[lotsofpulp]

A W-2 employee has to be offered all the same benefits as other employees to pass non discrimination testing to keep all those other benefits tax free. W-2 employees also increase unemployment insurance premiums, as well as be liabilities when it comes time to downsize.

I doubt it has anything to do with image.

[hinkley]

Coming from the other direction, the whole point of keeping them as contractors is that it reduces costs. Therefore, converting them by definition means increased costs.

Seems that they're running the same gambit Microsoft did years ago. Microsoft did not win that court case, and that set precedent that other companies are now trying to stay clear of.