Donna Vizcaino, Jon R. Waite, Mark Stout, Geoffrey Culbert, Lesley Stuart, Thomas Morgan, Elizabeth Spokoiny, and Larry Spokoiny sued on behalf of themselves and a court certified class against Microsoft Corporation and its various pension and welfare plans, including its Employee Stock Purchase Plan (ESPP), and sought a determination that they were entitled even as independent contractors to participate in the plan benefits because those benefits were available to Microsoft’s common law employees.
The Plaintiffs filed action against Microsoft Corp. for inclusion in Microsoft’s employee benefit plans. The district court denied the plaintiffs’ motion for summary judgment while granting Microsoft’s. The plaintiff’s appealed the district court’s decision and the appeal’s court reversed the district court’s judgment for Microsoft and remanded for determination of any remaining issues regarding the rights of a particular worker. On remand the district court 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 who were temps and whose claims arose post conversion. The court concluded that the class would remain as defined. 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.”
The district court denied the motion but “clarified” the employee class definition, limiting the class to specific workers (independent contractor). The district court also granted partial summary judgment for the plaintiff’s. Plaintiff’s filed a motion for reconsideration. The court issued a further “Order Regarding Motion to Revise” granting the motion in part and denying in part. The court denied summary judgment for the plaintiff. Plaintiff’s moved for a permanent injunction requiring Microsoft to immediately allow all common law employees to participate in the ESPP. The district court denied the motion. The Plaintiff’s felt that the district court failed to carry out the appeals court mandate and filed a Writ of Mandamus under the All Writs Act, 28 U.S.C. S 1651 (1994), to enforce this court’s mandate in Vizcaino I and II. The Appeals court held that it had jurisdiction and granted the petition.
Is the definition of common law employee as defined in Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 323-24 (1992) and the IRS 26 U.S.C. S 423 (1994) appropriate for independent contractor purposes? Are independent contractors which are considered employee’s under employee common law eligible for a company’s ESPP if they signed an independent contractor agreement expressing they are responsible for their own benefits? Is the reduced definition of employment class from the district court valid or should that definition be vacated and the original class definition be reinstated? Does the Appeals court have jurisdiction on this matter? Points of View:
The Plaintiffs feel that they are eligible for Microsoft’s ESPP plan because they qualify under the IRS reclassified positions. They also believe workers voluntarily converted and temps hired subsequent to conversion are eligible to participate in Microsoft’s ESPP plan. The defendants agree that based on the IRS rules some employees had the rights to ESPP but they do not feel workers that voluntarily converted to contractors or temps hired subsequent to conversion are eligible to participate in their ESPP plan. Microsoft denies any liability because these independent contractors signed an agreement in which they expressly agreed to provide their own benefits.
Microsoft’s basic contention is that the district court properly exercised its discretion to modify the scope of the employee class. From an economic prospective the common law definition as described in Darden and set forth by this case ensures the IRS will collect more federal taxes. From the employer/employee social prospective, this case almost certainly, negatively impacts the relationship between the two. Neither party can conclude what is mandatory or up for bargain when contracting with one another. These imposed contracts have the unnecessary consequence of forcing employers to retroactively extend to workers optional benefits for which they did not contract.
Common law employee
In the case of Nationwide Mutual INS. Co. v. Darden, 503 U.S. 318, 323-4, 112 S. Ct. 1344, 117 I. Ed. 2d 581 (1992). The court singled out five factors as determinative: recruitment, training, duration, right to assign additional work, and control over the relationship between the worker and agency. In Kelly v. Southern Pac. Co., 419 U.S. 318, 324, 95 S. Ct. 472, 42 I. Ed. 2d 498 (1974) “A person may be the servant of two masters, not joint employers, at one time as to one act, if the service to one does not involve abandonment of the service to the other.” The incorporation of S 423 of the Internal Revenue Code, see 26 U.S.C. S 423 (1994), requires that qualifying stock purchase plans permit all common law employees to participate.
