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THE FIDUCIARY CORNER: Microsoft Language Defeats Independent Contractor’s Claim

Plan sponsors who are worried about increasingly common claims for benefits filed by independent contractors recently received support from a federal court in New York. In the late 1990s Microsoft was held liable for failing to provide health and retirement benefits to a group of independent contractors who claimed that they should have been classified as common-law employees. Reacting to that holding, many employers added special “Microsoft” clauses to their plan documents in an effort to avoid a similar result. Typically such clauses are found in the definition of “eligible employee,” excluding from that term individuals who are treated in good faith by the sponsor as independent contractors, regardless of whether they are later reclassified as employees.

JP Morgan Chase relied on similar language recently to prevail on a claim for benefits filed by a long-term independent contractor. (Downes v. JP Morgan Chase). According to the court, JP Morgan did not violate ERISA when it denied various benefits to a woman who worked as an independent contractor for the company for 10 years. Each of the plans under which she claimed benefits contained a common provision that excluded coverage for anyone who “agrees to render services as an independent contractor.” The plaintiff was just such a person – and therefore was not eligible for benefits – even though she alleged that she should have been classified as an employee, rather than an independent contractor.