Microsoft to pay $97 million to settle 'permatemp' case

Outcome could mean that other companies have to offer benefits to at least some of their temporary and contract workers.

Microsoft Corp. and a law firm representing more than 8,000 people who have held temporary jobs at the software vendor today announced a settlement of a class-action lawsuit under which Microsoft will pay a total of $97 million to the workers and their attorneys.

The settlement would end the 8-year-old suit against Microsoft, known informally as the "permatemp" case. The deal between Microsoft and the plaintiffs received preliminary approval from a U.S. District Court judge in Seattle today, although it still needs to be formally approved before going into effect.

Permatemps are long-term temporary employees who may work at a company for years without getting the benefits given to regular workers. The Microsoft case has been closely watched by technology industry groups and legal observers because it could force companies to offer benefits to at least some of their temporary and contract workers -- a big issue in the IT world.

"We faced two possibilities: long-term litigation or being able to settle and move on," said Microsoft spokesman Matt Pilla in explaining the company's decision to settle the case. The $97 million to be paid by Microsoft under the deal would cover compensation to the temporary workers as well as attorneys' fees, litigation expenses and other costs.

In January, the U.S. Supreme Court rejected Microsoft's appeal of a lower-court ruling that as many as 10,000 workers hired on a temporary basis should have been allowed to take part in the stock-option plan that the company offers its permanent employees. The case was filed by the Seattle law firm of Bendich, Stobaugh and Strong PC.

Pilla noted that Microsoft changed its policies for temporary employees earlier this year. It now has a 12-month limit on temporary employment, after which workers have to take a 100-day hiatus, Pilla said, adding that the average length of a temporary employee's time at Microsoft has dropped to just 10 months. The company also tries to use temporary employment agencies that already pay benefits to the workers.

Despite the settlement, Pilla reiterated Microsoft's contention that it didn't set a formal policy aimed at keeping temporary workers on as virtually permanent employees in order to avoid having to pay benefits and Social Security taxes.

"I don't think you can look at it as a broad policy," he said. "A lot of times, it just happened. [Temporary workers] moved from project to project." But he added that Microsoft executives eventually "did recognize that" and moved to institute the new requirements for temporary workers.

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