The Freelance Economy

Unemployment is at a 29-year low. Millions are working. Yet many are working full time, but receiving no benefits, because they're not considered "permanent."

CBS News Correspondent Wyatt Andrews reports in "Eye on America" that the issue is coming to a head in a case that involves tax and labor laws and a lot of money.

For years Jim Emerson had a 1990s kind of job. He worked at Microsoft, one of the world's richest companies. He averaged $60,000 a year editing Cinemania, the popular CD-ROM software about Hollywood and the movies.

"I worked for three and a half years in that job...full time - more than full time; it's Microsoft," Emerson says.

But benefits were missing from the picture. He had none - no health insurance or 401(k). This was a time when Microsoft full-timers lived out fantasies as stock-option millionaires, while Emerson was employed as a freelance contractor.

"My predecessor was a full-time employee. There's no way you could say what I was doing was a temporary job," he says.

Despite that fact, Microsoft took pains to keep Emerson as a temporary, suggesting after two years that he sign up with temp agency S&T On-Site - to maintain the fiction of being freelance, he says.

A Microsoft supervisor told him to sign up with a temp agency to do the same job he had already been doing for two years, he says.

Emerson says he wasn't the only full-timer who signed up as a temp. Everybody knew it was a scam. This was Microsoft's way of avoiding benefits, of avoiding paying its fair share of Social Security taxes.

"It's a massive gaming of the labor laws and I don't think it's actually legal," says David Stobaugh, Emerson's lawyer.

Stobough has filed a class action against Microsoft, claiming the company mislabeled some 10,000 full-time workers as "contingent, nonpermanent" to save money.

Ordinary regular workers who used to be part of the regular work force are now called "contingent" in order to deny them pay and benefits. Today those workers have a name: permatemps. And Microsoft is not alone in using them. Permatemps are a growing part of the U.S. work force and so are charges of abuse.

Media giant Time Warner and the oil company Arco also face charges that they labeled full-timers as temporaries. Hundreds of other companies, including CBS News, have kept permatemps on the books.

Microsoft is just the most visible symbol of a sea change in the economy - the conversion from a full- time, full-benefit work force to a freelance, low-benefit work force.

"The assignments are of such a nature that quite often they're short term," says Bob Herbold, Microsoft's chief operating officer.

Microsoft calls its freelance work force necessary. Software products are developed and sold so quickly, Herbold argues, Microsoft has to have flexibility.

"The ebb and flow of the need for individuals in this industy is very significant," says Herbold.

But what about Emerson's three and a half years of working on the same product?

Says Herbold: "Well, some assignments wind up longer than we originally planned." He would not comment on a specific assignment.

Microsoft also says it treats its temps well, they are highly paid and they do receive some benefits through the temp agencies, such as S&T On-Site.

Emerson admits that's true, but that's not what the lawsuit is about. The lawsuit is about those obviously not temps; they've been there for years.

So the Microsoft lawsuit asks a 1990s kind of question: Is the use of permatemps essential to productivity, or an end run around laws that protect workers?

Part 2: Bridging The Benefits Gap

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