WashTech News: In The Courts
November 13, 2002
WashTech News

Supreme Court refuses to hear appeal of Microsoft 'permatemp' settlement

By Mike Blain

'Finally! It's about time. This is great news for workers. '

-- Former Microsoft contract editor Rebecca Hughes

The United States Supreme Court announced yesterday that it would refuse to hear an appeal of the settlement agreement in the long-running Vizcaino v. Microsoft "permatemp" case. Without comment, the court denied a petition filed in August 2002 on behalf of two plaintiffs in the class-action case who sought to reduce the fees awarded to plaintiffs' attorneys.

Under a settlement agreement upheld by the Ninth Circuit Court of Appeals in May 2002, Microsoft agreed to pay approximately $97 million, which includes compensation to class members, attorneys' fees, and expenses of litigation. This settlement was the largest ever for a "permatemp" class action.

The appeal had been filed on behalf of Donna Vizcaino, whose last name became shorthand for the case, and another plaintiff, by Lawrence Schonbrun, an attorney who has made a career of challenging fees awarded to plaintiffs' attorneys in class-action cases.

The law firm of Bendich, Stobaugh and Strong, which has represented plaintiffs in the Vizcaino case for more than a decade, labels Schonbrun a "professional objector." According to the firm, the Supreme Court decision is the end of the road for the appeal by Schonbrun to reduce the attorneys' fees, and effectively brings the case to a conclusion.

"We are pleased that the Supreme Court has rejected any further appeal of the settlement we have reached with Microsoft, including the award of reasonable fees for our work on the case over the past 11 years," said plaintiff's attorney Stephen Strong. "This case was brought to improve the situation for permatemps at Microsoft and it obtained compensation for thousands of employees."

In April 2001, U.S. District Judge John C. Coughenour approved the attorney fees and a settlement agreement worked out in December 2000 by plaintiffs attorneys and attorneys for Microsoft.

In upholding Judge Coughenour's decision in May of 2002, the Ninth Circuit Court of Appeals found a number of circumstances that justified the attorney fee award, including the risk of the case, the burden placed upon plaintiffs' attorneys from 11 years of work without compensation, and the fact that the case clarified the law nationwide regarding temporary worker classification.

Reaction from MS contractors is mixed

Reaction to the decision from Microsoft contractors who are class members in the suit - especially those who worked at the company in the early and mid 1990s - was generally one of guarded relief. Having seen positive developments in the case be followed by negative ones or new appeals, or simply months of silence, many dropped expectations of any timely resolution to the case long ago.

"Finally! It's about time," said Rebecca Hughes, who worked at Microsoft as a contract editor for more than three years in the 1990s, and gave depositions in the litigation. "This is great news for workers."

 Comment on the Microsoft permatemp settlement in the TechsUnite Community forums

Another former Microsoft contractor noted that many now-unemployed tech workers could really use the settlement award. "I'm not surprised [at the recent
ruling], just relieved that the settlement can now go forward," says Roberta Wilson, who worked as a contract writer at Microsoft in the mid and late-1990s. "I know many people could use the money right now, large or small amounts, with unemployment in the IT sector being so high."

The lawsuit was filed in 1992 and has received considerable national and international attention, prompting many U.S. employers to re-examine or change the way they deal with agency or other contract employees. In the class action, plaintiffs challenged the widespread employer practice of paying full-time workers through "temp" agencies, arguing that doing so was primarily a means of avoiding payment of employment benefits.

The practice of "pay-rolling" long-term, onsite employees through temp agencies expanded rapidly during the 1990s, after the Internal Revenue Service cracked down on employers who were treating workers as "independent contractors."

The lawsuit was filed on behalf of long-term Microsoft contractors who plaintiffs attorneys say were mislabeled as employees of temporary staffing firms or deemed "independent contractors", but who were in fact "common law" employees of Microsoft. The lawsuit sought to recover benefits, including the right to participate in the Microsoft Employee Stock Purchase Plan, for permatemps at Microsoft.

Not all former or current Microsoft contractors have appreciated such legal efforts, however.

