Opinion by Judge FERNANDEZ; Partial Concurrence and Partial Dissent by Judge FLETCHER; Partial Concurrence and Partial Dissent by Judge O’SCANNLAIN.
FERNANDEZ, Circuit Judge.
Donna Vizcaino, Jon R. Waite, Mark Stout, Geoffrey Culbert, Lesley Stuart, Thomas Morgan, Elizabeth Spokoiny, and Larry Spo-koiny brought this action on behalf of themselves and a court-certified class (all are hereafter collectively referred to as “the Workers”). They sued Microsoft Corporation and its various pension and welfare plans, including its Savings Plus Plan (SPP), and sought a determination that they were entitled to participate in the plan benefits because those benefits were available to Microsoft’s common law employees. The district court granted summary judgment against the Workers, and they appealed the determinations that they were not entitled to participate in the SPP or in the Employee Stock Purchase Plan (ESPP). We reversed the district court because we decided that the Workers were common law employees who were not properly excluded from participation in those plans. See Vizcaino v. Microsoft Corp., 97 F.3d 1187 (9th Cir.1996) (Vizcaino I). However, we then decided to rehear the matter en banc, and we now agree with much of the panel’s conclusion and reverse the district court.
BACKGROUND
At various times before 1990, Microsoft hired the Workers to perform services for it. They did perform those services over a continuous period, often exceeding two years. They were hired to work on specific projects and performed a number of different functions, such as production editing, proofreading, formatting, indexing, and testing. “Microsoft fully integrated [the Workers] into its workforce: they often worked on teams along with regular employees, sharing the same supervisors, performing identical functions, and working the same core hours. Because Microsoft required that they work on site, they received admittance card keys, office equipment and supplies from the company.” Id. at 1190. However, they were not paid for their services through the payroll department, but rather submitted invoices to and were paid through the accounts payable department.
Microsoft did not withhold income or Federal Insurance Contribution Act taxes from the Workers’ wages, and did not pay the employer’s share of the FICA taxes. Moreover, Microsoft did not allow the Workers to participate in the SPP or the ESPP. The Workers did not complain about those arrangements at that time.
However, in 1989 and 1990 the Internal Revenue Service examined Microsoft’s records and decided that it should have been withholding and paying over taxes because, as a matter of law, the Workers were employees rather than independent contractors. It made that determination by applying common law principles. Microsoft agreed with the IRS and made the necessary corrections for the past by issuing W-2 forms to the Workers and by paying the employer’s share of FICA taxes to the government.
[1009] Microsoft also realized that, because the Workers were employees, at least for tax purposes, it had to change its system. It made no sense to have employees paid through the accounts payable department, so those who remained in essentially the same relationship as before were tendered offers to become acknowledged employees. Others had to discontinue working for Microsoft, but did have the opportunity to go to work for a temporary employment agency, which could then supply temporary Workers to Microsoft on an as-needed basis. Some took advantage of that opportunity, some — like Vizcaino — did not.
The Workers then asserted that they were employees of Microsoft and should have had the opportunity of participating in the SPP and the ESPP because those plans were available to all employees who met certain other participation qualifications, which are not relevant to the issues before us. Microsoft disagreed, and the Workers asked the SPP plan administrator to exercise his authority to declare that they were eligible for the benefits. A panel was convened; it ruled that the Workers were not entitled to any benefits from ERISA plans1 — for example, the SPP — or,' for that matter, from non-ERISA plans — for example, the ESPP. That, the administrative panel seemed to say, was because the Workers had agreed that they were independent contractors and because they had waived the right to participate in benefit plans. This action followed.
JURISDICTION AND STANDARD OF REVIEW
The district court had jurisdiction pursuant to 29 U.S.C. § 1132(e)(1) and 28 U.S.C. §§ 1331 and 1367(a). We have jurisdiction pursuant to 28 U.S.C. § 1291.
We review the district court’s grant of summary judgment de novo. See Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.1996). However, when reviewing the decision of a plan administrator who has discretion, “the exercise of that discretion is reviewed under the arbitrary or capricious standard, or for abuse of discretion, which comes to the same thing.” Snow v. Standard Ins. Co., 87 F.3d 327, 330 (9th Cir.1996); see also Saffle v. Sierra Pac. Power Co. Bargaining Unit Long Term Disability Income Plan, 85 F.3d 455, 458 (9th Cir.1996).
