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AB5 Bill in California: What to do now?
Thread poster: Yoonkyung Walters

Yoonkyung Walters
United States
Local time: 19:53
Member (2018)
English to Korean
Dec 18, 2019

Hello everyone,

Today I have a question regarding a recent law update in California, which is also known as AB5. AB5 is designed to help mostly Uber and Lyft drivers by forcing companies to hire them as full-time employees instead of independent contractors. Problem is, this also includes translators like us, and while the intention behind this law is good, it is causing companies to end contracts with translators living in California since there's no real need for them to insist on
... See more
Hello everyone,

Today I have a question regarding a recent law update in California, which is also known as AB5. AB5 is designed to help mostly Uber and Lyft drivers by forcing companies to hire them as full-time employees instead of independent contractors. Problem is, this also includes translators like us, and while the intention behind this law is good, it is causing companies to end contracts with translators living in California since there's no real need for them to insist on using translators in California when they can use whomever they want anywhere in the world.

I got an email from one of my agencies today asking me to register myself as C corp or S corp by the end of this year (as if it's something that can be taken care of in two weeks.) Otherwise, they can't work with me anymore beginning 1/1/2020. Has anyone else got an email from agencies like this? If so, what did they suggest you do?

I appreciate any advice or information you share in advance. Also, happy holidays!

[Edited at 2019-12-18 20:53 GMT]
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Robert Rietvelt  Identity Verified
Local time: 04:53
Member (2006)
Spanish to Dutch
+ ...
Same here, but different Dec 18, 2019

Yoonkyung Walters wrote:

Hello everyone,

Today I have a question regarding a recent law update in California, which is also known as AB5. AB5 is designed to help mostly Uber and Lyft drivers by forcing companies to hire them as full-time employees instead of independent contractors. Problem is, this also includes translators like us, and while the intention behind this law is good, it is causing companies to end contracts with translators living in California since there's no real need for them to insist on using translators in California when they can use whomever they want anywhere in the world.

I got an email from one of my agencies today asking me to register myself as C corp or S corp by the end of this year (as if it's something that can be taken care of in two weeks.) Otherwise, they can't work with me anymore beginning 1/1/2020. Has anyone else got an email from agencies like this? If so, what did they suggest you do?

I appreciate any advice or information you share in advance. Also, happy holidays!

[Edited at 2019-12-18 20:53 GMT]


I have no suggestions, but something like this is also happening in Holland, only (till sofar) they make a distinction between former contract workers who are forced to become freelancers to keep their job and "real" freelancers, like us, to put it simply.

Maybe one suggestion. Why don't you contact agencies outside of California, or the US for that matter, just like they are doing. Maybe you won't believe me, but there is a whole world to discover outside your sunny state.

[Edited at 2019-12-18 21:13 GMT]


Jorge Payan
 

Jean Lachaud  Identity Verified
United States
Local time: 22:53
English to French
+ ...
Hot topic Dec 18, 2019

That issue has been inflaming translation blogs, web sites and discussion lists for several months.

Simply search for "california ab5 translators".


Yoonkyung Walters wrote:

Hello everyone,

Today I have a question regarding a recent law update in California, which is also known as AB5.


 

rehtsep  Identity Verified
United States
Local time: 19:53
German to English
+ ...
Terrifying Dec 19, 2019

Yoonkyung, I am in California too and I got the same letter - from two major translation companies. They probably make up about 75% of my translation income. One company is based in NY, the other in Connecticut. It means that if I don't incorporate, I am essentially jobless. I am terrified. I looked into incorporating today, I don't have a choice. I don't know what it will mean for my taxes or anything else going forward, but I can't think about that. I have to preserve my relationship with thes... See more
Yoonkyung, I am in California too and I got the same letter - from two major translation companies. They probably make up about 75% of my translation income. One company is based in NY, the other in Connecticut. It means that if I don't incorporate, I am essentially jobless. I am terrified. I looked into incorporating today, I don't have a choice. I don't know what it will mean for my taxes or anything else going forward, but I can't think about that. I have to preserve my relationship with these companies or I will be on the streets. It makes me very sad. I have worked for these companies for several years as a freelancer, with good relationships with project managers and consistent work. But now they have essentially given me two weeks' notice.Collapse


Diane G
Andrea Capuselli
 

Samuel Murray  Identity Verified
Netherlands
Local time: 04:53
Member (2006)
English to Afrikaans
+ ...
SITE LOCALIZER
Will they consider single-member LLCs? Dec 19, 2019

Yoonkyung Walters wrote:
AB5 is designed to help mostly Uber and Lyft drivers by forcing companies to hire them as full-time employees instead of independent contractors.


