Since Georgia Governor Brian Kemp signed Act 809 (formerly House Bill 389) into law altering the definition of employees regarding unemployment benefits, it is now more important than ever for businesses to understand the changes and new worker classifications. Effective July 1, 2022 in Georgia, only workers classified as “employees” may be eligible for unemployment benefits. This new law aims to expand the pool of workers who may be able to claim these benefits by adding a new definition of “employment” to Georgia Code Section 34-8-35. Under this new definition, a majority of workers are likely to be deemed employees for Georgia unemployment insurance purposes unless the Georgia Department of Labor (GA DOL) determines otherwise.
Act 809 states, “services performed by an individual for wages shall be deemed to be employment subject to this chapter unless and until it is shown that:
(A) Such individual has been, and will continue to be, free from control or direction over the performance of such services, both under the individual’s contract of service and in fact, as demonstrated by whether the individual:
- Is not prohibited from working for other companies or holding other employment contemporaneously;
- Is free to accept or reject work assignments without consequence;
- Is not prescribed minimum hours to work or, in the case of sales, does not have a minimum number of orders to be obtained;
- Has the discretion to set his or her own work schedule;
- Receives only minimal instructions and no direct oversight or supervision regarding the services to be performed, such as the location where the services are to be performed and any requested deadlines;
- When applicable, has no territorial or geographic restrictions; and
- Is not required to perform, behave, or act or, alternatively, is compelled to perform, behave, or act in a manner related to the performance of services for wages, which is determined by the Commissioner to demonstrate employment; or
(B) Such individual is customarily engaged in an independently established trade, occupation, profession, or business.”
Act 809 also provides separate factor tests that the GA DOL uses to determine the classification status of music industry professionals, rideshare network service drivers, and certain delivery drivers.
There is no requirement to receive a determination from the GA DOL prior to classifying a worker; however, in case of an investigation by the GA DOL, an employer must be able to show that the factors of the independent contractor test have been satisfied. Georgia employers must also ensure proper classification under the U.S. Department of Labor and Internal Revenue Service criteria for independent contractor classification.
Employers who fail to classify their workers properly are subject to fines, penalties, and/or offenses from the Georgia Department of Labor. Businesses with less than 100 employees will be charged a penalty (paid to the Georgia DOL) of up to $2,500 for each misclassified worker. Businesses with more than 100 employees are subject to a penalty of up to $7,500 for each misclassified worker. Georgia’s Commissioner of Labor determines the amount of these penalties by evaluating the number of incorrectly classified individuals and the frequency of misclassification. These penalties do not include the cost of the investigation or interest for delinquent payments that were assessed.
It is now more crucial than ever for Georgia businesses to be mindful of worker classification and lawfully classify workers as either an employee or an independent contractor. If you have any questions about this new law, reach out to a Stanton Law attorney today. It’s much better to be prepared ahead of time before any misclassification occurs.