DISCUSSION
Although the Workers challenge both their exclusion from the SPP and their exclusion from the ESPP, the two plans are subject to rather different legal regimes. The former is a 26 U.S.C. § 401(k) plan, which is governed by ERISA; the latter is a 26 U.S.C. § 423 plan, which is not governed by ERISA. It, instead, is governed, at least in large part, by principles arising out of the law of the State of Washington. Nevertheless, certain issues, perhaps the most critical ones, cut across both regimes, and we will address them first.
I. GENERAL CONSIDERATIONS.
A The Workers’ Status.
It is important to recognize that there is no longer any question that the Workers were employees of Microsoft, and not independent contractors. The IRS clearly determined that they were. In theory one could argue that what the IRS said was fine for withholding and FICA purposes, but that is as far as it goes.
However, the IRS made its determination based upon the list of factors which is generlly used to decide whether a person is an independent contractor or an employee. See 26 C.F.R. § 31.3401(e)-1(b). The same essential definition is used for § 401(k) plans, see 26 C.F.R. § 1.410(b)-9, and for § 423 plans, see 26 C.F.R. §§ 1.423-2(e)(2), 1.421-7(h). That there should be a congruence of approaches is not surprising. As the Su-preme Court has pointed out, when Congress uses the word “employee,” courts ‘“must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning’ ” of that word. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322, 112 S.Ct. 1344, 1348, 117 L.Ed.2d 581 (1992). The Court then went on to scrutinize [1010] the various typical factors that go into a determination of whether a person is an employee. See id. at 323-24,112 S.Ct. at 1348-49. Those were the usual common law factors. But, again, we recognize that one could still question the IRS’s application of those factors in a particular case.
That question is obviated here for, perhaps more to the purpose, both Microsoft and the SPP have conceded for purposes of this appeal that the Workers were common law employees. In fact, they have asserted that the Workers’ status is a “nonissue” because they concede that the Workers were common law employees. That is to say, they were employees of Microsoft.
B. The Employment Agreements.
The concession that the Workers were employees would, at first blush, appear to dispose of this case. It means that for legal purposes they, along with the other employees of Microsoft, were subject to Microsoft’s control as to both “the manner and means” of accomplishing their job, that they worked for a substantial period, that they were furnished a workplace and equipment, that they were subject to discharge, and the like. See id.; see also 26 C.F.R. § 31.3401(c)-1(b). If that were all, this would be an exceedingly easy case. Of course, it is not all.
Microsoft also entered into special agreements with the Workers, and it is those which complicate matters to some extent. Each of the Workers and Microsoft signed agreements which stated, among other things not relevant here, that the worker was “an Independent Contractor for [Microsoft],” and nothing in the agreement should be construed as creating an “employer-employee relationship.” As a result, the worker agreed “to be responsible for all of [his] federal and state taxes, withholding, social security, insurance, and other benefits.” At the same time, Microsoft had the Workers sign an information form, which explained: “[A]s an Independent Contractor to Microsoft, you are self employed and are responsible to pay all your own insurance and benefits ____ Microsoft ... will not subject your payments to any withholding____ You are not either an employee of Microsoft, or a temporary employee of Microsoft.” We now know beyond peradventure that most of this was not, in fact, true because the Workers actually were employees rather than independent contractors. What are we to make of that?
We now know that as a matter of law Microsoft hired the Workers to perform their services as employees and that the Workers performed those services. Yet we are also obligated to construe the agreements. See Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 474 (9th Cir.1991); Swanson v. Liquid Air Corp., 118 Wash.2d 512, 521, 826 P.2d 664, 669 (1992). In doing so, we could take either a negative or a positive view of Microsoft’s intent and motives. We could decide that Microsoft knew that the Workers were employees, but chose to paste the independent contractor label upon them after making a rather amazing series of decisions to violate the law. Or we could decide that Microsoft mistakenly thought that the Workers were independent contractors and that all else simply seemed to flow from that status.
