Understanding Worker Classification: The ABC Test, Misclassification, and Tips for Professionalizing Your Language Services Business
Disclaimer: This post is for educational purposes only. Consult a reputable professional for financial, legal, and tax advice related to your situation.
Translators, Interpreters, and Worker Classification: Why Now?
Translators and interpreters have existed ever since humans have spoken and written. The first recorded proof of language interpretation dates back to Ancient Egypt in 3000 B.C.E. If translators and interpreters have been around for thousands of years, why is the way we are classified such a hot topic?
According to the Small Business Administration, 99.9% of all US businesses are small businesses, including translators and interpreters, who often run businesses of one. The emergence of the gig economy has indelibly changed the country’s economic landscape. As a result, more and more states are weighing in on small businesses, independent contractors, and what is (and isn’t) “gig” work.
In an attempt to clarify these issues, many states have adopted some form of the so-called ABC test for determining employee status and reducing the potential for worker misclassification, most notably in California. Proposed federal legislation—the Protecting the Right to Organize (PRO) Act—would include California’s ABC test and make it federal labor law. But as our California colleagues know firsthand, applying the ABC test to translation and interpreting (T&I) can feel like trying to put a square peg into a round hole, and many T&I professionals were negatively impacted when the ABC test was codified into law in California as Assembly Bill 5 (AB 5).
California broadened the application of the ABC test as defined in 2019 with the Dynamex decision, and it became law when AB 5 was passed and signed in 2020. AB 5 contained about a dozen exemptions, but linguists were not among them. The law directly affected up to 1 million or more California workers. Due to a ballot initiative at the end of 2020, ride-share and delivery drivers working for app-based companies like Uber, Lyft, and Instacart are now exempted from AB 5. And thanks to the pioneering work of the Coalition of Practicing Interpreters and Translators (CoPTIC), independent contractor professionals, civil rights groups, industry groups, business groups, and many others from all over the country , another 90+ occupations earned exemptions from AB 5 through a follow-up bill that was passed at the end of the 2020 legislative session. Translators and interpreters were among those granted exemptions.
Understanding the ABC Test and Common Law Rules
The ABC test is used in some states to decide whether a person is an employee or an independent contractor. In California, where it originated, it is used to determine unemployment, wage and hour, disability, and worker’s compensation benefits. This test involves looking at three separate criteria (the A, B, and C “prongs” of the legislation that established this test) to determine independent contractor status:
- The worker is free from the hiring entity’s control or direction in performing the work.
- The person performs work that is outside the usual course of the hiring entity’s business.
- Customarily, the worker is engaged in an independent trade, occupation, profession, or business of the same nature as that involved in the work performed.
The precise criteria for the ABC test are different in every state. Some states, such as California, require a person to meet each criterion to be considered an independent contractor, while other states may only require a person to satisfy two.
Challenges with the B Prong for T&I
The B prong is particularly challenging for many contractors and hiring entities to meet; some criticize it as overly restrictive. For example, a self-employed freelance journalist hired by a magazine or website to write an article could not meet the B prong because their line of work is the same as that of the hiring company: producing written content. The same would apply to many workers, including a musician who plays in multiple symphony orchestras, a carpenter procured to help a construction firm build a house, or a baker hired to help a caterer with a huge event. The B prong could also be a stumbling block for T&I professionals who work for language service providers (LSPs) since their line of work is the same as that of the hiring entity: producing written translations or providing sign- or spoken-language interpretation and everything in between (dubbers, subtitlers, bilingual captioners & voice-over artists, etc.). Subsequently, another California state law, AB 2257, was passed to alleviate the unintentional restrictions of the B prong. AB 2257 exempts certain types of workers from the ABC test, including translators and interpreters. ATA, along with its members, deserves many thanks for its part in the Coalition’s success in earning this exemption.
Common Law Rules
States that do not use the ABC test use similar common law rules outlined by the US Internal Revenue Service (IRS). The answers to the following common law questions help determine how a worker should be classified:
1. Behavioral control: Does the hiring company control the workers or the methods they use to complete the work?
2. Financial control: Does the hiring company control aspects of the worker’s compensation, such as how they are paid, if expenses are reimbursed, and who furnishes needed supplies?
3. Relational control: Does the hiring company offer workers benefits such as insurance or vacation pay? Is the work being done part of the hiring company’s primary business? Is the working relationship ongoing?
Whether you live in a state with an ABC test or are subject to the common law rules, it is important to know how to justify your business-of-one and articulate why you believe you are operating as a non-employee.
