Vizcaino v. U.S. Dist. Court for Western Dist. of Washington

• Decision Date: 12 May 1999
• Docket Number: 99-35013,Nos. 98-71388,s. 98-71388
• Parties: 99-1 USTC P 50,531, 99 Cal. Daily Op. Serv. 4543, 99 Cal. Daily Op. Serv. 4990, 1999 Daily Journal D.A.R. 4627, 1999 Daily Journal D.A.R. 5834, 1999 Daily Journal D.A.R. 6503, Pens. Plan Guide (CCH) P 23953S In re Donna VIZCAINO, John R. Waite, Mark Stout, Geoffrey Clubert, Lesley Stuart, Thomas Morgan, Elizabeth Spokoiny and Larry Spokoiny, and the class they represent, Plaintiffs-Petitioners, v. UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON, Respondent, Microsoft Corporation and its pension and welfare benefits plans, Defendants/Real Parties in Interest. Donna Vizcaino; John R. Waite; Mark Stout; Geoffrey Culbert; Lesley Stuart; Thomas Morgan; Elizabeth Spokoiny; Larry Spokoiny, Plaintiffs-Appellants, v. Microsoft Corporation, and its health and benefits plans: Health Benefit Plan, Life Insurance Plan, Short-term and Long-term Disability Plans, and Savings (401K) Plan, Defendant-Appellee. Ninth Circuit
• Court: U.S. Court of Appeals — Ninth Circuit

Page 713

173 F.3d 713

99-1 USTC P 50,531, 99 Cal. Daily Op. Serv. 4543,

99 Cal. Daily Op. Serv. 4990,

1999 Daily Journal D.A.R. 4627,

1999 Daily Journal D.A.R. 5834,

1999 Daily Journal D.A.R. 6503,

Pens. Plan Guide (CCH) P 23953S

In re Donna VIZCAINO, John R. Waite, Mark Stout, Geoffrey

Clubert, Lesley Stuart, Thomas Morgan, Elizabeth

Spokoiny and Larry Spokoiny, and the

class they represent, Plaintiffs-Petitioners, v. UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF

WASHINGTON, Respondent,

Microsoft Corporation and its pension and welfare benefits

plans, Defendants/Real Parties in Interest.

Donna Vizcaino; John R. Waite; Mark Stout; Geoffrey

Culbert; Lesley Stuart; Thomas Morgan;

Elizabeth Spokoiny; Larry Spokoiny, Plaintiffs-Appellants, v. Microsoft Corporation, and its health and benefits plans:

Health Benefit Plan, Life Insurance Plan,

Short-term and Long-term Disability

Plans, and Savings (401K)

Plan, Defendant-Appellee.

Nos. 98-71388, 99-35013 United States Court of Appeals,

Ninth Circuit.

May 12, 1999. ^*

Stephen K. Strong and David F. Stobaugh, and Brian J. Waid, Bendich, Stobaugh & Strong, Seattle, Washington, for appellants-petitioners-plaintiffs.

James D. Oswald and Michael P. Monaco, Song Oswald & Mondress, Seattle, Washington, Theodore O. Rogers, Jr., Sullivan & Cromwell, New York City, and Margaret K. Pfeiffer, Richard H. Sauer, and Joseph J. Matelis, Sullivan & Cromwell, Washington, DC, for appellee-real party in interest.

Petition for Writ of Mandamus to the United States District Court for the Western District of Washington. D.C. No. CV-93-00178-CRD.

Appeal from the United States District Court for the Western District of Washington; John C. Coughenour, District Judge, Presiding. D.C. No. CV-93-0178C.

Before: REINHARDT and HAWKINS, Circuit Judges, and SCHWARZER, ^** Senior District Judge.

ORDER

The Court is of the unanimous opinion that the facts and legal arguments are adequately presented in the briefs and record Therefore, this matter is ordered submitted on the briefs and record without oral argument on Wednesday, May 12, 1999, in San Francisco. Fed.R.App.P. 34(a); 9th Cir.R. 34-4(a)(2).

and the decisional process would not be significantly aided by oral argument.

OPINION

SCHWARZER, Senior District Judge.

In our prior opinions in this litigation, we held that, as common law employees, the members of a class certified by the district court were entitled to participate in Microsoft's tax-qualified Employee Stock Purchase Plan ("ESPP") even though they had been told when hired that they were ineligible for such benefits and had signed contracts disclaiming them. See Vizcaino v. Microsoft Corp., 97 F.3d 1187 (9th Cir.1996) ("Vizcaino I"), aff'd, 120 F.3d 1006 (9th Cir.1997) (en banc) ("Vizcaino II"). The certified class had been defined by the district court to include "[a]ll persons employed by Microsoft Corporation ... who are denied employee benefits because they are considered independent contractors or employees of third-party employment agencies, but who meet the definition of employees of Microsoft Corporation under the common law." Vizcaino I, 97 F.3d at 1190 n. 1. We reversed the district court's judgment for Microsoft and remanded for determination of "[a]ny remaining issues regarding the rights of a particular worker." Vizcaino II, 120 F.3d at 1015. On remand, the district court revised its prior class definition to limit the class to workers who worked for Microsoft as independent contractors between 1987 and 1990 either in positions that the Internal Revenue Service (IRS) had reclassified as in fact being common law employee positions, or in positions that Microsoft contemporaneously had voluntarily converted to temporary agency employees. It held those workers to be eligible for employee benefits for work done while independent contractors and for work subsequently performed by them in the same position as temporary employees hired through a temporary employment agency. The district court's revised class definition excludes (1) all other temporary employees hired into a position subsequent to its reclassification or conversion, and (2) all other persons who worked for Microsoft as common law employees. We must decide whether the district court's order fails to carry out this court's mandate.

