On May 2, 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 1st.
Ultimately, the legal classification of workers and the consideration of the liabilities and obligations associated with that classification was more important than ever.
Additionally, on May 5, Georgia enacted a new, employer-friendly law, SB 331 (Act 823), that prevents cities and counties from enforcing local regulations governing hours of work, scheduling of work hours, 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 governments 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.
unemployedment advantages
Law 809 amends the Georgia Code provisions regarding unemployment benefits. In particular, the definition of employment is amended to include “services rendered by a person for remuneration”.
Under Georgian Common Law, the distinction between employees and contractors boils down to one key element: control. In general, an employer-employee relationship exists on a contractual basis, or more commonly on an arbitrary basis, when the employer claims the right to determine when and how the work is performed.
However, the passage of Law 809 expands the category of workers who can claim unemployment benefits. 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:
- Ability to work for other companies or hold other employment at the same time.
- Freedom to accept or decline work assignments without consequences.
- No minimum working hours or, in the case of sales, no minimum number of orders.
- Discretion to set his or her own work schedule.
- 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.
- No territorial or geographic restrictions.
- No obligation to perform, behave or act in a manner related to the provision of services for remuneration.
Given this broadened definition of employment, more workers are classified as workers 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 in determining the employment status of music industry professionals and individuals providing services to network businesses, such as: B. Driving app services, among other transportation and delivery services.
New commitmentns, 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 Disability Discrimination Law of Georgia and many other Georgian labor laws do not define what constitutes a worker entitled to compensation under the law. Therefore, courts are likely to use the expanded definition of an employee under Code 809 to determine liability under the Georgia Equal Employment for Persons with Disabilities Code and other employment statutes.
The broadened definition of worker is likely to affect not only the Georgian Unemployment Law, but also the Georgian laws regulating discrimination, wage and working time 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.
The 809 law is likely to create a variety of liabilities and obligations for Georgia employers beyond unemployment benefits.
Anticipating labor laws in relation 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.
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. Act 823 places many Georgia employers in the same untenable position.
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.
Joseph A. Ciucci, Adam Keating and Christopher D. Kanne are attorneys with Duane Morris in Atlanta. Nicolette J. Zulli is an attorney with Duane Morris in Houston. ©2022. All rights reserved. Reprinted with permission.