Yes, if I understand correctly, previously the burden of proof regarding whether a worker is an independent contractor lay with the worker, but in California the burden is now on the client (except for certain professions, which may in future include translators), and so many clients will want to protect themselves against possible legal action by simply no longer hiring independent contractors.

I got an email from one of my agencies today asking me to register myself as C corp or S corp by the end of this year...


A bit of googling leads me to ask: wouldn't it be simpler to register as an LLC? If an LLC is an option for you, then I guess it's better to start the process sooner rather than later because I suspect many, many independent contractors in California are going to try to switch in the coming weeks, and the register offices will be inundated with applications. I hear you can jump the queue a bit by registering in person.

rehtsep wrote:
I am in California too and I got the same letter ... One company is based in NY, the other in Connecticut.


IANAL nor do I understand US law, hence my question: does this mean that agencies or clients from all over the US are subject to California law in this regard? In other words, you can't simply re-focus your business on working for out-of-state clients?



[Edited at 2019-12-19 07:19 GMT]


 

Lincoln Hui  Identity Verified
Hong Kong
Local time: 10:53
Member
Chinese to English
+ ...
Sole proprietor? Dec 19, 2019

California recognizes sole proprietorship. Can't you obtain a business license and operate as a sole proprietor? (Yes, sole proprietors can hire employees) Can your clients even tell that you are not an S Corp or C Corp? (it being Christmas season is another matter)

 

RobinB  Identity Verified
United States
Local time: 21:53
German to English
CoPTIC website Dec 19, 2019

You will find out more about this truly horrific legislation on the CoPTIC website: https://coalitionptic.org/

The ATA is also publicly backing CoPTIC, which has retained an experienced lobbyist to push the message to the Californian lawmakers that freelance translators and interpreters must be exempted from AB5. The further risk is that other states will take over AB5 - apparently New York and Ne
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You will find out more about this truly horrific legislation on the CoPTIC website: https://coalitionptic.org/

The ATA is also publicly backing CoPTIC, which has retained an experienced lobbyist to push the message to the Californian lawmakers that freelance translators and interpreters must be exempted from AB5. The further risk is that other states will take over AB5 - apparently New York and New Jersey are already considering doing this.

Unfortunately it appears that a single-person LLC will not function as a shield from AB5, which is presumably why your agencies are asking you to register as a C Corp or an S Corp. While it is unlikely that any translator or interpreter will register as a C Corp, an S Corp may be an attractive option if you generate an annual income above a certain level (speak to your CPA) - I am registered as an S Corp, which makes me an employee of my own company, at least for tax and social security purposes (but I've done this for the distinct tax advantages, not because of AB5 or the ABC test).

For the time being, the best you can hope is that CoPTIC will be successful and obtain a carve-out for freelance translators and interpreters.
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RobinB  Identity Verified
United States
Local time: 21:53
German to English
California law Dec 19, 2019

Samuel Murray wrote: IANAL nor do I understand US law, hence my question: does this mean that agencies or clients from all over the US are subject to California law in this regard? In other words, you can't simply re-focus your business on working for out-of-state clients?


That is correct. The Californian authorities appear to be taking the view that freelance translators and interpreters who are resident in California are employees of their agency clients, wherever those agency clients are based, so those out-of-state agency clients will have to pay payroll taxes and grant employee rights to their Californian freelancers.

As you can imagine, this is probably the easiest way to kill off a profession, and hence an entire industry. But in their blinkered desire to punish the likes of Uber and Lyft, the Californian lawmakers don't appear to care. I suppose Californian translators can at least work for agencies outside the United States, because Californian laws are not enforceable in such cases.


 

John Fossey  Identity Verified
Canada
Local time: 22:53
Member (2008)
French to English
+ ...
(very) Long arm of the law? Dec 19, 2019

RobinB wrote:

The Californian authorities appear to be taking the view that freelance translators and interpreters who are resident in California are employees of their agency clients, wherever those agency clients are based, so those out-of-state agency clients will have to pay payroll taxes and grant employee rights to their Californian freelancers.


Do you mean to say that if I, living in Canada, subcontract a job to a California-based freelance translator, California expects me to pay payroll taxes and grant employee rights to him or her?

Isn't going to happen...


 

RobinB  Identity Verified
United States
Local time: 21:53
German to English
No Dec 19, 2019

John Fossey wrote: Do you mean to say that if I, living in Canada, subcontract a job to a California-based freelance translator, California expects me to pay payroll taxes and grant employee rights to him or her?

Isn't going to happen...


That's not what I said. I wrote "I suppose Californian translators can at least work for agencies outside the United States, because Californian laws are not enforceable in such cases."

But agencies in other states, that's another matter entirely.


 

Rudolf Vedo  Identity Verified
United States
Local time: 21:53
Member (2008)
Croatian to English
+ ...
Why not register yourself as a corporation? Dec 19, 2019

Yoonkyung Walters wrote:

I got an email from one of my agencies today asking me to register myself as C corp or S corp by the end of this year (as if it's something that can be taken care of in two weeks.)