Were we to take the former approach, we would have to determine that Microsoft, with the knowledge that the Workers were simply a group of employees, decided to engage in the following maneuvers:
(1) Despite the requirements of federal law that amounts be withheld from employee wages, Microsoft decided it would not withhold. See 26 U.S.C. §§ 3102, 3401-3406.
(2) Despite the fact that the SPP states that “employee” means “any common law employee ... who is on the United States payroll of the employer,” Microsoft decided to manipulate the availability of that benefit by routing the wages of these employees through the accounts payable department, so that it could argue that they were not on the United States payroll. Beyond that, it also determined that it would tell the IRS in its “Application for Determination for Defined Contribution Plan,” that Microsoft did, indeed, basically include all employees, a category that it knew included the Workers, even though it had contrived to exclude them. Beyond even that, Microsoft excluded these [1011] employees when it filed its tax returns for the SPP, even though it knew better.
(3) Despite the fact that the ESPP must, essentially, be made available to all employees, Microsoft excluded these employees and thereby intentionally risked the possibility that the plan would not qualify for favorable tax treatment. It did that, even though the plan itself stated that it covered all regular employees and that it was to be construed to comply with 26 U.S.C. § 423, a law which basically requires that all employees be covered. The officers of Microsoft also decided to eliminate one group of common law employees from the benefits, even though the board of directors and the shareholders had already made the benefits of the ESPP available to those employees. In doing that, the officers intentionally violated the corporate law of Delaware, to which Microsoft was subject, because the terms of coverage of stock option plans are not in the hands of corporate officers; they are in the hands of the board itself. See Del.Code Ann. tit. 8, § 157; see also Michelson v. Duncan, 386 A.2d 1144, 1150-51 (Del.Ch.1978), aff'd, in part and rev’d in part on other grounds, 407 A.2d 211 (Del.1979).
On the other hand, in construing the agreements we can view the label as a simple mistake. That is, Microsoft honestly thought that the Workers were independent contractors and took its various actions and inactions based upon that misapprehension. Its actions and the conclusions conveyed to the Workers in the agreements and in the explanation in the information form, which accompanied the agreements, were simply an explication of what the effect of independent contractor status would be and had no separate purpose or effect aside from that explanatory function. That is to say, of course there could neither be withholding from wages nor participation in the benefit plans because those keyed on common law employment status. If the Workers were independent contractors, those would be the inevitable results, even if nothing were said about them in the agreement or the information form. Explaining the meaning of independent contractor status was simply a helpful disclosure.
Absent evidence that the officers of Microsoft used their daedalian talents to follow the first route we have just outlined, we must decide that the second route is a more accurate portrayal of what occurred here. In other words, we should, and we do, consider what the parties did in the best light. In so doing, we do not believe that we are being panglossian; we are merely acting in accordance with the ancient maxim which assumes that “the law has been obeyed.” See, e.g., Cal. Civ.Code § 3548.
The evidence does not undercut our approach; it supports it. As soon as Microsoft realized that the IRS, at least, thought that the Workers were employees, it took steps to correct its error. It put some of them on its United States payroll forthwith. It also gave the Workers retroactive pay for overtime hours. If Microsoft had been withholding taxes while failing to provide benefits, that would have suggested that it knew that the Workers were a species of employee. However, its failure to withhold indicates that it did not think that the Workers were a special breed of employee; it simply thought that they were not employees at all. That was underscored when Microsoft told its managers about the status of the Workers. See Microsoft Manager’s Handbook 4.7-4.8 (1988). It distinguished the Workers from other employees, both regular full-time and temporary. It did not say that the Workers were employees in some special category; rather, it said that they were not employees at all. See id.
But they were employees, which returns us to the contracts themselves. Viewed in the proper light, it can be seen that the Workers were indeed hired by Microsoft to perform services for it. We know that their services were rendered in their capacities as employees. The contracts indicate, however, that they are independent contractors, which they were not. The other terms of the contracts do not add or subtract from their status or, indeed, impose separate agreements upon them. In effect, the other terms merely warn the Workers about what happens to them if they are independent contractors. Again, those are simply results which hinge on the status determination itself; they are [1012] not separate freestanding agreements. Therefore, the Workers were employees, who did not give up or waive their rights to be treated like all other employees under the plans. The Workers performed services for Microsoft under conditions which made them employees. They did sign agreements, which declared that they were independent contractors, but at best that declaration was due to a mutual mistake, and we know that even Microsoft does not now seek to assert that the label made them independent contractors.
On the contrary, Microsoft intended that the Workers perform services under the conditions in question, and they agreed to do so. The parties’ intentions were in perfect accord in that respect, and the independent contractor label was a mere error. We see no reason to embrace and perpetuate that error. It could be argued that we would have to reform the contracts in order to elide the mutual mistake. Reformation is a concept available under the law of Washington, as it is elsewhere. See Wilson v. Westinghouse Elec. Corp., 85 Wash.2d 78, 84-85, 530 P.2d 298, 301-02 (1975); Denny’s Restaurants, Inc. v. Security Union Title Ins. Co., 71 Wash.App. 194, 212, 859 P.2d 619, 629-30 (1993); cf. Scott v. Petett, 63 Wash.App. 50, 57-58, 816 P.2d 1229, 1234-35 (1991). But Microsoft saved us and the Workers the trouble of applying reformation doctrine when it agreed that the Workers were, in fact, not independent contractors. Thus, the label became meaningless, as did the explication of what would follow from that label — no withholding, no benefits.
A similar case from the Eleventh Circuit lends support to our conclusion. See Daughtrey v. Honeywell, Inc., 3 F.3d 1488 (11th Cir.1993). In Daughtrey, the plaintiff had gone to work for Honeywell and had signed an agreement which stated that she was an independent contractor, that she was not an employee, and that she was not “entitled to any benefits or privileges provided by HONEYWELL to its employees.” Id. at 1490. She later claimed that she was entitled to certain ERISA benefits because she was, in fact, an employee. The district court granted summary judgment against her on the theory that she was actually an independent contractor, but the Eleventh Circuit reversed. It did so because it found the facts to be in dispute on that status issue. It seems apparent that what made her status an issue of material fact was that she would be entitled to “employee benefits for the period during which she performed services as a consultant,” if she was an employee. Id. at 1493. Similarly, in this case, other things remaining equal, it would appear that the Workers are entitled to the benefits of all other employees, or, at least, they are not excluded simply because of the contractual terms.
One additional matter must detain us for a moment. It could, perhaps, be argued that the statements about benefits, unlike statements about withholding, stand on their own footing as a waiver of benefits, regardless of the Workers’ true status as employees. As we have said, we think that would be an incorrect interpretation of these agreements, and Microsoft assured us at argument that this is not a waiver case. Were it one, we would have to consider whether the waivers based, as they would have been, on the mistaken premise of independent contractor status were knowing and voluntary under ERISA and Washington law. See, e.g., Laniok v. Advisory Comm., 935 F.2d 1360, 1367 (2d Cir.1991) (ERISA); Yakima County (West Valley) Fire Protection Dist. No. 12 v. City of Yakima, 122 Wash.2d 371, 384, 858 P.2d 245, 252 (1993) (Washington law). Moreover, at least as far as the SPP is concerned, we would have to consider whether the mistaken waiver must and would withstand special scrutiny designed to prevent potential employer or fiduciary abuse. See, e.g., Sharkey v. Ultramar Energy Ltd., 70 F.3d 226, 230-31 (2d Cir.1995) (close scrutiny used); Smart v. Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 181-82 (1st Cir. 1995) (careful scrutiny used); Leavitt v. Northwestern Bell Tel. Co., 921 F.2d 160, 162 (8th Cir.1990) (release reviewed to assure no breach of fiduciary duty); cf. Holt v. Winpisinger, 811 F.2d 1532, 1541 (D.C.Cir.1987) (ERISA vesting provisions cannot be waived); Amaro v. Continental Can Co., 724 F.2d 747, 752 (9th Cir.1984) (ERISA’s minimum standards cannot be waived). Howev[1013] er, these issues need not even be mooted once it is recognized that there was no separate waiver at all. Moreover, we need not consider what the result would be if the agreements were of a different form or character.
