On May 2, 2022, Georgia Governor Brian Kemp signed into law HB 389 (Act 809) changing the scope of the employer-employee relationship. This new law is likely to reclassify many independent contractors as employees and trigger a host of liabilities and obligations for Georgia employers. This measure will come into effect on July 1, 2022.

Ultimately, the legal classification of workers and the consideration of the liabilities and obligations associated with that classification was more important than ever. If you work with independent contractors, consult legal counsel.

Additionally, on May 5, 2022, Georgia enacted a new, employer-friendly statute, SB 331 (Act 823), that prevents cities and counties from enforcing local regulations governing hours of work, scheduling, and work performance. This restriction took effect immediately and commemorates the state’s attempts in 2020 to prevent local governments from enforcing local COVID-19 restrictions that conflicted with the state’s more relaxed COVID-19 standards. The resulting turf wars between state and local government left many employers questioning which rules—state or local—they had to follow. The same could happen with Georgia’s new attempt to pre-empt local codes of conduct in the workplace.

Law 809 expands the definition of an “employee” for unemployment benefits

Act 809 amends the provisions of the Georgia Code relating to unemployment benefits. In particular, the definition of ’employment’ is amended to include ‘services rendered by an individual for remuneration’.

Under Georgian customary law (ie law enacted by the judiciary rather than the legislature), the distinction between employees and contractors boils down to one key element: control. In general, an employer-employee relationship is by contract (employment contract) or, more commonly, on an arbitrary basis, when the employer claims the right to determine the time and manner in which work is performed.

However, the passage of Law 809 expands the category of workers who can claim unemployment benefits. Now the nature and scope of the work of the individual – and not pure control – ultimately determine the existence of the employer-employee relationship. Under the new law, seven factors are taken into account in this determination:

  1. ability to work for other companies or hold other employment at the same time;
  2. Freedom to accept or decline work assignments without consequences;
  3. No minimum hours of work or, in the case of sales, no minimum number of orders;
  4. discretion to set his or her own work schedule;
  5. Receiving only minimal instructions and no direct supervision or oversight of the services to be provided, such as B. the place where the services are to be performed and any requested deadlines;
  6. No territorial or geographic restrictions; and
  7. No obligation to perform, conduct or act, or alternatively be compelled to perform, conduct or act in a manner related to the provision of services for consideration.

Given this broadened definition of “employment,” more employees are classified as employees for unemployment benefit purposes. Law 809 classifies workers as contractors only if they are autonomous and unrestricted in the provision of services.

Act 809 also establishes specific criteria to be considered when determining the employment status of music industry professionals and individuals providing services to network businesses such as ride-hailing app services alongside other transportation and delivery services.

What Act 809 Means for Employers: New Obligations, Risks and Liabilities

Georgia employers must understand, critically evaluate, and document the classification of workers as employees or independent contractors, or face costly consequences for unlawful classification. Law 809 provides a graduated scale of civil penalties for misclassifying an employee, depending on the size of the employer. For example, employers with more than 100 employees face a fine of up to $7,500 per employee.

More importantly, the Georgia Equal Employment for Persons with Disabilities Code and many other Georgian labor codes do not define what an “employee” entitled to compensation under the law is. Therefore, courts are likely to use the expanded definition of “employee” under Code 809 to determine liability under the Georgia Equal Employment for Persons with Disabilities Code and other employment statutes. This means that the expanded definition of “employee” is likely to affect not only the Georgian Unemployment Law, but also the Georgian laws on discrimination, wage and hour requirements and records. Misclassification can also affect tax laws related to the employer’s failure to withhold and remit wages and Social Security, federal unemployment, and Medicare contributions to the government. In other words, the 809 law is likely to create a variety of liabilities and obligations for Georgia employers beyond unemployment benefits. Employers who are unsure about whether they meet the requirements of the new law and how it classifies workers as employees or contractors should consult experienced legal counsel.

Act 823 attempts to prevent labor laws related to private employers

Law 823, the Protecting Georgia Businesses and Workers Act, amends Georgia’s minimum wage law by prohibiting local governments from making or enforcing local regulations on working hours, work schedules, and work performance. This employer-friendly law aims to prevent local governments from mandating certain workplace parameters that apply to private employers.

What Act 823 Means for Employers: Potential conflicts between laws and regulations governing workplace conduct

Georgia employers should consider legal advice before ignoring – or spending time and money on – local regulations that Act 823 seeks to prevent. Act 823 isn’t the first time the state has tried to forestall more restrictive local laws. During the COVID-19 pandemic, the governor of Georgia issued executive orders to prevent local governments from enforcing COVID-19 restrictions that conflicted with the state’s looser standards. In response, many cities, including Atlanta, claimed that businesses and residents must continue to follow local COVID-19 restrictions or face fines and closures. Employers were faced with the difficult choice between complying with costly local restrictions or relying on the state to try to forestall those restrictions.

Law 823 puts many Georgia employers in the same untenable position. If your business is subject to local regulations about working hours, scheduling, or work performance, contact an attorney to determine the best way forward.

Additionally, Georgian companies that have a presence in other states should note that while Georgian law seeks to prevent local governments from regulating certain aspects of employment in the state, other states allow local governments to regulate these areas of private employment to regulate. These considerations are particularly relevant when drafting employment contracts and other contracts that contain a choice of law provision to settle disputes that may arise between employer and employee.

For more informations

If you have any questions about this warning, please contact Joseph A. Ciucci, Adam Keating, Christopher D. Kanne, Nicolette J. Zulli, one of the attorneys in our Employment, Benefits and Immigration practice group, or the firm’s attorney with whom you work regularly stay in contact.

Disclaimer: This warning has been prepared and published for informational purposes only and is not offered as legal advice and should not be construed as such. See the company’s full disclaimer for more information.