The headphones I was using were noise cancelling headphones.
So I tried out 4 different headphones, 2 non-noise cancelling worked fine and the 2 noise cancelling headphones would stop the microphone from working.
Ironically enough one of the noise cancelling headphones was a Sony product.
Is anyone else having this problem?
EDIT: This happens when the noise cancelling is on or off, doesn't make a difference still turns off the mic.
Which mic? The one on the console, or one on the headset? If it is the one on the console, then it depends on the way that the headphone jack is wired. If the Vita thinks that the headphones have a mic, then it will disable the mic on the console. If it doesn't think that the headset has a mic, then it will keep the mic on the console active.
The mic on the Vita console doesn't work when I plug in my noise cancelling headphones (which do not have mics on them).
I've tried this with two different noise cancelling headphones already and got the same results both times (that the mic on the vita does not work, in both the video recording and in games of psasbr)