The difference in compensation for reporters classified as contractors and those classified as "staff reporters" is substantial, according to the lawsuit filed Tuesday by longtime correspondents Jeanie Senior and Beth Quinn.

The suit seeks forgone benefits of $236,000 for Senior and $72,000 for Quinn because "plaintiffs were not offered or allowed to participate in any of the employer-sponsored [benefits] plans The Oregonian offered to its staff reporters." (Wages aren't a subject of the suit.)

Senior covered the Hood River area for 23 years ending in 2000. Quinn covered southern Oregon for six years ending in 2005.

Employers have long tried to save the cost of benefits, withholding taxes and higher salaries by hiring contractors to do work that full-time employees might otherwise perform.

In 1997, the 9th U.S. Circuit Court of Appeals, which has jurisdiction over Oregon, ruled that Microsoft wrongly classified workers as independent contractors when they were performing the duties of employees. The plaintiffs in that suit won full Microsoft benefits, and the case led to many employers clarifying workers' status.

In their lawsuit against The Oregonian, Senior and Quinn make a number of claims in an attempt to establish that they were employees in all but name.

They say they performed substantially the same work as staff reporters and worked full-time "under The Oregonian's direction and control," and that the newspaper paid their expenses (contractors typically pay their own).

In a deposition, Tom Maurer, an Oregonian editor who supervised a team of five staff reporters and nine correspondents, acknowledged that he communicated with all regional team members in the same way and evaluated them by the same criteria.

To buttress their argument, the plaintiffs highlight a puzzling inconsistency.

Correspondents' contracts specified they would "not be treated as an employee for any purpose, including but not limited to...unemployment taxes." In other words, the paper wouldn't pay unemployment taxes for contractors, as it does for employees. Yet when Quinn was laid off last year, she applied for unemployment, and the state approved her claim. Since contractors don't normally qualify for unemployment, that approval led Quinn to ask questions. To her surprise, she learned that The Oregonian had been paying unemployment taxes for her for six years and that the state considered her an Oregonian employee.

In a deposition, Oregonian controller David Palmer said the decision to pay unemployment insurance for correspondents stemmed from a 1988 audit by the state of Oregon—a result that clearly rankled Oregonian management.

"We disagreed," Palmer said. "[But] we did reach an agreement with the state that we would pay the unemployment tax under protest." The paper has made such payments ever since, at times for nine or more correspondents.

The state's determination that correspondents are employees for purposes of the unemployment tax is a central argument in the lawsuit.

"The Oregonian paid unemployment insurance as Plaintiffs' employer for years, but did not disclose those payments to Plaintiffs and affirmatively misled Plaintiffs by stating in written contracts that they were not treating Plaintiffs as employees for purposes of unemployment compensation insurance," the suit says.

The plaintiffs also point to a letter that the Internal Revenue Service sent Quinn on Oct. 4, saying it had determined she had been an employee while working for The Oregonian.

Chrys Martin, a lawyer at Bullivant Houser Bailey who specializes in employment and benefits law, says a person can be classified as an employee by various government agencies but still not qualify as an employee under a company's benefit plan.

"An employer has a lot of leeway as to whom its plan covers," says Martin, who is not involved in the lawsuit. "The key is the plan definition of 'employee.'"

Thus far, the newspaper has argued that, whatever anyone else may think, Quinn and Senior do not meet its benefit plan's definition of an employee.

The Oregonian referred questions to lawyer Todd Hanchett, who declined comment.

While there are only two plaintiffs to the current lawsuit, a ruling against The Oregonian could carry larger implications.

The suit claims The Oregonian has improperly compensated correspondents since at least 1977. If the lawsuit is successful, the paper could owe all the correspondents of the past three decades additional benefits and also owe the IRS for taxes that should have been withheld.

The Oregonian is part of New York-based Advance Communications, which owns 40 other publications, including large daily newspapers in Cleveland, New Orleans and Newark, N.J. It is unclear how other Advance publications treat correspondents, but the issue is now moot in Oregon: As of Jan. 1, 2006, The Oregonian made all correspondents employees.