California Independent Contractor Rules

NCTA director Essam Elmahgoop has received the following letter from Richard Paegelow of Inline Translation Services in Glendale. Thanks, Richard. – ed.

”I am writing as a member of NCTA about an issue that was quite hot two years ago: the EDD’s infamous rules on who is and who is not an independent contractor in our industry. I worked with Nassey [Pourfathi] of Atlas Interpreters and other corporate members of NCTA on this issue and helped to finance and develop a model contract (which was totally misunderstood by many members of NCTA, as you probably know). This issue really never went away…

”During the past two years I have become involved in the San Fernando Chamber of Commerce as a board member and co-chair of the government affairs committee. Much to my surprise and pleasure, I have found that the independent contractor status determination issue is one that involves small business all over the state. In fact, there is now a bill in the State Assembly (AB 2737) that would help solve some of the problems of our industry. Two very useful web sites are www.calchamber.com and the State of California web site (see links on the calchamber web page), where you can get copies of the bill and status updates.

If there is still interest in this issue in the NCTA, I would hope that you, your committee, and/or the board could write their local representatives in the State Assembly. In the meantime, I have written my local reps and hope to have the government affairs committee of the San Fernando Chamber take a position and do the same. Attached is a copy of my letter which you are free to use as a model letter or a draft letter for interested parties.” – Richard S. Paegelow

April 15, 2000
Mr. Jack Scott
State Assemblyman, 44th District
State Capitol
Sacramento, CA 95814

Dear Assemblyman Scott:

I am writing to strongly encourage your support of legislation such as Assembly Bill 2737 introduced by Bob Margett and Jim Cunneen. This bill will help resolve a major problem facing many small businesses which encounter different and conflicting rules on determining who is an independent contractor. While this legislation does not change the classification of any worker, it will force the EDD to follow more closely the well-known IRS twenty-factor test for independent contractor status determination.

From personal experience, I know that the EDD promulgates rules which vary significantly from the IRS guidelines. In our industry – language translation and interpretation –  the EDD has ruled that if a translation company pays its contractors before we get paid by our clients, that is evidence of an employee/employer relationship rather than one of independent business contracting for services. This EDD ruling even defies common sense! We have always paid our contracted translators very quickly and independently of when we get paid by our clients. Quite reasonably, our contracted translators have refused to sign contracts which follow the EDD’s guideline on this issue. As a consequence, we now send written translations outside the State of California or abroad whenever possible, even though there are many highly qualified translators in California working as independent businesses.

You support of AB 2737, and any other legislation which forces state agencies to conform to the IRS guidelines for independent contractor status determination, will be most welcome by small business throughout the state.

Thank you for your consideration.
Yours truly,
Richard S. Paegelow
Managing Director
Inline Translation Services