A Bad Day for Microsoft

SAN FRANCISCO: TIME's David Jackson reports that a federal appeals court decision which forces Microsoft to allow employees improperly classified as independent contractors to participate in the company's benefits programs is likely to have a major impact on freelance hiring practices in the high-tech industry. "This labor issue is significant industry-wide for the precedent it could set. Microsoft was not doing anything other companies in the high-tech industry have not been doing for a long time. Many of them have freelancers who work right alongside full-time employees. The danger is that if these companies suddenly can't hire freelancers without having to offer full benefits, it's certainly going to raise labor costs and in some cases might result in fewer people being hired." Microsoft's employee classifications came under fire in 1990, when the IRS ruled the company had to treat the freelancers as employees for tax purposes, based on the type of work they did and the amount of control the company had over their jobs. Although Microsoft complied with the order and coughed up withholding and Social Security taxes, it refused to allow the workers into benefits programs, a move which prompted them to sue.