Recent Independent Contractor Classification Rule Changes and What They Mean for Translators and Interpreters

Insights from the Advocacy and Business Practices Education Committees of the American Translators Association on the DOL’s final rule on worker classification under the FLSA.

Employee or independent contractor?

In recent years, many professions that include a high number of independent contractors, the language services industry included, have been rocked by the passage of oftentimes problematic legislation aimed at imposing rules to determine whether workers are truly independent contractors or whether they should be classified as employees. Worker classification is a key area of ATA’s advocacy, as well as an important consideration for running a language services business. Our goal is to keep our members abreast of any developments as we learn of them.

We would like to alert you to a recent development at the federal level and a new, final rule that takes effect on March 11, 2024. All ATA members who are independent contractors should learn more and take any needed steps to help ensure you are classified the way that makes sense for you and how you work.

New independent contractor test under FLSA

The United States Fair Labor Standards Act (FLSA) is a federal law that provides certain protections for employees that independent contractors are not entitled to, such as minimum wage and overtime pay. The Department of Labor recently announced a final rule that outlines a six-factor test for determining whether a worker is an employee or an independent contractor under the FLSA. The six factors are:

1. Opportunity for profit or loss depending on managerial skill
   For example: Can you prove you have negotiated the amount of compensation and deadline(s) for your services? Do you spend money on equipment to run your business or on marketing or other efforts to grow your business?
2. Investments by the worker and the potential employer
   For example: Does the contracting entity invest in your business, and if so, to what extent (and are such investments required for you to accept work from the contracting entity)? Do you make meaningful investments in your business (new equipment, continuing education, etc.)?
3. Degree of permanence of the work relationship
   For example: Is it clear that you are working under a contract with a defined duration and that you may freely work for other clients? Does the contracting entity demand exclusivity?
4. Nature and degree of control
   For example: Does the contracting entity keep you from working for other people, require that you work certain hours, or supervise your work? Do they control how you manage your time or your rates?
5. Extent to which the work performed is an integral part of the potential employer’s business
   For example: Is the work you perform “critical, necessary, or central” to the contracting entity’s business? For T&I professionals, this can be tricky, but remember that this factor is not necessarily determinative if other factors are explicitly met.
6. Skill and initiative
   For example: Are you using specialized skills to “contribute to business-like initiative?” Do you invest in continuing education to grow your skills, or do you rely on the contracting entity to provide all training?

Under this final rule, no single factor is determinative, and other factors may also be applied. Any analysis by an auditor would be based on the “totality-of-the-circumstances economic reality approach,” which means that the worker or contracting entity could present additional information to help determine whether the worker is an independent contractor. If a worker depends on a single entity for all of their income (as they would if they had an employer), they will likely not qualify as an independent contractor under this rule.

What about the ABC test? Isn’t that the one that we had to worry about?

The ABC test is a state-level test that has been enacted or is being considered in several states, and yes, it has caused significant problems for many freelance language services professionals. California’s passage of AB5 in 2020, which codified the ABC test in state law, triggered wide-reaching activism on behalf of interpreters and translators, many of whom were erroneously classified as employees under the ABC test rather than independent contractors. The misclassification occurred because the B prong of the ABC test states that an independent contractor must perform work that is outside the main focus of the contracting entity’s business. Freelance translators and interpreters working for language services providers (LSPs) could not pass this prong of the test, and many suffered severe business losses as a result. To protect these freelance linguists, CoPTIC, ATA, and other partners advocated for—and helped pass—legislation exempting some linguists from the ABC test in California.

This new final rule under the FLSA specifically rejects the ABC test at the federal level. According to the Department of Labor, as it states on its Frequently Asked Questions page, “Under the final rule, the Department will instead rely on the long-standing multifactor ‘economic reality’ test used by courts to determine whether a worker is an employee or independent contractor. This test relies on the totality of the circumstances where no one factor is determinative.”

The six factors listed in the final rule are meant to give a more comprehensive definition of an individual’s business than the ABC test. However, the Department of Labor also points out that this final rule does not invalidate or otherwise affect other laws:

The final rule only revises the Department’s interpretation under the FLSA. It has no effect on other laws—federal, state, or local—that use different standards for employee classification. For example, the Internal Revenue Code and the National Labor Relations Act have different statutory language and judicial precedent governing the distinction between employees and independent contractors, and those laws are interpreted and enforced by different federal agencies. Similarly, this rule has no effect on those state wage-and-hour laws which use an “ABC” test, such as California or New Jersey. The FLSA does not preempt any other laws that protect workers, so businesses must comply with all federal, state, and local laws that apply and ensure that they are meeting whichever standard provides workers with the greatest protection. See 29 U.S.C. 218.

In other words, although this final rule under the FLSA provides a different framework for determining whether a given worker is an employee or an independent contractor, it does not automatically exempt linguists from ABC tests or other legislation passed, either at the federal level or in the states where the linguist lives or works. The more prepared you are to prove your status as either an employee or contractor, the easier it will be for you to protect yourself from any problems arising from misclassification.

I’m a translator or interpreter. What should I do?

Please take some time to read the Department of Labor’s announcement of the final rule and frequently asked questions. You can also find an interpretation of the rule here. Note that this post and the posts it links to should not be construed as legal advice, and you should always consult a qualified professional if you have questions about your specific situation.

We also encourage you to read Understanding Worker Classification: The ABC Test, Misclassification, and Tips for Professionalizing Your Language Services Business, a post by ATA member Jason Knapp on the basics of professionalizing your T&I business and steps you can take to meet the criteria provided for in the test and prove your independent contractor status.

Lastly, discuss this new rule with your colleagues and clients as appropriate, especially those who might not know about it yet. Your efforts to inform and educate them will benefit us all.

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About the Author

Ben Karl, MBA, CT is an ATA-certified translator, specializing in corporate, marketing, and financial translation from French and Mandarin into English. He serves as chair of the ATA Advocacy Committee and is a member of the ATA Membership Committee and the Chronicle Editorial Board. He chairs the International Federation of Translators’ (FIT) Translatio Standing Committee and edits À Propos, the ATA French Language Division’s blog. He holds a BA in translation and East Asian Studies from McGill University, a certificate of advanced Chinese proficiency from Beijing Language and Culture University, and an MBA from the University of Nevada, Reno.

Danielle Maxson has been translating since 2009 and specializes in medical translation with a focus on patient records. She is an ATA-certified Portuguese to English and Spanish to English translator and the chair of ATA’s Business Practices Education Committee. Before focusing on translation, she worked as a Spanish teacher and a medical interpreter. For more information, visit http://dmaxsontranslates.com.