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Georgia Law Imposes Penalties for Improper Employee Classification

By August 16, 2022August 30th, 2022Employment Law, Employment News

Independent ContractorGeorgia’s new Act 809 (H.B. 389), effective July 1, 2022, seeks to tighten the distinction between employees and independent contractors. By expanding the definition of employee, more workers will be able to claim unemployment benefits.

Act 809 changes the definition of employment to include any services an individual performs for wages, which would apply to most workers. Act 809 classifies workers as contractors only if they are autonomous and unrestricted in the performance of services.

What constitutes a contractor?
Under the new law, an individual may be classified as a contractor if they have the following:

  • Ability to work for other companies or hold other employment at the same time
  • Freedom to accept or reject work assignments without consequence
  • Ability to set their work schedule
  • Absence of territorial or geographic restrictions

Independent contractors also are free from having to work a certain number of hours or conform to specific employer standards as they perform services.

Misclassification can be costly.
Act 809 creates civil penalties paid to the Georgia Department of Labor if a business incorrectly classifies its workers. Under the new law, a sliding scale of civil penalties, depending on the employer’s size, will apply if an employee is classified incorrectly. For example, employers with more than 100 employees face a fine of up to $7,500 per worker.

Misclassification could have other financial consequences if penalties are imposed for nonconformance to different laws, such as disability, discrimination, wage and hour requirements and recordkeeping.

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