Not all California translators are subject to the employee classification under AB5, but many agencies refuse to work with them anyway.
On January 1, 2020, translators and interpreters joined the list of endangered species in California. Overnight, thousands of independent contractors found themselves booted out of their chosen careers – quite often sans a valid reason.
With the turn of the decade, California Assembly Bill 5, AB5 for short, went into effect. The new law extends the definition of what constitutes an employee. As a result, many translators and interpreters no longer classify as independent contractors under its rules. This puts freelancers in a dire situation, but it gets worse: Many translation agencies across the United States now refuse to work with California-based language professionals altogether on what appears to be a “better safe than sorry” basis.
While AB5 does apply to individual workers, it offers an exemption for established business entities. This exemption, spelled out in AB5 Section 2, Subsection (e), covers many typical translator-agency relationships.
This article attempts to clear up misunderstandings around AB5 and its application to California translators. Disclaimer: I am not a lawyer, and the following information represents my personal opinion based on my interpretation of the law as written.
What is AB5?
AB5 was designed to protect the rights of workers in the so-called “gig economy,” such as Uber, Lyft, and DoorDash drivers. It established three criteria, generally referred to as the “ABC-test,” to decide whether a worker can be classified as an independent contractor or must be granted employee status.
These criteria are:
- (A) The worker is free from the hiring company’s control and direction in connection with the performance of the work.
- (B) The worker performs work that is outside the usual course of the hiring entity’s business.
- (C) The worker normally performs work in an independent business or occupation of the same nature of the work he or she is performing for the hiring company.
Since many translators work for agencies, item B poses a problem. Both translators and translation agencies make money selling translations; the only difference being whether they perform the work themselves or outsource it. This means that AB5 does indeed jeopardize freelance translators who work as individuals.
But the ABC-test only applies to individual workers, not business entities. For California translators who operate as sole proprietors, LLCs, partnerships, or corporations, the B2B exemption should be used as the deciding standard.
Who falls under the B2B exemption of AB5?
Subdivision (e) of AB5 Section 2 offers an exemption from the ABC-test and the stipulations of AB5 in the case of business-to-business (B2B) contracts. This exemption applies if the contracting relationship is between two businesses that are “formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation” and meets a number of criteria explained below.
Still, as seen in the examples below, some agencies are refusing to work with California contractors altogether or are telling them they have to incorporate. In response, many language professionals in the state are now seeking S-Corp status in hopes of protecting their livelihood.
But nowhere does AB5 state that corporations are exempt over other forms of business, such as a sole proprietorship or an LLC. Subdivision (e) mentions sole proprietorships and LLCs in the same breath as corporations, making any agency claims that they can only work with California translators who incorporate unfounded – an interpretation shared by the Coalition of Practicing Translators and Interpreters of California (CoPTIC), an interest group formed to defend the independence of language professionals:
Even the bill’s author herself, Assemblywoman Lorena Gonzalez-Fletcher, emphasizes this fact. During a January 10 interview with KUSI News in San Diego, she pointed it out a total of ten times in the course of the 18-minute interview. “The law says if you’re truly a sole proprietor, if you’re truly your own business, nothing in AB5 – we said it when we were passing it on the floor, it says it in the bill – it spells out that you are fully exempt from this law if you’re a sole proprietor and have the ability to negotiate your own terms. It says it in the law! I’m not sure why people have skipped over that part, but they have.” She also stressed that the exemption doesn’t just apply to corporations, but that “you can be a sole proprietor, (…) you can be an LLC.”
Since then, Gonzalez has sent out several Tweets in an effort to clarify this frequently misinterpreted stipulation of the law, such as this one on January 18:
No matter what legal form they adopt, translation businesses have to meet a list of criteria in order to qualify for the B2B exemption. However, for many translators – whether they operate as solopreneurs or small companies – these requirements are par for the course.
Below are the conditions for the business-to-business exemption, along with explanations how translators can establish compliance.
- (A) The business service provider is free from the control and direction of the contracting business in connection with the performance of the work.
Translators can generally choose when, where, and how to work on assignments. As long as they deliver their translations in the agreed format by the agreed deadline, no one cares if they completed them in their home office, in a local coffee shop, or on the beach.
- (B) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.
Translators working for agencies typically aren’t in contact with the end clients who will ultimately use their translations. In some cases, they don’t even know who these clients are. They are hired by the translation agency for a specific job, and produce this job for the agency. If they don’t, it’s the agency that will have to answer to the end client. Moreover, many contracts between translators and agencies include non-compete clauses that specifically prevent translators from working directly with the agency’s end clients.
- (C) The contract with the business service provider is in writing.
Most legitimate translation agencies have their translation providers sign agreements at the beginning of their working relationship. In addition, many translators have their own agreements for agency partners to sign.
- (D) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.
In order to work as a sole proprietor in California, you need to file a Fictitious Business Name Statement with the recorder in your county, publish an announcement of your new business entity in a generally circulated publication, get an Employer Identification Number (EIN) from the IRS, and obtain any necessary business permits or licenses. Even if you work from home, most California cities require a business license. Whether a translator runs a sole proprietorship, an LLC, or a corporation: As long as they’ve dotted their Is and crossed their Ts, they will be compliant in this regard.
- (E) The business service provider maintains a business location that is separate from the business or work location of the contracting business.
Most translators work from home and conduct nearly all business over the Internet. Some work in co-working offices, others prefer to work on the go – but very few freelance translators ever see the inside of a translation agency’s office.
- (F) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.
This is different from item B of the ABC-test, where compliance is dependent on the “course of the hiring entity’s business.” Here, it’s the type of work that matters, not the line of business. If the “work performed” under the contract is a translation, it is perfectly OK to contract with a translation business that offers translation as part of its regular portfolio of services.
- (G) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.
Putting all your eggs in one basket is never a good idea, which is why many freelance translators work for more than one agency. Many translator-agency contracts specifically state that the translator is allowed to work with other entities.
- (H) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.
Any translator who has a business website, a LinkedIn or Facebook business page, or an entry in a professional directory such as that of the ATA or Proz.com, meets this requirement.
- (I) The business service provider provides its own tools, vehicles, and equipment to perform the services.
Translation agencies generally don’t provide tools and equipment to translators, let alone cars (we wish!). Translators make significant investments to meet the requirements of translation agencies in terms of software, and purchasing the necessary tools of the trade, such as laptops or dictionaries, is every translator’s own responsibility.
- (J) The business service provider can negotiate its own rates.
Translators set their own rates. In most cases, translation agencies ask translators what their rates per word or per hour are without any guidance as to what they pay other translators. While translation agencies generally have limits as to how much they will pay, it is up to the translator to negotiate and ultimately accept or decline the offered conditions.
- (K) Consistent with the nature of the work, the business service provider can set its own hours and location of work.
As mentioned earlier, translation agencies don’t care when, where or how you work, as long as you deliver your translations on time and as agreed.
- (L) The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required.
There is no licensing requirement for translators.
While not every California translator, even as a business entity, will meet all of these requirements, many (including Integrated MarCom Translations) do and should be given the chance to prove it. Agencies with blanket policies against hiring California freelancers, and agencies pressuring their California vendors to incorporate, should take a closer look at AB5 and its stipulations, particularly Section 2, Subdivision (e).
As for individual workers and those who don’t meet the requirements under the B2B exemption, there is hope. The American Translators Association has issued a position statement calling for an exemption of professional translators and interpreters from this law, much like it is included for other professions. CoPTIC is also advocating for such an exemption, and freelancers across California are meeting with their representatives to discuss the ramifications of AB5. Hopefully, our collective voices will be heard.