A David and Goliath story?von , veröffentlicht am 13.11.2019
Slator, an online news site for the language services industry, bills itself as “Language Industry Intelligence.” I don’t know what that means. So when Slator published an article entitled “California LSP Bankrupted By Lawsuits Over Social Security Contracts,” I got pulled in. On its face, that headline not only alludes to an adversarial relationship between industry and the state – as it were, between David, the California language service provider (LSP), and Goliath, the Social Security Administration (SSA) – it also adds a twist: it suggests that David is the loser in that relationship. In broad strokes, this is also what Slator’s article goes on to describe.
Carmazzi Global Solutions (CGS), the California LSP of the article’s title, went out of business as of 2:00 pm on 1 November 2019 (see here). According to Slator’s article, CGS’s plight was caused by major financial losses suffered in connection with litigation against the SSA. CGS was awarded a significant government contract by the SSA for so-called verbatim hearing recording (VHR) services, essentially court-reporting services. While the Slator article outlines allegations that CGS has a known history of late payment and nonpayment to its “subcontractors” and that it allegedly submitted false invoices to the SSA, Slator ends its article by stating, simply and almost disinterestedly, that the SSA took action against CGS both for failure to pay to its “subcontractors,” who rendered the VHR services, specific wages and for defrauding the United States of millions. Without further information as to how all this might hang together, which is not provided by Slator, one ends the article with the impression that – given the title, “California LSP Bankrupted by Lawsuits Over Social Security Contracts” – Slator might be suggesting that CGS would not have been bankrupted, if the United States, through the SSA, would just continue to allow itself to be defrauded of millions. In other words, David seems to have lost, because Goliath didn’t let him win.
A cute story, I guess. But it’s not useful; it’s not even very informative. One reason Slator picked up this story is that it touches upon a regrettable, because exploitative, practice within the language services industry. That practice consists of LSPs’ retaining subcontractors, usually freelancers, to render language services at below-market rates, only not to pay those subcontractors for services rendered or to pay them, but with substantial delays. The most charitable reading of this article is that Slator expects its readers to recognize this practice in this story; such a reading is bolstered by the article itself; for instance, Slator not only mentions CGS’s failure to pay minimum wages in a timely fashion, it also uses the term “subcontractor” to denote the very VHR professionals allegedly stiffed by CGS.
But there’s the rub. Slator would have been better advised not to call the VHR professionals “subcontractors,” if it had no intention of discussing the dispute concerning the status of the VHR professionals under the SSA contract, which required, among other things, compliance with the Service Contract Act (SCA) (see ¶ 5 of the complaint brought on behalf of the United States against CGS and two other co-defendants in the United States District Court in the Northern District of Iowa, Eastern Division (the Complaint)).
CGS called the VHR professionals who worked for it “independent contractors” or “freelancers” (as an aside, both are generally accepted synonyms of “subcontractor” in the language services industry), as evinced not only by CGS’s own admission in the form of “official responses” it posted to indeed.com, but also by the Complaint (see ¶ 7). The Complaint presents a different view: “In all respects, these individuals were ‘service employees’ under the SCA and not independent contractors or freelancers” (see ibid.). A “service employee” under the SCA is defined “as a non-exempt individual and includes an individual without regard to any contractual relationship alleged to exist between the individual and a government contractor” (¶ 26 of the Complaint; emphasis added by the author of this blog post).
Theoretically, one supposes, CGS could have called its VHR professionals whatever it wanted as long as it treated them as service employees at all statutorily relevant junctures in keeping with the SCA, which requires that government contractors such as CGS “pay prevailing wages and benefits for service employees” (¶ 5 of the Complaint). Practically, it looks a lot like CGS wanted to have its cake and eat it too. On the one hand, CGS stands accused of having represented to the SSA that it paid to its VHR professionals the wages and benefits required by the SCA; on the other, it stands accused of having paid – it seems almost invariably late – less than half of those wages and benefits (see, for instance, ¶ 40 in conjunction with ¶¶ 44 and 45 of the Complaint). And the difference? CGS stands accused of pocketing that (see ¶ 7 of the Complaint). This proverbially impossible situation proved no doubt both lucrative and tenable until it didn’t.
If these accusations are true, CGS’s scheme was an exploitative one doomed to fail from the outset – and not just because it recklessly disregarded a proverb. According to the Complaint, the SCA was designed to neutralize this very scheme: that is, a scheme involving the attempt by a prospective contractor – such as CGS was at the time it placed its bid with the government – to “low-ball” labor costs in the service contract arena. At ¶ 25 of the Complaint, we read:
Congress originally passed the SCA to ensure that workers performing Federal service contracts were adequately compensated. […] Congress was particularly concerned about prospective contractors low-balling labor costs in the bidding process to obtain public contracts, which not only distorted the competitive process but also led to the Federal government effectively subsidizing the payment of subminimum wages.
So the story is not some inverted tale of David and Goliath. Nor did some government giant slay an industry David; nor does it seem that CGS was bankrupted by lawsuits over social security contracts. The story appears to be that CGS looks like an LSP who wanted the federal government to subsidize “the payment of subminimum wages” – that CGS looks like an LSP, for which things were going well until around the time the Complaint was filed on 30 October 2017. A review of indeed.com and glassdoor.com, the only sites I could find with reviews of CGS, reveals that it was January 2018 when – that is, it took only some two months from the date the Complaint was filed before – VHR professionals really began both to voice their grievances about CGS’s late payments and to warn against accepting work from CGS.
Put somewhat differently: the story appears to be that CGS looks like an exploitative middleman who began to go under once the jig was up.