Business Law: FMLA
FMLA was enacted in 1993 to guarantee workers unpaid time off from work for medical emergencies and other situations. What companies does this act apply to? How does an employee qualify for leave under the act? What are the situations for which leave is granted?
Microsoft Corporation is the world’s largest provider of computer operating systems, software programs, and Internet browsers. The company has grown into one of the largest corporations in the United States, making one of its founders, Bill Gates, one of the richest persons in the world. But the company was caught nickel-and-diming some of its workers. The situation was brought to light by an Internal Revenue Service (IRS) investigation. Microsoft is headquartered in the state of Washington. In addition to having regular employees, Microsoft used the services of other workers, classified as independent contractors (called freelancers) and temporary agency employees (called temps). Most of these special employees worked full time for Microsoft, doing jobs that were identical to jobs performed by Microsoft’s regular employees. Microsoft paid the special employees by check as outside workers. The IRS conducted an employment tax examination and determined that Microsoft had misclassified these special workers as independent contractors and that the workers in these positions needed to be reclassified as employees for federal tax purposes. But the IRS investigation was not the end of the story. Plaintiff Donna Vizcaino and other freelancers sued Microsoft in a class action lawsuit, alleging that they were denied employment benefits, especially employee stock options that were paid to regular employees. Microsoft contributed 3 percent of an employee’s salary to the stock option plan. The U.S. Court of Appeals agreed with the plaintiffs, citing the Internal Revenue Code, which requires such stock option plans to be available to all employees. The Court of Appeals stated, “It is our conclusion that Microsoft either exercised, or retained the right to exercise, direction over the services performed. This control establishes an employer-employee relationship.” Thus, Microsoft’s attempt to define certain full-time employees as freelancers and temps was rebuffed by the courts.
What do you think of the case? Why would Microsoft classify certain workers as temps or independent contractors?