LAS VEGAS -- When is an employee really an employee and what difference does it make?

In the case of Donna Vizcaino et al. vs. Microsoft Corp., it cost the Seattle-based software maker more than $100 million in stock options when the U.S. Supreme Court declined to reverse an appellate court ruling holding that Microsoft's temporary workers were entitled to the same benefits accorded full-time employees.

"And you thought Bill Gates was having a bad day when Nasdaq dropped," quipped Rodney Glover, managing partner of the Washington office of Gardner, Carton & Douglas.

In a similar case, the Internal Revenue Service ordered Atlantic Richfield Co. to pay $3 million for allegedly misclassifying temporary workers.

And a lawsuit filed by two former volunteers for America Online Inc. pending in federal court in New York is seeking back pay and benefits from the Internet service provider.

While the Microsoft case has received the most notoriety, human resource professionals also should be aware of these other cases, as well as federal legislation recently introduced to bar employers from discriminating against temporary employees, Mr. Glover said during a session at the 52nd Annual Society of Human Resource Professionals' Conference and Exhibition, held June 25-28 in Las Vegas.

Mr. Glover offered some guidelines for employers using temporary workers to avoid liability like that which Microsoft and other employers now face.

In particular, he suggested that employers apply the test that the 9th U.S. Circuit Court of Appeals used in the Microsoft case, which arose out of a 1992 Supreme Court decision in Nationwide Mutual Insurance Co. vs. Darden.

According to "the Darden Dirty Dozen," as Mr. Glover has dubbed them, the factors used to define whether a hired party is an employee include:

* The skill required.

* The source of the instrumentalities and tools.

* The location of the work.

* The duration of the relationship between the parties.

* Whether the hiring party has the right to assign additional projects to the hired party.

* The extent of the hired party's discretion over when and how long to work.

* The method of payment.

* The hired party's role in hiring and paying assistants.

* Whether the work is part of the regular business of the hiring party.

* Whether the hiring party is in business.

* The provision of employee benefits.

* The tax treatment of the hired party.

In the Microsoft case, the 9th Circuit focused on "the hiring party's right to control the manner and means of the job or work," which is basically the issue at the heart of the Darden factors, Mr. Glover explained.

Despite the fact that the individuals were both employed by and paid by temp agencies, the court ruled they were "common law employees," and entitled to the same benefits as full-time employees, he said.

In response to the class-action litigation, Microsoft has made several changes in its policies pertaining to temporary employees, according to Mr. Glover.

For example, beginning this month, Microsoft established a one-year limit for the duration of temporary workers' employment, with 100-day intervals in between rehiring a temp. The company also is encouraging its 5,500 to 6,000 temporary workers to apply for 3,000 regular positions now open.

Mr. Glover advised employers to follow Microsoft's lead, but also suggested some other protections.

For example, he encouraged employers to make sure that the temporary agencies with which they contract offer a complete benefits package to workers.

Employers that use temporary agencies also should ensure that the agency recruits the workers themselves and provides any necessary training before being assigned to a position that requires certain skills, according to Mr. Glover.

He also warned against awarding temporary workers any of the perks that regular full-time employees get, such as business cards, company cars or even attending the company picnic.

"Make sure your temps are treated differently," he insisted.

Mr. Glover also advised employers to review all existing and future contracts with temporary agencies and outside service providers to make it clear that the employer "neither seeks nor accepts responsibility for control over the employees of its contractors."

"You need to make sure your temporary workers are `employed' in every sense of the term through the temp agency" or outside vendor, Mr. Glover said.