing identical functions, and working the same core hours. Because Microsoft required that they work on site, they received admittance card keys, office equipment and supplies from the company." Id. at 1190. However, they were not paid for their services through the payroll department, but rather submitted invoices to and were paid through the accounts payable department.

Microsoft did not withhold income or Federal Insurance Contribution Act taxes from the Workers' wages, and did not pay the employer's share of the FICA taxes. Moreover, Microsoft did not allow the Workers to participate in the SPP or the ESPP. The Workers did not complain about those arrangements at that time.

However, in 1989 and 1990 the Internal Revenue Service examined Microsoft's records and decided that it should have been withholding and paying over taxes because, as a matter of law, the Workers were employees rather than independent contractors. It made that determination by applying common law principles. Microsoft agreed with the IRS and made the necessary corrections for the past by issuing W-2 forms to the Workers and by paying the employer's share of FICA taxes to the government.

Microsoft also realized that, because the Workers were employees, at least for tax purposes, it had to change its system. It made no sense to have employees paid through the accounts payable department, so those who remained in essentially the same relationship as before were tendered offers to become acknowledged employees. Others had to discontinue working for Microsoft, but did have the opportunity to go to work for a temporary employment agency, which could then supply temporary Workers to Microsoft on an as-needed basis. Some took advantage of that opportunity, some -- like Vizcaino -- did not.

The Workers then asserted that they were employees of Microsoft and should have had the opportunity of participating in the SPP and the ESPP because those plans were available to all employees who met certain other participation qualifications, which are not relevant to the issues before us. Microsoft disagreed, and the Workers asked the SPP plan administrator to exercise his authority to declare that they were eligible for the benefits. A panel was convened; it ruled that the Workers were not entitled to any benefits from ERISA plans1 -- for example, the SPP -- or, for that matter, from non-ERISA plans -- for example, the ESPP. That, the administrative panel seemed to say, was because the Workers had agreed that they were independent contractors and because they had waived the right to participate in benefit plans. This action followed."