Elizabeth Wasserman, a writer for American Express’ Inside Edge publication, sat down with Language Line Services’ attorney Steve Weinberg to discuss the difference between independent contractors and employees. Below is an excerpt of what Weinberg had to say. To access the full article, click here.
Language Line Services, of Monterey, California, provides interpretation and translation services in 170 languages to emergency services operators, online retailers, banks and other businesses across the country. One corporate decision the $300 million company made, however, involves the difference between two common English business terms – “employee” and “independent contractor.”
More than 97 percent of the company’s nearly 5,000 interpreters – people who’ve mastered languages from Afrikaans to Yiddish – are employees eligible for health care and other benefits. The company also pays its share of federal and state employment taxes and withholds taxes from employee paychecks.
Less than 3 percent of Language Line’s interpreters are independent contractors who get called in for special project work on rare languages such as Woloff, Visayan or Fukienese.
Not all translation companies follow suit. In fact, Language Line attorney Steven Marc Weinberg says many of the company’s competitors classify all of their interpreters as independent contractors. As contractors, interpreters handle their own taxes and aren’t eligible for employee benefits. Weinberg argues that translation companies using such a set up are able to unfairly undercut prices charged by firms like Language Line. “Some businesses that classify workers as independent contractors end up increasing their bottom line unfairly,” says Weinberg. “It’s tough enough in this economy without so many folks being denied the support they’re rightly owed.”
More state and federal lawmakers are on Language Line’s side as they crack down on employee misclassification, a dodge they argue cheats workers – and U.S. taxpayers – out of billions of dollars each year.
With budgets still tight despite the improving economy, lawmakers are working harder to get that money. In 2010, the Congressional Joint Committee on Taxation estimated that the federal government could recover $6.9 billion in taxes by 2020 by closing federal loopholes that allow employers to misclassify employees as contractors. Bills have been introduced in Congress seeking stiffer penalties on employers who skirt the rules. The White House’s 2011 budget includes $25 million for 100 additional enforcement personnel to sniff out cheats.
In the past three years, 18 states also have passed laws cracking down on employee misclassification, including Illinois, which instituted civil penalties of $1,500 for each violation, increasing to $2,500 for repeat violations.