You can very easily register an C corp or S corp in two weeks. Probably even as little as an afternoon, in fact. There other benefits to doing so anyway.


 

Jean Chao  Identity Verified
United States
Local time: 19:53
English to Chinese
+ ...
Other benefits for registering as a LLC? Dec 22, 2019

LEXpert wrote:

Yoonkyung Walters wrote:

I got an email from one of my agencies today asking me to register myself as C corp or S corp by the end of this year (as if it's something that can be taken care of in two weeks.)


You can very easily register an C corp or S corp in two weeks. Probably even as little as an afternoon, in fact. There other benefits to doing so anyway.



I'm based in California. I hadn't been paying attention to this ridiculous "umbrella" law for all freelance workers until yesterday one of my clients asked me to form a LLC by the end of this year so I can keep working with them.

I guess I have no choice but to do it now. Otherwise, freelance translators in California might be shunned by most agencies in the USA if I can't prove that I won't need their social securities and other employee benefits.

LEXpert mentioned there might be other benefits registering myself as a company. May I know what these benefits are? Thanks.


 

Dan Lucas  Identity Verified
United Kingdom
Local time: 03:53
Member (2014)
Japanese to English
Regulation Dec 23, 2019

Yoonkyung Walters wrote:
and while the intention behind this law is good...

I have watched this thread with weary interest and no little sympathy. I'm going to bookmark it so that I can show it to the next contributor to the forums who starts a thread about the need for regulation to "protect" freelancers.

When I think of regulation, I don't think of a wand that magically fixes some problem or other, but of this kind of thing. Well-intentioned but heavy-handed government intervention resulting in unintended consequences that cause working people more problems than the original regulation solves (if it solves anything). Since all this regulation needs to be administered, it costs regional tax payers as well. And because no region is an island entire of itself in this era of the internet, clients can and will look elsewhere if regulations make hiring translators in a certain region onerous.

FWIW, if I were in California I'd immediately set up a corporation, and not wait to be asked. Maybe legislators will make an exception for freelancer translators, maybe not, but given that they've come this far with this ill-conceived rule I wouldn't bet on them doing the right thing.

Dan


Thomas T. Frost
Robert Carter
 

RobinB  Identity Verified
United States
Local time: 21:53
German to English
LLC not a guaranteed shield against AB5 Dec 23, 2019

Jean,

It needs to be emphasized that simply forming an LLC is no guarantee in itself that you will shield yourself from the monstrous intrusion of AB5. An S Corp election for the LLC should do the trick (because it makes you technically the employee of your own LLC, and you will have to pay social security taxes on your "salary"), but please remember a) that an LLC is only worthwhile if you're generating sufficient annual business EBT (revenue less expenses), typically >$75k, and b)
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Jean,

It needs to be emphasized that simply forming an LLC is no guarantee in itself that you will shield yourself from the monstrous intrusion of AB5. An S Corp election for the LLC should do the trick (because it makes you technically the employee of your own LLC, and you will have to pay social security taxes on your "salary"), but please remember a) that an LLC is only worthwhile if you're generating sufficient annual business EBT (revenue less expenses), typically >$75k, and b) once you make the S Corp election, you can't reverse it.

Also, in states like California, there are recurring expenses for an LLC in addition to the initial relatively high formation fee. That's why you should wait until next year to form a Californian LLC, otherwise you'll pay the full fee for 2019 even if you register the LLC on December 31st. And of course you'll then have to pay the license fee for 2020.

Robin
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Ildiko Santana  Identity Verified
United States
Local time: 19:53
Member (2002)
Hungarian to English
+ ...

MODERATOR
Sole proprietor? - permitted by AB5 but NOT accepted by client Dec 23, 2019

Lincoln Hui wrote:

California recognizes sole proprietorship. Can't you obtain a business license and operate as a sole proprietor?


Here is the e-mail I received this morning from my 2nd biggest client of 10 years:

"Thank you for uploading your documents. I see you check Individual/sole proprietor on the W9 and completed with your SSN (and on the Independent Contractor Agreement). For our purposes as a CA resident, if you are a C Corp, an S Corp, or an LLC with tax classification as a C or S Corp as noted on your W9 (green box below), you would be compliant. Anything else (red), we won’t be able to issue your POs for 2020 work."

This decision has little to do with the law, which specifically permits sole proprietorship. After 20 years of doing business in California as an independent contractor, I have no choice but leave either the profession or the state of California. Forming a Corporation is over my budget, especially now that my income is to drop dramatically after January 1, 2020.

Good luck and happy holidays to everyone!


 
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AB5 Bill in California: What to do now?

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