On May 2, 2022, Georgia Governor Brian Kemp signed into law HB 389 (Act 809), altering the scope of the employer-employee relationship. This new law is likely to reclassify many independent contractors as employees and trigger a host of assets and obligations for Georgia employers. This measure will become effective on July 1, 2022.
Ultimately, lawfully classifying workers and taking account of the assets and obligations that attach to those classifications has never been more important. If you work with independent contractors, seek legal counsel.
Additionally, on May 5, 2022, Georgia enacted a new, employer-friendly law, SB 331 (Act 823), that restricts cities and counties from enforcing local rules governing work hours, scheduling and work output. This restriction became immediately effective and is reminiscent of the state’s 2020 attempts to stop local from enforcing local COVID-19 restrictions that conflicted with the state’s more relaxed COVID-19 standards. The resulting turf war between the state and local many left many employers wondering which rules—state or local—they were required to follow. The same may happen with Georgia’s new attempt to preempt local rules on workplace conduct.
Act 809 Expands the Definition of an “Employee” for Unemployment Benefits
Act 809 amends the provisions of the Georgia Code relating to unemployment benefits. Specifically, it changes the definition of “employment” to include “services performed by an individual for wages.”
Under Georgia common law (ie, law made by the judiciary, rather than the legislature), the distinction between employees and contractors boils down to one key element: control. Generally, an employer-employee relationship exists by contract (an employment agreement) or, more frequently, on an at-will basis, when the employer assumes the right to control the time and manner of executing the work.
However, the passage of Act 809 expands the category of workers who may be able to claim unemployment benefits. Now, the nature and scope of the individual’s work—rather than purely control—ultimately determines the existence of the employer-employee relationship. Under the new law, seven factors are considered in making this determination:
- Ability to work for other companies or hold other employment at the same time;
- Freedom to accept or reject work assignments without consequence;
- No minimum hours to work, or in the case of sales, no minimum number of orders to be obtained;
- Discretion to set his or her own work schedule;
- Receipt of only minimal instructions and no direct oversight or supervision regarding services to be performed, such as the location where the services are to be performed and any requested deadlines;
- No territorial or geographic restrictions; and
- No requirement to perform, behave or act or, alternatively, being compelled to perform, behave or act in a manner related to the performance of services for wages.
In light of this expanded definition of “employment,” more workers will be classified as employees for the purposes of unemployment benefits. Act 809 classifies workers as contractors only if they are autonomous and unrestricted in the performance of services.
Act 809 also sets forth specific criteria to be considered in determining the employment status of music industry professionals and individuals who perform services for network companies such as ride-hailing app services, among 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. Act 809 provides a sliding scale of civil penalties, depending on the employer’s size, if an employee is classified incorrectly. For example, employers with more than 100 employees face a penalty of up to $7,500 per worker.
More importantly, Georgia’s disability discrimination law (the Georgia Equal Employment for Persons with Disabilities Code) and many other Georgia-specific employment laws do not define what constitutes an “employee” entitled to damages under the law. Therefore, courts are likely to look to the expanded definition of “employee” under Act 809 to determine liability under the Georgia Equal Employment for Persons with Disabilities Code and other employment laws. This means that the expanded definition of “employee” is likely to affect not only Georgia’s unemployment law, but also Georgia’s laws governing discrimination, wage-and-hour requirements and recordkeeping. Misclassification may also implicate tax laws relative the employer’s failure to withhold and remit wages and Social Security, federal unemployment and Medicare contributions to the government. In other words, Act 809 is likely to trigger a host of assets and obligations for Georgia employers beyond just unemployment benefits. Employers uncertain about meeting the new law’s requirements and how it classifies workers as employees or contractors should consult with experienced legal counsel.
Act 823 Attempts to Preempt Workplace Laws Related to Private Employers
Act 823, the “Protectinges and Workers Act,” amends Georgia’ Georgia’s minimum wage law by prohibiting local from enacting or enforcing local regulations governing work hours, scheduling and work output. This employer-friendly law is designed to constrain local workplace parameters applicable from dictating certain workplace parameters to private employers.
What Act 823 Means for Employers: Potential Conflict of Laws and Regulations Governing Workplace Conduct
Georgia employers should consider legal guidance before ignoring—or spending time and money following—the local rules that Act 823 attempts to preempt. Act 823 is not the first time the state has tried to preempt more restrictive local laws. During the COVID-19 pandemic, Georgia’s governor issued executive orders in an effort to stop local from enforcing COVID-19 restrictions that conflicted with the state’s more relaxed standards. In reaction, many cities, including Atlanta, maintained that businesses and residents were still required to follow local COVID-19 restrictions or else face fines and shutdowns. Employers were left with the difficult decision between compliance with costly local restrictions or reliance on the state’s attempt to preempt those restrictions.
Act 823 forces many Georgia employers into the same untenable position. If your business is subject to local regulations governing work hours, scheduling or work output, consult with an attorney to plot the best path forward.
Additionally, Georgia businesses that have a presence in other states should take heed, while Georgia law attempts to prevent that local from regulating aspects of employment in the state, other states allow local to regulate these areas of private employment. These considerations are particularly relevant to consider when drafting employment agreements and other contracts that include a choice of law provision to govern disputes that may arise between the employer and employee.
For More Information
If you have any questions about this alertplease contact Joseph A. Ciucci, Adam Keating, Christopher D. Kanne, Nicolette J. Zulli, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.