TIME WARNER: Faces Labor Dept. Suit Over Benefits
The Labor Department filed suit yesterday against Time Warner Inc., accusing the media and entertainment giant of "improperly denying full-time employees pensions and health benefits by classifying them as temporary workers or independent contractors." The Wall Street Journal reports that the case highlights a growing trend "by companies to hold down employment costs by farming out more and more important work to employees who aren't considered full time." The Journal notes the action marks "the first time the government has used its authority to assert that certain employees were improperly disqualified from benefits." The suit contends that Time Warner classified employees as temporary workers months after the company's own personnel policies suggest the employees should have been bumped up to full-time status. Furthermore, the suit alleges that Time Warner classified employees as independent contractors, "even though 'common law' tests" indicated their full-time status (Schlesinger/Shapiro, 10/27). The suit stems from a two-year Labor Department investigation of the company. USA Today reports the Labor Department entered into negotiations with Time Warner to secure retroactive benefits for misclassified employees, but the company refused to sign the agreement (Liberman/Armour, 10/27). Time Warner President Richard Parsons dismissed the allegations, asserting that the government's suit has "no basis in law or in fact," and charging the department with moving "beyond the scope of its authority." The company issued a statement saying that the government allegations contradict the conclusions of three previous state and federal agency audits that gave the company's employee classification system a green light.
Although a court decision in favor of the Labor Department would "have little material impact" -- it would secure retroactive benefits for fewer than 1,000 misclassified employees and "appoint an independent fiduciary to audit Time's payroll" --the Wall Street Journal reports that such a decision's repercussions could influence other companies "embroiled in lawsuits filed by employees over denied benefits." Indeed, an attorney for the Labor Department "portrayed the case as significant because 'we haven't endeavored in this area before.'" Employee-benefits lawyer Robert Eccles agreed, saying, "This is new turf for the Labor Department, and it's a significant development that they've chosen to weigh in on the side of" the allegedly misclassified employees. He said, "This could now be asserted in other cases, and a lot of companies have large work forces that aren't normal, traditional employees" (10/27).