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Microsoft Testing Limits on Temp Worker Use

Workplace: Issue of 'permatemps' hired through 'payrolling' agencies prompts a closely watched class-action suit.


SEATTLE — "Why are we at Microsoft?" bellowed Microsoft Corp.'s billionaire Executive Vice President Steve Ballmer to a crowd of 9,000 employees packed into the Kingdome, Seattle's indoor stadium.

"For the money!" he screamed. "Show me the money!" The crowd responded with a roar: "Show me the money!"

The annual company meeting, a revivalist celebration held this fall to mark another year of record-breaking profits for the software company and its stock-wielding employees, was classic Microsoft. But excluded from the gathering--and the money--were thousands of other full-time Microsoft employees, including program manager Jim Johnson, who has worked there for the last five years.

Johnson has taken long business trips as a Microsoft representative and helped negotiate important deals on behalf of the software giant. Yet he works on revolving three-month contracts that leave him open to being laid off at any time--even before his contract ends--and leave him out in the cold when it comes to showing him the money.

"People who started at the same time as I did are cashing in their options and paying for their houses in cash," said Johnson, who doesn't want his real name used for fear of retribution. "Meanwhile, I live in an apartment; I'm still paying $200 a month for health care."

Such is life for Microsoft's "permatemps." These men and women stoke the Microsoft moneymaking machine by doing everything from writing software manuals to developing CD-ROMs and designing Internet Web sites. But although they often work doggedly and loyally for 50 hours or more a week, they are denied employee status--and, more important, the stock options and other rich benefits that come with it.

Microsoft is in the vanguard of a growing movement in corporate America, especially among high-tech companies: using full-time temp workers who save the company millions of dollars in benefits but who can be fired in the time it takes to boot up a computer.

Using temporary workers isn't a new phenomenon, but Microsoft has added a twist: The Redmond, Wash.-based company funnels the workers through "payrolling" agencies that cut paychecks and often force the workers to sign restrictive contracts. Microsoft aggressively uses these agencies, hiring great numbers of workers for critical jobs and over long periods.


Microsoft has long been viewed as an industry leader for providing unusually generous stock options to a broad swath of employees. "We share more of our wealth with our employees than anybody," boasted Microsoft Chairman Bill Gates.

As for contingency workers, Gates said Microsoft is above reproach because it uses few temps to fill its most important positions. "Of the technical people, it's a tiny percentage," Gates said in an interview. "For people who have talent, our doors are open."

But Microsoft's use of temporary workers has thrust it in the center of a hotly contested class-action lawsuit whose outcome could have wide-reaching implications for the thousands of companies that depend on contingent workers.

Businesses--particularly in the technology sector--are closely watching the case, which will in effect define who is an employee and what responsibilities an employer has.

If Microsoft prevails in its arguments, other companies are likely to expand their use of payrolling agencies, one of the fastest-growing sectors of a temporary staffing business that has doubled over the last four years to reach $31 billion in worker wages last year, according to the National Assn. of Temporary and Staffing Services, an industry trade organization.

A study by the Conference Board, a business research group, estimates that as many as 20% of U.S. corporations use temps for more than 10% of their work force, although there's no indication how many are long-term permatemps.

"In recent years, businesses have begun to use staffing services on a strategic basis," said Richard Wahlquist, executive vice president of the National Assn. of Temporary and Staffing Services.

But the pendulum of public opinion has been moving against employers who try to deny full-time status or benefits to a large segment of their workers. Earlier this year, support for part-time workers played a key role in the United Parcel Service strike settlement in favor of the union.

A look at Microsoft's use and treatment of permatemps illuminates the legal and social issues that have arisen as companies seek to redefine what constitutes an employee and what responsibilities they have regarding workers.

The issue has come to a head as the result of a U.S. 9th Circuit Court ruling that ordered Microsoft to pay full benefits to contractors who were hired and supervised by Microsoft managers on campus and who met other criteria for being "common law" employees.

In its ruling, the court found that Microsoft should have been classifying contractors as employees and paying them full benefits.

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