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You must protect contractors from hostile environments 

A Mexican-American owner of a company hired to clean parking lots at Wal-Mart claimed that several racially tinged incidents, such as the words "White Supremacy" being painted on the lot, created a hostile work environment.

The U.S. Supreme Court let stand a lower court's $300,000 award under Section 1981, which bars racial discrimination in making and enforcing contracts. Congress broadened the racial bias law in 1991, and some courts say the new language protects independent contractors.

Wal-Mart argued the ruling would make a company responsible for protecting all its contractors, but the 1st Circuit said only on-site workers would likely be affected. The 1st Circuit's decision applies to Maine, Massachusetts, New Hampshire, Rhode Island and Puerto Rico. (Danco Inc. v. Wal-Mart Stores Inc., Nos. 98-2101 and 98-2269, 1st Cir., 1999) 

Don't treat contractors like employees

The high court let stand a closely watched 9th Circuit ruling that said Microsoft Corp. may owe benefits to thousands of workers that it hired as free-lancers.

The court said contractors can stake a claim to pension benefits if they did work identical or similar to that done by workers classified as employees. Also, it said people who work for a firm long enough, even as "temporary" employees, can be viewed as "permanent" for benefits purposes.

The ruling affects nine western states, but it will likely spark challenges elsewhere.

Advice: Double-check that all your contractors qualify under the IRS' 20-factor test, which is available at www.irs.gov. Bottom line: The more behavioral and financial control you have over a worker, the more likely he'll be deemed an "employee." And make sure your pension plan clearly spells out who is and who isn't qualified to participate.

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