Business Law Journal

Background

The company subject to this latest hearing, represented by Atkinson, Andelson, Loya, Ruud & Romo (“AALRR”), provides language interpretation and translation services to state and county governments, the healthcare industry, and various other agencies.  Independent contractors are utilized through a technology platform (similar to ridesharing platforms) that identifies a clients’ need for an interpreter and the skills of the contract interpreter looking for an assignment.  The Employment Development Department (“EDD”) audit was initiated by an unemployment claim from one of its interpreters, with the claimant successfully obtaining an EDD ruling that she was an employee, not an independent contractor.  A subsequent EDD audit resulted in an assessment of $619,700 against the company, and a reclassification of all of the linguists from independent contractors to employees.

Despite bearing the burden of proof as to the status of the workers, and despite the fact that the interpreters were essential to the ongoing viability of their business, AALRR and the company were successful in obtaining a critical ruling that the interpreters were not under the direction and control of the company and were appropriately treated as independent contractors.  Accordingly, the company was found not liable for all taxes, penalties, and interest which had been previously assessed — a complete victory!

Changing Standards for Interpreters and Translators

Such a result was possible because the controlling standard was that articulated in the Unemployment Insurance Code, i.e. the "multi-factor" or the "economic realities" test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations (1989) 48 Cal.3d 341.  In applying the economic realities test, the most significant factor to be considered is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed.  Additional factors that may be considered in the language interpreter’s industry include the following:

1. Policies, rules or procedures of conduct;
2. Supervision on the job;
3. Training;
4. Meetings;
5. Reports;
6. Agency or principal and language interpreter contract;
7. Termination;
8. Interpreter’s engagement in a distinct business;
9. Required skill of the language interpreter;
10. Duration of services;
11. Whether the agency or principal or the language interpreter supplies the instrumentalities, tools, and place of work;
12. Custom in industry and location;
13. Method of payment;
14. Belief of parties; and
15. Whether services are an integral part of regular business of agency or principal.

AALRR was able to successfully establish that many of the above-mentioned factors were in the company’s favor, especially so where interpreters were never supervised or controlled while performing their interpreting assignments, and could go months, or even years, between assignments.  For these and other reasons, the CUIAB found that the weight of the evidence established that the company’s linguists were independent contractors.

However, as keen observers of recent law may be aware, due to the California Supreme Court’s decision in Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, reh'g denied (June 20, 2018), which specifically applied the “ABC test” to the California Wage Orders, consideration of these factors may quickly become a thing of the past.  That is because the “ABC test” requires that each of the following three factors must be met to be considered an independent contractor:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact,

(B) that the worker performs work that is outside the usual course of the hiring entity's business, and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business.

Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, 964.

While this heavy-handed approach does not yet apply in EDD Audits, on May 29, 2019, Assembly Bill 5 (“AB5”) was passed in the California State Assembly and headed to the state Senate — moving Californians one step closer to a formal codification of the “ABC test” from the Dynamex decision. If passed, the “ABC test” would officially apply to the California Wage Orders, the Labor Code, and the Unemployment Insurance Code, and may drastically alter the classification of workers as employees or independent contractors in California.

Conclusion

Such a change in law would threaten the previously growing body of authority to which this recent victory added, and which provided much-needed clarity to business in the language interpretation industry.  As such, where AB5 may well shift the entire landscape for the language interpreter’s industry, the attorneys of Atkinson, Andelson, Loya, Ruud & Romo are closely following any developments in the law, and welcome any questions as to how this may affect your business model and liabilities.  If you have questions regarding the status of your workers, contact us for a thorough analysis of your options moving forward.