In short, Microsoft has already recognized that the Workers were employees and that the “no withholding” consequence of the independent contractor label has fallen; we now hold that the “benefit” consequence has fallen also. Having thus burned off the brumes which threatened to obscure our view, we will now turn to the plans themselves.
II. THE PLANS.
A. The SPP.
The SPP is an ERISA plan. See 29 U.S.C. § 1002(2)(A)(ii); 26 U.S.C. § 401(k); In re Dunn, 988 F.2d 45, 46 (7th Cir.1993). The Workers seek enforcement of the terms of that plan. That is, they seek to have us review the determination of the plan administrator and to require that the plan make its benefits available to them. See 29 U.S.C. § 1132(a)(1)(B). As we have already pointed out, the administrative panel of the SPP determined that the Workers are not entitled to benefits. The reasons appear to have been that the Workers were independent contractors and that they waived the benefits. We must review those determinations to see if they were arbitrary or capricious. See Snow, 87 F.3d at 330. Based upon what we have already said, it is pellucid that they were. To the extent that the decision was based upon the supposed independent contractor status of the Workers, the plan conceded that the decision was wrong when it conceded that the Workers were, in fact, employees. To the extent that the decision was based upon a supposed waiver of benefits, the plan administrator purported to construe the agreements rather than the plan itself. But, as we have pointed out, our construction is the opposite. We, therefore, determine that the reasons given for denying benefits were arbitrary and capricious because they were based upon legal errors which “misconstrued the Plan and applied a wrong standard to a benefits determination.” Scuffle, 85 F.3d at 461.
The SPP now concedes as much, but it and the Workers asked the district court, and ask us, to decide a different issue of plan construction, one on which the administrator has not opined. The district court accepted that invitation, so did the panel. See Vizcaino I, 97 F.3d at 1193. We are tempted to do the same, but upon reflection we have determined that we should not allow ourselves to be seduced into making a decision which belongs to the plan administrator in the first instance.
We are asked to decide what is meant by the SPP’s restriction of benefits to common law employees who are “on the United States payroll of the employer.” The panel explored some of the reasonably possible meanings of that phrase and construed the apparent ambiguity in favor of the Workers. See id. at 1193-96. No doubt the plan administrator should pay careful attention to what was said there. We have also pointed out that we are dubious about the proposition that Microsoft would manipulate plan coverage by assigning recognized common law employees to its accounts payable department or to its payroll department, as it saw fit. We have our doubts that it could properly do so. But it is the terms of the SPP which control, and the plan is separate from Microsoft itself. Thus, we cannot, and will not, predict how the plan administrator, who has the primary duty of construction, will construe the terms of the SPP.
We do not know whether he will rely upon an “is” construction — you must actually be on the payroll — or upon an “ought” construction — you must be a person who should be on the payroll. Nor do we know if he will accept the domestic versus foreign gloss on the provision in question. What we do know is that the decision is his in the first instance. We would set a poor precedent were we to intrude upon that exercise of discretion before he has even considered and ruled upon the issue. We would encourage the dumping of difficult and discretionary decisions into the laps of the courts, although one of the very purposes of ERISA is to avoid that kind of complication and delay. Of course, should [1014] he rule in favor of the Workers’ position, he must then go on to determine what benefits they are entitled to and under what conditions, but that, too, is exactly the kind of decision that he should be making for each of the Workers in the first instance.
We are aware of and do not resile from our decision in Nelson v. EG & G Energy Measurements Group, Inc., 37 F.3d 1384 (9th Cir.1994). However, that case presented us with a somewhat unusual set of facts. In Nelson the Administrative Committee had not construed the particular provision, but, more than that, an attempt had been made to induce the Committee to rule on the claims, and that request was rejected out of hand. See id. at 1388. Moreover, while the litigation was in progress, the plaintiffs again attempted to induce the Administrative Committee to rule, but that approach was also rebuffed. See id. at 1388-89. Given that recalcitrance, we decided that we would determine the issue ourselves and would decide it de novo because there was no exercise of discretion to defer to. See id. at 1389. That is not this case; this is simply a ease where a wholly new issue, which was never put to the SPP administrator, has been raised. He has both the right and the duty to decide it, and we must then review his ultimate decision regarding the Workers by the usual standard. “‘It is not the court’s function ab initio to apply the correct standard to [the participant’s] claim. That function, under the Plan, is reserved to the Plan administrator.’ ” Saffle, 85 F.3d at 461 (citation omitted).
B. The ESPP.
The ESPP was a plan adopted for the purpose of taking advantage of the benefits conferred under 26 U.S.C. § 423. It was approved by the board of directors and by the shareholders of Microsoft. Their action was an offer to employees, as that term is defined in § 423. As we have already suggested, we doubt that the corporate officers set out to withdraw the offer from some employees, even if they could have done that. The Workers knew about the fact of that offer, even if they were not aware of its precise terms. Under the law of the State of Washington, which all agree applies here, a contract can be accepted, even when the employee does not know its precise terms. See Dorward v. ILWU-PMA Pension Plan, 75 Wash.2d 478, 452 P.2d 258 (1969). In Dorward the court pointed out that a pension is not a gratuity, but “rather is deferred compensation for services rendered.” Id. at 483, 452 P.2d at 261. We think that that same form of reasoning applies to all employee benefits. Few of them are mere gratuities or a result of unadulterated altruism. Most are for services rendered or for the purpose of inducing the further rendering of services. They help to guarantee a competent and happy labor force. The Washington Supreme Court went on to say:
The consideration rendered for the promise in the pension contract of the employer to pay a pension is established when the employee is shown to have knowledge of the pension plan and continues his employment. An enforceable contract will arise in such instances even though the pensioner does not know the precise terms of the pension agreement.
Id. Again, we are confident that the court would apply the same reasoning to this employee benefit. Other of its decisions confirm us in our opinion, for it has adopted a protective view toward employees’ rights. See Bowles v. Washington Dep’t of Retirement Sys., 121 Wash.2d 52, 67-68, 847 P.2d 440, 448 (1993) (pension benefit rights enforced for public employees, even in the absence of specific expectations); Culinary Workers & Bartenders Union No. 596 Health & Welfare Trust v. Gateway Cafe, Inc., 91 Wash.2d 353, 368, 588 P.2d 1334, 1344 (1979) (pension and welfare benefit promises enforced for employees as third-party beneficiaries); Jacoby v. Grays Harbor Chair & Mfg. Co., 77 Wash.2d 911, 915, 468 P.2d 666, 669 (1970) (where employee knows that a pension plan exists, continued employment is consideration).
The ESPP was created and offered to all employees, the Workers knew of it, even if they were not aware of its precise terms, and their labor gave them a right to participate in it. Of course, Microsoft’s officers would not allow that participation because they were under the misapprehension that the board and the shareholders had not ex[1015] tended the offer to the Workers. That error on the officers’ part does not change the fact that there was an offer, which was accepted by the Workers’ labor. Of course, the ESPP provides for a somewhat unusual benefit. An employee, who chooses to participate, must pay for any purchase of stock, and the Workers never did that. We, however, leave the determination of an appropriate remedy to the district court.2
CONCLUSION
Microsoft, like other advanced employers, makes certain benefits available to all of its employees, who meet minimum conditions of eligibility. For some time, it did not believe that the Workers could partake of certain of those benefits because it thought that they were independent contractors. In that it was mistaken, as it now knows and concedes.
The mistake brought Microsoft difficulties with the IRS, but it has resolved those difficulties by making certain payments and by taking other actions. The mistake has also brought it difficulties with the Workers, and the time has come to resolve those.
Therefore, we now determine that the reasons for rejecting the Workers’ participation in the SPP and the ESPP were invalid. Any remaining issues regarding the rights of a particular worker in the ESPP and his available remedies must be decided by the district court upon remand. However, any remaining issues regarding the right of any or all of the Workers to participate in the SPP must be decided by the plan administrator upon remand.
REVERSED and REMANDED to the district court as to the ESPP. REVERSED and REMANDED to the district court for further remand to the plan administrator as to the SPP.