(Bloomberg News) -- Hidden beneath the ecosystem of twentysomething programmers making six figures at big tech companies is a class of workers who don’t get paid vacation or maternity leave, discounted stock, 401(k) matches, or tuition assistance. For more than two decades, the industry has outsourced an expanding range of jobs to contractors, including coders, chip designers, customer service reps, custodial staff, security guards, and cafeteria workers. “A lot of temps are really used as a permanent tier of second-class workers,” says Erin Hatton, author of The Temp Economy, a history of U.S. contingent labor.
In September, 38 bug testers who review Microsoft apps voted to create a union, the Temporary Workers of America. They work full time in Microsoft’s offices but are employed by cloud services contractor Lionbridge. Before and after unionizing, the group’s efforts to get benefits comparable with those at Microsoft proved fruitless, says union head Philippe Boucher, who’s worked at Microsoft under Lionbridge full time for more than three years. “I think Lionbridge does not want to do anything,” he says. “The only thing that’s going to work is if Microsoft makes them do it.” Lionbridge didn’t respond to requests for comment.
In the fall, Boucher’s union began to put pressure on Microsoft, appealing to its board to make Lionbridge provide paid leave and other benefits. Union members contacted reporters at papers near Microsoft’s Redmond (Wash.) campus and Lionbridge’s Waltham (Mass.) headquarters and published a blog called Lionbridge Union and an e-book, The Other Microsoft, available at Amazon.com since Oct. 11.
That strategy’s starting to work: On March 26, Microsoft announced it would require contractors employing more than 50 workers to give those doing “substantial work” with Microsoft no fewer than 15 paid days off a year. (Between vacation and sick days, Microsoft’s entry-level employees receive at least 25 paid days off.) “Our decision was based on a number of factors,” says Microsoft spokesman Dominic Carr, “including the ongoing national discussion about the challenges facing working families, our own review of the research on the benefits of paid time off, and feedback from the employees of some of our suppliers.” Microsoft contracts with more than 2,000 companies for services including communications, legal counsel, management consulting, food service, and grounds work, along with bug testers.
About 1.8 million of the 14 million contractors that U.S. staffing companies hire out each year work in engineering, IT, and scientific fields, estimates the American Staffing Association. Contracting giant Kelly Services says it places close to 70,000 workers a year at 2,700 technology companies, including 82 percent of those in the Fortune 500. Contract labor is particularly attractive to tech companies, says Wharton business professor Peter Cappelli, because “it’s just easier to churn them through if you decide at some point, we don’t need these guys anymore.”
Union-backed campaigns are trying to improve contractors’ treatment throughout Silicon Valley, both by unionizing them and by shaming the big companies that use them. In February shuttle bus drivers at Compass Transportation, which serves Apple, EBay, and Yahoo!, voted to join the Teamsters. Drivers at Loop Transportation, which buses Facebook employees, did the same in November. In March, Apple said it would fund 25 percent raises for its drivers. The bus companies didn’t respond to requests for comment.
Following pressure from the Service Employees International Union, Google stopped using its private security contractor in October and began hiring security guards directly; Apple did the same in March. “We hope that virtually all of these positions will be filled by employees from our current security vendor, and we’re working closely with them on this process,” Apple said at the time. EBay and Facebook didn’t respond to requests for comment. Yahoo declined to comment.
Collective bargaining is a poor fit for tech companies, says Melissa Schilling, a management professor at New York University’s business school. “When you have an industry with a lot of technological change, you really need to preserve your ability to be nimble,” she says. But Wilma Liebman, who chaired the National Labor Relations Board during President Obama’s first term, says companies shouldn’t be able to treat contract workers who aren’t technically their employees as second-class citizens. “What we’re seeing is a whole web, a very complicated web of contractual relationships,” Liebman says. “Some of them clearly are, if not to evade labor law obligations, to push that burden and responsibility to someone else.”
Microsoft has had previous legal battles over contract labor. Following a 1990 audit, the IRS concluded the company violated federal law by misclassifying workers as independent contractors instead of full-fledged employees. While Microsoft offered some of those contractors staff positions after the audit, most “were given the option to convert’ to temps or lose their working relationship with Microsoft,” according to a federal appellate decision. In 1992 some of the workers sued Microsoft, alleging that they were illegally denied employee stock purchase benefits. The company agreed to pay more than 8,000 of them about $97 million in 2000.
Boucher says his union will keep pushing Microsoft to improve contractor benefits, such as by requiring that workers get paid holidays in addition to their 15 days off and that new parents have access to two weeks of additional paid leave. He says he’s sought advice from the Communications Workers of America and the AFL-CIO, but won’t start a larger unionization effort before securing a contract with Lionbridge. Even co-workers who voted to unionize with Boucher expect some of those battles to take years, he says. Still, he’s optimistic. “From a very small group, we were able to trigger the reaction from Microsoft that they are going to apply to their suppliers,” he says. As temps at Microsoft, “you are completely second-class, and you feel stuck there. There is no reason to have two different standards.”
The bottom line: Microsoft’s contract workers are the latest to force a big tech company to improve benefits for outsourced labor.
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