Vizcaino situation? What do you do?

[Guest tintree73]

We just found out that we misclassified four workers as Indep contractors (when they were really ees). I know this means that we have to pay them the benefits - but do we try to retroactively get them included in the plans (EPCRS, etc.) or do we pay them a settlement based on the amount of benefits they would have received? I looked at the plan document and we do not have the "magical" language (not an employee even if determined by a court after the fact to be an employee). Thanks for any help!

[Guest Mrilaomt]

I don't know about your situation, but I always understood it that if you have the Microsoft language, you are able to deny the benefits (of course, you want your administrator to make a decision pursuant to the plan terms and you may want to negotiate a release of any additional claims pursuant to a settlement agreement release). Has anyone handled it any differently?

[GBurns]

I thought that Microsoft lost using that language etc.

[mbozek]

Where did you get the idea that msft lost?

[Ron Snyder]

Vizcaino v. Microsoft Corp., 173 F.3d 713 (9th Cir. 1999)

[mbozek]

I thought at the end of all the litigation the courts sent the question of whether the IC were eligible for benefits back to MSFT plan admin for review under the ERISA claim procedures. MSFT then settled the case for 99M w/out admitting liability (because it was cheaper than continuing the litigation).

[Kirk Maldonado]

My recollection is that Microsoft also had to pay roughly $27 million in attorneys' fees to the plaintiffs.

[GBurns]

They also had to give retroactive benefits (stock etc etc) to many of those ICS who had to be reclassified.

[mbozek]

I thought the 27M was part of the 99M settlement which was pocket change for a co that had 50B in cash reserves. My point is that from a litigaton standpoint nothing was resolved by the courts regarding the exclusion of the ICs under the terms of the plan.

[jquazza]

MS did not exclude from its plan reclassified employees. People started to add that language in their docs after that case settled.

[GBurns]

The resolution of the Microsoft case came not directly through Vizcaino but through settling the misclassification with the IRS and DoL.

[Kirk Maldonado]

jquazza:

Some of us had language like that in our plans many years before the Microsoft case.

[jquazza]

Kirk,

That's because you're a visionary with IRS insider info and you know which problem area they will tackle next. You have to admit it was not as prevalent then as it is now..

[GBurns]

It really did not need insider information nor the ability to see the future. It was that Microsoft apparently either did not bother to read the law, do any research or just thought that they could get away with flaunting the law.

There have been no law changes caused by Vizcaino or anything related to it. Thereby showing that it was Microsoft's interpretation at fault, whether they admit it or not.

The people who had the wording before were only being correct in their interpretation and application of the applicable laws. They needed no insider info or fortune telling powers, just basic reading and comprehension skills.

In fact it was not the IRS that started the whole issue, it was Vizcaino and other employees who saw that they were being mistreated etc and who sued. These simple employees saw the questionable treatment first not the IRS. They saw exactly the same thing that the employers who had the wording also saw.

[Kirk Maldonado]

jquazza:

Thanks for the compliment but I don't feel that I deserve (at least all of) it.

I had a number of clients back then that were very aggressive in classifying workers as independent contractors. Because the IRS was very vigiliant (and successful) in challenging those arrangements, I thought that the logical next step was for the IRS to try to disqualify the employer's retirement plan for excluding those workers. Thus, the first generation of that language in my plan documents said that those workers were excluded from the plan even if the IRS later reclassified them as employees.

I later thought about employees suing under ERISA to enforce the terms of the retirement plan that would have required their inclusion, so the second generation of that exclusionary language said that the exclusion applied even if it was a court that reclassified the workers as employees.

I've learned that you can learn a lot of valuable insights from having aggressive clients. They can also generate huge legal fees when their aggressive schemes come under scrutiny from the administrative agencies.