Over the past several years, the United States Department of Labor ramped up its scrutiny of the classification of workers as “independent contractors.” Both the National Labor Relations Board and the Internal Revenue Service followed suit. Thirty-two states joined in. These agencies share information, so a report of misclassification to one entity could potentially end up with an investigation by several. Why are so many major, government entities laser-focused on the issue of “contractors vs. employees?”
Why Is Employee Misclassification a Big Deal?
Experts offer up many explanations as to why government agencies are focused on independent contractor misclassification. For example, the Affordable Care Act (“ACA”) penalized employers that didn’t offer health insurance to all of its “full-time employees,” which term is defined as an employee working 30 hours or more each week. Since independent contractors are not employees, businesses could avoid these penalties by using contractors. Additionally, many state governments look at misclassified contractors as a potential source of payroll tax income. Further, the growth of the “gig economy” has increased the types of “work” available on a contractor basis, and blurred the lines between employees and contractors.
Why do Employers Want to Use Contractors?
The temptation to classify workers as independent contractors seems to be a mighty one for many companies. This is probably because using independent contractors means:
- No payroll taxes
- No fringe benefits, including health insurance
- No overtime
- No employment discrimination claims/lawsuits
- No ability to form a union
- No paid leave (where required by law for employees)
- No job-protected leave (like under the Family and Medical Leave Act)
- No workers’ compensation
- No unemployment benefits
Of course, workers who want fringe benefits, overtime, paid leave, FMLA rights, the right to unionize etc. can file complaints with the Department of Labor, the IRS, the National Labor Relations Board, and various state entities and file private lawsuits. And they do … with increasing frequency. In fact, one of the most prolific bloggers on this topic has reported on 45 misclassification lawsuits so far in 2018!
Contractors vs. Employees in Language Services
The “independent contractor vs. employee” issue strongly impacts the language service industry. Many language service providers (LSPs) continue to use independent contractor interpreters. Just this year, the National Labor Relations Board ordered an LSP in California to reclassify some of its court interpreters as employees. On the heels of this decision, the California Supreme Court recently changed the independent contractor test under California law. Under the new “ABC test,” a worker who performs work in the usual course of the company’s business is an employee. As interpreting is within the usual course of most LSPs’ business, this test seems to preclude using contractor/freelancer interpreters in California.
These legal developments beg the question – are interpreters employees or contractors?
What is the Difference Between a Contractor and Employee?
To truly understand the debate as it affects interpreters, we must first look at the difference between employees and independent contractors. The IRS explains that the difference between an independent contractor and an employee comes down to the degree of control over the workers’ duties and responsibilities. More control leads to employee status. Facts to consider in this analysis fall into three main categories:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (Paying hourly/weekly/monthly, reimbursing expenses, providing tools/supplies, etc.)
- Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue? Is the work performed a key aspect of the business?
This list isn’t an “all-or-nothing” proposition. Agencies and courts will weigh and balance the facts of each, unique circumstance. Overall, the less autonomous a worker is, the more likely he/she is an employee. Factors that lead to a finding of “employee” include:
- The company directs when, where and how work is done.
- The worker must take company-provided training.
- The worker cannot subcontract the job – he/she must perform it personally.
- The workers’ tasks are integrated into business operations and significantly affect business success.
- The relationship between the worker and the company is long-term and open-ended (e.g., not a series of 1-year contract terms).
- The company pays the worker hourly or on a weekly, biweekly or monthly salary.
- The company reimburses for mileage and other business or travel expenses.
- The worker has no risk of taking a significant loss.
- The worker only works for one company.
- The company has the right to discharge the worker unilaterally.
How Does the Contractor/Employee Debate Affect Clients?
At first blush, it may seem like the “contractor vs. employee” issue for interpreters is just an internal issue for LSPs. But in reality, the decision your LSP makes can have a major effect on the interpreting services you receive. LSPs who use an employee model have substantially more control over the standards and practices of their interpreters. To borrow some elements from the above, LSPs using an employee model can:
- Direct when, where and how interpreting work is done, including setting quality standards.
- Require specific training geared toward the types of interpreting needed by their clients.
- Prohibit subcontracting, ensuring that the specific interpreter assigned actually does the work.
- Set interpreter schedules.
When it comes down to it, LSPs who use an employee model recognize interpreting as a key aspect of their business that significantly affects success. These LSPs acknowledge that having the right and ability to ensure interpreters are qualified and compliant and adhere to the LSP’s standards, policies, and procedures means using an employee model.
Does this mean that interpreters are never independent contractors? The answer to this is “no.” There are many circumstances under which interpreters truly are acting as contractors. The most common example is conference interpreting. Highly skilled and experienced interpreters who travel to interpret at conferences are often contractors, working directly for the conference or through an LSP. They typically have a contract to provide services at a specific conference (i.e., a short-term commitment with a clearly-stated end date). Similarly, interpreters in very rare languages often work as independent contractors. These interpreters take on contract work to fulfill the limited needs of various entities in a geographic region.
Contrast these with, for example, the court interpreters at issue in the National Labor Relations Board decision referenced above. Those interpreters worked regularly for an agency, interpreting for various immigration court proceedings. Similarly, many LSPs in the healthcare industry staff teams of interpreters who take appointments daily, relying on work from that LSP as their primary source of income.
In the end, this issue will remain subject to heated debate, politics, and advocacy for the foreseeable future. However, one thing is certain: using the W-2 employee model allows an LSP heightened control over its interpreting staff. This results in more consistent service from highly-qualified, competent, and compliant interpreters – no matter the language.
Vocalink Global adopted the W-2 employee model for its on-site interpreters in 2012. Our interpreting services are designed to provide consistent, high quality interpreting from compliant interpreters. Want to learn more? Connect with us today!
 Independent Contractor Misclassification and Compliance blog list from blogger Richard Reibstein, available here: https://independentcontractorcompliance.com/archives/
 See https://slator.com/industry-news/sosi-loses-key-ruling-over-dismissed-interpreters-and-back-pay-plans-to-appeal/
 Source: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee