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Illustration by Phil Wrigglesworth

In the late 1990s Microsoft Corp. ran afoul of the IRS when auditors discovered it had used thousands of “temporary” contract engineers who worked alongside regular employees for indefinite periods under similar conditions but didn’t receive employee benefits. IRS auditors determined that the company supervised and controlled the engineers’ work just like employees, and said they had to be treated as such for the purpose of withholding Social Security, Medicare and unemployment taxes. Microsoft admitted the error to the IRS, and was required to pay back taxes and overtime wages. Some employees were shifted to employee status.

MP McQueen

MP McQueen is editor-at-large, and can be reached at mpmcqueen@alm.com

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Caroline Spiezio

Caroline covers the intersection of tech and law for Corporate Counsel. She's based in San Francisco. Find her on Twitter @CarolineSpiezio.

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