Microsoft to Pay $97 Million to End Temp Worker Suit


Microsoft Corp. will pay $97 million to settle a federal lawsuit from employees who claimed the software giant classified them as “temporary” workers for years to deny them standard benefits such as health insurance and the lucrative employee stock purchase plan, thereby saving the company millions.

Under the agreement announced Tuesday, between 8,000 and 12,000 people are eligible for a share of the settlement. The amount each worker will receive depends on when he or she worked, how long he or she worked and the total number of people who file claims under the settlement.

Microsoft has more than 40,000 employees; about 5,000 of them are so-called contingency workers. The settlement is unlikely to adversely affect the bottom line for Microsoft, which reported a $9.4-billion profit last year.


The issue has wide-ranging implications for the nation. The Labor Department estimates that more than 10 million Americans are temporary or contract workers.

Marcus R. Courtney, who co-founded the Washington Alliance of Technology Workers, a labor organizers group based in Seattle, argues that the battle is just beginning.

Many companies continue to use temporary employees on what is essentially a permanent basis to deny them benefits, he said.

“This ends the permatemp scam at Microsoft,” he said. “It does not end the problem with contract work in this industry.”

Courtney, who was a temporary employee at Microsoft for two years, said people often take such jobs because they have no other options. “This is not going to go away,” he said. “We are dealing with the issue of equal compensation for equal work, and ultimately that issue will have to be addressed.”

The case initially began with two lawsuits dating back to 1992, which charged that Microsoft offered prospective employees temporary work that was identical to the work performed by “blue badge” employees with permanent positions.


The only functional difference between the two classes was that one group did not receive benefits. Although some employees preferred temporary employment, many said they stayed in such jobs for years--in a few cases, for more than a decade--in hopes of winning a permanent job.

As the legal battle wore on, Microsoft changed its policies for using temporary workers. First, it developed guidelines to help managers figure out when a job shouldn’t be given to a temporary employee. Then, Microsoft set up policies favoring temp agencies that offer better benefits to the temporary workers they handle.

Last February, the company instituted a policy prohibiting temporary employees from working more than 12 months at a stretch without taking at least a 100-day break.

“That has nothing to do with this case,” said Matt Pilla, a Microsoft spokesman. “We’ve implemented these changes to ensure that temporary workers were just that, not to avoid lawsuits.”

But Stephen K. Strong, one of the plaintiffs’ lawyers, disagreed. “The first thing Microsoft had to do to settle this case is end the permatemp policy,” said Strong, a partner in the Seattle law firm of Bendich, Stobaugh & Strong. “The timing makes it quite evident that that’s exactly why they did this.”

The changes in Microsoft’s policies, Strong said, have achieved the plaintiffs’ objectives: Over the last fiscal year, the company issued blue badges to 3,000 temporary employees. “It seems like a big improvement. They still have temporary employees there, but they’re more in the nature of real temps,” Strong said. His law firm is seeking 28% of the settlement amount, or $27.1 million.


The settlement came after the U.S. 9th Circuit Court of Appeals found that employers must make the same retirement benefits available to everyone. Anyone who worked for Microsoft for at least five months a year is entitled to money they would have received if they had been able to purchase the company’s stock at a discount, as full-time employees are.

The agreement still must be finalized, but preliminary approval came Tuesday from Judge John Coughenour of the U.S. District Court for the Western District of Washington. No one knows when the money will be distributed.