Microsoft to pay $ 97 million to temps

Seattle

Thousands of Microsoft workers have been getting paid through the temporary employment agencies used by the software giant. While they work full-time as Microsoft employees, often for years on end, they never received the same employee benefits of regular Microsoft workers, such as medical, dental, pension and other benefits.

This week, Microsoft agreed to pay $ 97 million to compensate between 8,000 and 12,000 current and former Microsoft temporary employees for benefits they did not receive. That would represent an average of $ 8,000 to $ 12,000 per worker. The settlement concludes a lawsuit filed in 1992 on behalf of the temporary workers hired by Microsoft. It is the largest settlement in a temporary-workers case.

The case could have major implications for hundreds of high-tech employers that extensively use workers solicited through employment agencies. Most companies treat these workers as equals, except for the benefits awarded to workers hired directly by the company.

Using temporary employment agencies for between 10 and 35 percent of the workforce, has been part of a fundamental hiring strategy in the technology industry for more than a decade. Intense competition has forced many companies to reduce overhead costs by using employment agencies.

Temps are cost effective because companies don't owe these workers expensive benefits and payroll procedures are the responsibility of the temporary agencies.

Also with high-tech business market going through highly volatile cycles, such as in the disk drive, semiconductor, semiconductor equipment and other segments, companies can more easy scale their workforce to industry ups and downs by quickly getting rid of temporary workers which can be dropped almost at a moment's notice.

"This case shows that an employer can't just create a new workforce and treat them differently," said Sarah Horowitz, Executive Director, Working Today, a New York-based non-profit that works on behalf of freelancers and other independent workers.

Microsoft currently employs some 5,000 temporary workers in addition to 42,000 permanent employees. Since 1997, it has limited the length of temporary agency employees' assignments for the company to 12 months.

"Microsoft is pleased to reach an agreement that is acceptable to both sides and resolves this litigation," said Deborah Willingham, VP (Human Resources), Microsoft.

The case follows an earlier lawsuit in which Microsoft was ordered to make the company's discounted stock purchase program available to additional 10,000 temporary employees. Microsoft took its appeal to that case all the way to the US Supreme Court where it lost its argument.