Worker’s Compensation and the Independent Contractor January 10, 2011
Posted by Jill (@bonnjill) in Business practices.trackback
I received an e-mail from a client the other day telling me I was required to fill out the attached Worker’s Compensation form or I would not be able to work with them in the future. My first reaction was “Heck no, I’m an independent contractor. We aren’t subject to Worker’s Compensation.” I immediately called my project manager to clarify, who then double-checked with the “Subcontracts Coordinator” who had sent the e-mail in the first place. Luckily I also twittered my indignation about my client not understanding the “Independent” in Independent Contractor.
An agency owner who is one of my followers graciously explained why the agency was doing this (and did a MUCH better job than the Subcontracts Coordinator, who just said I needed to fill it out “because she is a contractor… and resides in the U.S.” – talk about a non-answer…). The agency owner shall remain nameless, but according to her, “These are the kind of he-said she-said issues that need to be addressed at ATA. These are the things Independent Contractors don’t know but should understand.”
Her agency did not have a worker’s comp policy until this past summer because they refused to put their people through the paperwork. Many worker’s comp companies will not grant policies to LSPs unless they have their contractors complete the forms. The form is used by the worker’s comp company to then evaluate that you ARE for sure an Independent Contractor and determine for themselves if you are an Independent Contractor or an employee because if the LSP misclassifies you, and you get hurt, you can sue and win and the policy would have to cover you if the state reclassifies you as an employee.” There are some companies out there that don’t require them to do this, but they are very hard to find. It apparently took her agency 3 years to find a company that didn’t require this.
Herein lies the rub… apparently agencies even have to get the forms filled out by people they don’t use if they advertise them. According to her example, “Say we have a database of 1200 translators. If we only use 68 in a year, you still need 1200 forms because it’s on your website.” You need 100% compliance, because otherwise the insurance company thinks you are hiding something if you have fewer forms on your contractors than you claim. Her reasoning was “Some guy in China who makes $25/yr shouldn’t have to.” Her company kept looking for a new insurance company who wouldn’t make them jump through all those hoops. However, the state found out they didn’t have a worker’s comp policy and fined the company $75,000. Luckily, they were able to get the fine reduced, but in essence they were fined because they didn’t want to inconvenience their Independent Contractors.
As she graciously sums it up: “This whole independent contractor vs employee issue, misclassification, work comp, unemployment and all is a nightmare for LSPs. … The Association of Language Companies has a committee that only helps bail members out when they get sued or fined in situations like these. That’s why it’s über-important that independent contractors see themselves as such and hold up their end too. There’s one LSP I know that had to literally pay the state millions because an audit said they had misclassified employees as independent contractors since the 80s so they had to pay back everything. What made the difference? What made these independent contractors employees instead? According to the company owner, name tags with the LSP name on them.”
So the moral of this story is that even though we are Independent Contractors we should fill out the form and make our clients’ lives easier. If you don’t want to submit form, you can show proof of your own worker’s comp policy, but let’s be honest – there probably isn’t a single freelance translator out there who has their own worker’s comp policy…
Musings from an overworked translator 
Once again an insightful post on something I had never considered. Thank you for the useful information!
Egad. So you’re telling me they need a worker’s comp form filled out by their freelancers in Bulgaria so that the insurance company will believe that those people are not employees? Quam tauri merda. If this is true, I’ll take it as yet another reason not to do business with that Third World country I was born in. I’m already sick enough of explaining to PMs that they need a W-8 from me, not a W-9. All my Dutch and Swiss customers want, or the Australians for that matter, is my bank account data so they can pay the invoices. That works better.
Kevin, based on the Subcontracts Coordinator’s response that I needed to fill it out because I reside in the U.S. I am inclined to believe you wouldn’t have to fill one out… but then again some companies truly can be myopic and draconian about “the Rules.”
Jill, given how often I have dealt with that W-9 vs. W-8 issue I am not counting on any enlightened actions from a big agency PM. Also, if the PM says 1200 translators mentioned on the website means the insurance sharks want to see 1200 forms, that implies to me that the poor souls outside the US may be drawn into the mess. I think it’s rare these days that an agency wouldn’t work with resources across borders.
This looks like something out of Dilbert.
“Also, if the PM says 1200 translators mentioned on the website means the insurance sharks want to see 1200 forms, that implies to me that the poor souls outside the US may be drawn into the mess”
Well, in Jill’s example, only 68 of those actually provide services to the company. The other are just in the database. I’d like to see the kind of conversations they are going to have with translators who are in their database but that have never received a project from them:
“You have to fill this form for us, otherwise we have to pay a big fine”
“You never sent me any work, why should I bother?”
Kevin, if you think that the US is bad, try to deal with the Italian red-tape mills – there is a reason I no longer live there, despite the food.
On the other hand I have worked for some months in a company en Europe that was not hiring anyone. Just subcontracting people and having them inhouse for years saving lots of money in insurance, holydays, sickness absence, etc. Job situation was (is still) so bad that they where kind of happy to have a job. There was never a propper inspection there.