I. FACTUAL AND PROCEDURAL BACKGROUND

The relevant facts are set forth in detail in our prior opinions. We summarize them here only to the extent necessary for this disposition.

Microsoft, in addition to having regular employees, has utilized the services of other workers whom it classified as independent contractors (sometimes called freelancers) or temporary agency employees (also called temps). Following a federal employment tax examination in 1990, the IRS determined that Microsoft had misclassified workers in various positions occupied by independent contractors and that services performed by workers in the specified positions constituted an employer-employee relationship. In response to the IRS ruling, Microsoft offered some of the workers in reclassified positions jobs as regular employees. Most of the workers, however, were given the option to "convert" to temps or lose their working relationship with Microsoft. In addition, Microsoft voluntarily "converted" independent contractors in other positions to temps. The temporary employment agency "payrolled" these workers but in other respects the workers' relationship with Microsoft remained essentially unchanged. In the years following the reclassification and conversion, Microsoft utilized the services of numerous temps.

Plaintiffs, who were formerly independent contractors, brought this action on behalf of a class of persons employed by Microsoft who met the definition of employees under the common law but who were denied employment benefits because Microsoft considered them independent contractors or employees of third-party employment agencies. Of the various employee benefits sought by plaintiffs, only the ESPP remains at issue. Microsoft denied liability because each of the workers--though conceded to be common law employees--had signed an Independent Contractor Agreement which expressly provided that each independent contractor was responsible for his or her own benefits. The district court granted Microsoft's motion for summary judgment on two grounds: First, because the terms of the agreement barred the claim, and, second, because the terms of the ESPP had not been communicated to the workers and therefore could not have become a part of their contract.

We reversed, holding that through its express incorporation of § 423 of the Internal Revenue Code, see 26 U.S.C. § 423 (1994), which requires that qualifying stock purchase plans permit all common law employees to participate, Microsoft's ESPP extended eligibility to all common law employees. See Vizcaino I, 97 F.3d at 1197. The plaintiff class was therefore afforded the same options to acquire stock as all other employees. See id. We remanded for "the determination of any questions of individual eligibility for benefits that may remain following issuance of this opinion and for calculation of the damages or benefits due the various class members ." Id. at 1200; see also Vizcaino II, 120 F.3d at 1015 ("Any remaining issues regarding the rights of a particular worker in the ESPP and his available remedies must be decided by the district court upon remand.").

On remand, the district court, on February 13, 1998, issued its "Order Regarding Scope of Remand." It denied Microsoft's motion for clarification of the composition of the class, rejecting its contention that the class definition excluded those plaintiffs who were temps and whose claims arose post-conversion (some but not all of whom had worked as independent contractors pre-conversion). The court concluded that "the plaintiff class will remain as defined in its original certification order [of July 21, 1993] until the issue of whether post-conversion plaintiffs are common law employees is presented."

Following the February 13 order, Microsoft renewed its motion to amend the class certification, asking the court to "certify subclasses for the question of who is a common law employee." By order of July 15, 1998, the district court denied Microsoft's motion but "clarified" the class definition, limiting the class to

all Microsoft workers who, like all the named plaintiffs, worked as independent contractors between 1987 and 1990 and whose positions were reclassified as employee positions after the IRS reviewed them. This ... includes the claims brought by the same workers for their work after 1990, when many of them, including four named plaintiffs, were transferred to temporary employment agencies. This is the scope of the plaintiff class.

The court explained that the class had to be clarified because it could only include "the named plaintiffs and those similarly situated, both before and after conversion to temporary employment." The new definition excluded from the class other groups of potential claimants who were not reclassified by the IRS or converted by Microsoft, i.e., temps hired post-conversion into reclassified or converted positions, and all other common law employees not treated as such by Microsoft.

The July order also granted partial summary judgment for plaintiffs (it is unclear whether the order included only named plaintiffs or also the members of the redefined class). Based on Microsoft's concession, the court found these plaintiffs to have been common law employees while working as independent contractors in positions later reclassified by the IRS. In addition, it found that most plaintiffs who had subsequently been converted into temps were also common law employees entitled to ESPP participation during their time as temps. The court reasoned that the issue is "not whether a worker is an employee or an independent contractor; the question is which company is the workers'...