Professionalizing Your Translation or Interpreting Business: Tips for Protecting Yourself and Your Livelihood
Translators, interpreters, and other language services industry professionals who want to be classified as independent contractors should consider taking steps to professionalize their businesses. Doing so, if you haven’t already, will help you provide sufficient evidence that you operate in a way that passes the aforementioned classification tests and safeguards against potential misclassification issues for you and your clients. Here is a list of tips for professionalizing and formalizing your business practices:
Set up a distinct legal entity
Establishing a distinct legal entity for running your business, such as a sole proprietorship or an LLC, demonstrates you have taken steps to create and promote an independent company. Business-to-business (B2B) relationships can offer protection from misclassification. The easiest entity to establish is a sole proprietorship. Consider other options, like an LLC, depending on where and how you work. Different business structures have different startup costs and potentially more complex and costly tax filing requirements. Also, consider consulting a legal, financial, or tax professional before deciding which business structure would suit your situation best.
Obtain a business license
Depending on where and how you run your business, you may need to get a business license from your city, county, or state. For more information, you can contact the Small Business Development Center (SBDC) in your area or your state’s Secretary of State’s office, which usually manages business creation and can provide more information specific to where you live.
Get a federal Employer Identification Number (EIN)
An EIN is free and provides many benefits, from making it easier to separate your personal and business finances (more on that below) to lowering the risk of your social security number (SSN) being used to steal your identity.
Separate business and personal finances
Keeping your business-related expenses separate is another way to demonstrate that you are running a legitimate, independent business, which helps fulfill the requirements of the aforementioned classification tests. It also makes it much easier to track deductible expenses and complete your taxes with less stress and a lower risk of error.
Sign service agreements with your clients
Contracts are vital for outlining the scope of the work being performed and the deadline, your agreed payment terms, and terms for breach of contract. Businesses generally spell out the conditions of their collaboration in this way, and ATA makes a service agreement template available as a benefit to our members. It covers many of the most common elements translators and interpreters would want to spell out to their clients. Most agencies also sign agreements with their contractors and use documents like purchase orders (POs) to explain the details of specific jobs or tasks.
Promote your services and advertise your availability
An essential criterion of worker classification tests is whether the contractor “holds themselves out as being engaged in an occupation or business distinct from that of the employer.” So, it is crucial to establish that you offer your services to other clients (both potential agencies and direct clients). Proof of service offerings can include your ATA Directory listing, a LinkedIn profile or Facebook Business page, business cards and other promotional or marketing materials, a professional website, etc. You should also maintain a current resume/CV or service sheet.
Negotiate your rates and fees
Another common classification test criterion is the possibility of profit or loss. In other words, any person in a position to realize a profit or suffer a loss due to their services is generally an independent contractor (employees get paid regardless of whether their employer is making or losing money). When an individual negotiates their rates for a particular job or a certain term (e.g., agreeing to maintain a specific rate for one year), it demonstrates the opportunity for profit or loss.
Join a professional association and provide professional affiliation or certification documentation where applicable
If you belong to a professional association like ATA, are ATA-certified, or are a certified or registered interpreter, provide relevant documentation to your clients. If you work in a language pair that does not have certification, association membership paired with information related to your training and professional experience further demonstrates your investment in your business and continuing education.
Keep detailed business records
Keeping detailed records of your professional activity to show you have multiple clients, practicing your craft in your own office or at various locations or venues (even virtually), having your own tools and equipment, and belonging to professional associations whose membership you pay for are all effective ways to meet a variety of the criteria that are shared across classification tests.
Why are these steps necessary? Professionalizing your practice can help you be in compliance with worker classification legislation similar to AB 5 and protect yourself and your clients in the event of an enforcement entity audit. It’s good for you and the companies you work with, and ATA provides the tools you need to do so.
Navigating the complexities of worker classification demands awareness and preparedness. The ABC test, common law rules, and impending potential legislative changes necessitate that T&I professionals take informed steps to safeguard the worker classification status that works best for them. By staying informed, engaging in advocacy efforts, and learning to articulate why most translation and interpreting professionals are truly independent contractors, in fact and by choice, you can protect your rights and contributions to the workforce.
All professionals, including translators and interpreters, who feel they are misclassified should avail themselves of the mechanisms where they live to rectify the issue. Precisely what those mechanisms are will be the topic of a future article.
Acknowledgments: This article acknowledges the contributions of Ben Karl, Lorena Ortiz Schneider, Caitilin Walsh and the Coalition of Practicing Interpreters and Translators in research and advocacy.
About the Author
Jason Knapp is a freelance interpreter and translator and the owner of Knapp Language Services, LLC. He specializes in the translation of legal, medical, manufacturing, and construction subject matter. He is certified as a court interpreter in California, Colorado, Indiana, Kentucky, Ohio, and Oregon. He is also certified as a medical interpreter for Spanish through the National Board of Certification for Medical Interpreters. He has a post-graduate certificate in conference interpreting from the Universidad del Salvador. email@example.com
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