One contract software engineer, who has worked at Microsoft for nearly three years, blamed the Vizcaino case for ruining a good situation for him and thousands of other Microsoft contractors.

"These are the same people that collectively screwed every happy permatemp out of decent work," he said, explaining that he had been perfectly content working as a long-term contract tester on the Exchange 2000 team, with an "outstanding manager", when Microsoft first instituted its mandatory break-in-service policy in 1999.

"All of this," he adds, "and good pay and none of the BS of being a Microsoft FTE [full-time employee]."

The policy, instituted largely in response to the Vizcaino case, now mandates that agency contractors leave Microsoft for 100 days after working for one consecutive year at the company.

This software tester feels there has been "quite a bit of backlash" directed at contractors at Microsoft in recent years due, in part, to the Vizcaino lawsuit. "Various phrases like 'dash trash' (a reference to the 'a-' that is appended to the front of all contractor email addresses) are more common than Microsoft likes to admit."

He says he will be unemployed again within a month "thanks to the plaintiffs." In light of the 100-day break policy, and what he sees as growing anti-contractor sentiment at the company, he says this latest contract will likely be his last at the company. "I will have to be seriously desperate to take another contract at Microsoft again."

A digital production artist currently contracting at Microsoft praised the Supreme Court decision. "I'm glad that this case is finally moving forward with settlements. This could have dragged out for who knows how long."

She first began working at the software giant in 1996 and says she has been juggling Microsoft contract assignments ever since, with the possibility of a regular full-time job always dangled before her, but never fulfilled.

"You take what you can get in order to pay rent, buy food," she explains. "If you can find a group that might have potential for hiring on permanently, you take the risk of staying around and putting in a lot of hours, proving yourself to these folks."

She says she has been in several Microsoft groups that wanted to hire her but couldn't because, she was told, the group lacked "head count" or had a hiring freeze. So, she says, "you continue to be a contractor. Working holidays. Or just simply eating the time. Or even making up time when you get sick."

"It is a risk on so many levels when contracting. But
to be led to believe that you have a possibility of being hired on permanently and then not, well, it's almost like a big lottery game with these folks."

Up to 12,000 class members could receive payments in coming months in the Vizcaino v. Microsoft settlement. The amount any individual class member may receive will depend on when he or she worked at Microsoft, the duration of his or her "permatemp" status at the company, and the total number of workers who file claims under the settlement.

Talkback on Article
Dec 9, 2009, 11:04 pm
When i read Alice Gilmore's post i know why America is slowly failing. She wants to sue people who fought on behalf of the workers. She want to be an apologist for the corporation that is attempting to circumvent worker protection laws and avoid paying workers properly with proper benefits. I would never want to live your world Alice.

     Randy, Redmond, WA
Sep 25, 2009, 1:33 pm
(Part 2 of 2) The final issue is that (at least in my case) I am uniquely assigned to a role that in all other cases in the company (and it is a very large company) is filled by a FTE. One of the criteria for the role is that I have access to systems contractors are not allowed to use. So, in my case, I have to escalate all sorts of administrative work to my manager who is a Sr. Director in the firm. It just makes NO sense.

     Neil M, New York, NY
Sep 25, 2009, 1:29 pm
I work for a firm that instituted a 1-yr limit on contractors. There are means to appeal or work around the policy but it means extra administrative effort for a company that is already strapped for admin resources and time. Also; the 1-yr rule means that for those of us who spend 3 mos ramping up into the job and 3 mos working on personal and professional transition planning, we are only effectively working at something clost to full potential for 6 mos. (Part 1 of 2)

     Neil M, New York, NY
Jan 25, 2009, 4:36 pm
I just want to comment as to the troubles that Vizcaino has brought upon all IT contractors, who are now limited to only being able to serve 2 yrs at at time at any one place. Out of this lawsuit, came huge heartache for hard working people trying to make an honest living. I feel like all of the 10s of thousands who have been hit by the 4160 Rule, should file lawsuit against the contractors involved on the plaintive side of this lawsuit. I will spread the word.

     Alice Gilmore, Colorado Springs, USA