The All Writs Act provides that “[t]he Supreme Court and all courts established by Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.” 28 U.S.C. S 1651(a) (1994). The traditional office of the writ of mandamus is to “confine an inferior court to a lawful exercise of its prescribed jurisdiction or to compel it to exercise its authority when it is its duty to do so.'” Will v. United States, 389 U.S. 90, 95 (1967) (quoting Roche v. Evaporated Milk Ass’n, 319 U.S. 21, 26 (1943)). Thus, when a lower court obstructs the mandate of an appellate court, mandamus is the appropriate remedy. See United States v. United States Dist. Ct., 334 U.S. 258, 263-64 (1948). The justification for mandamus in such circumstances is two-fold.
First, inferior courts’ disregard of appellate mandates “would severely jeopardize the supervisory role of the courts of appeals within the federal judicial system.” In re Chambers Dev. Co., 148 F.3d 214, 224 (3d Cir. 1998); see also Citibank, N.A. v. Fullam, 580 F.2d 82, 87 (3d Cir. 1978). Second, as a policy matter, litigants who have proceeded to judgment in higher courts “should not be required to go through that entire process again to obtain execution of the judgment.” General Atomic Co. v. Felter, 436 U.S. 493, 497 (1978). A trial court can only consider “any issue not expressly or impliedly disposed of on appeal.” Firth, 554 F.2d at 993; see also Nguyen v. United States, 792 F.2d 1500, 1502 (9th Cir. 1986). Bauman v. United States Dist. Ct., 557 F.2d 650, 654-55 (9th Cir. 1977). Bauman does not apply when mandamus is sought on the ground that the district court failed to follow the appellate courts mandate.
The court looked back to its decision in Vizcaino I and II for its previous determination of who is an employee and what entitlements employees are entitled to. The Appeals court based its decisions on the IRS rules and the Darden case to define the common law employee dispute that originated in Vizcaino I and II. The Appeals court then applied its determination to the lower court’s ruling and determined that lower court erroneously restricted the certified employee class. Microsoft had a major point of contention that the certification order was “provisional” and hence subject to future alteration. The Appeals court looked to Nguyen v. United States, 792 F.2d 1500, 1502 (9th Cir. 1986) which held that the district court’s order was not conditional, much less provisional.
The traditional office of the writ of mandamus is to “confine an inferior court to a lawful exercise of its prescribed jurisdiction or to compel it to exercise its authority when it is its duty to do so.'” Will v. United States, 389 U.S. 90, 95 (1967). In this case the Appeals court declared that the lower court acted outside of its scope and therefore confined it through a writ of mandamus. The only qualification that the Appeals court left to the lower court was “If at a later date it appears certain questions should be decertified pursuant to 23 (c) (4) (A), the court can do so. This did not give the lower court the right to substantially lower the membership of the class at some future date. This was in opposition to Rule 23 (c) (1) which permits a certification order be altered or amended “before the decision on the merits,” not afterward.
The court held in Vizcaino I and II that all common law employees of Microsoft are entitled to participate in Microsoft’s ESPP, subject to the exceptions specified in the plan. The members of the certified class share a common claim to past and, in certain cases, current and future participation. They are entitled to press their claim in this action.
The Writ of Mandamus petition was granted and the matter was remanded to the district court for further proceedings consistent with their opinions. The appeals court concluded the district court orders did not follow their mandate of the employee class definition. Their opinion also disposed of the issues raised in plaintiffs appeal from the denial of a permanent injunction, the court dismissed that appeal without prejudice.
This ruling is significant because anyone who is asked to provide work for another that does so within the definition of the IRS rule and Darden case is considered a common law employee and is eligible under the incorporation of S 423 of the Internal Revenue Code, see 26 U.S.C. S 423 (1994) to purchase the employers ESPP. The implication of this ruling is serious and far reaching for employers and employees throughout the nation. The impact will be less pay for employees because employers will be required to give the additional benefits to “employees” that otherwise would not have been eligible. The long term societal impact could also lower the burden on the government to assist retirees with subsistence due to them not having a retirement fund or ESPP because of their employment class with an employer.
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