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New Georgia Law: Franchisor Is Not an Employer or Co-Employer of Franchisee Employees

The Georgia legislature recently passed an amendment to the state’s Labor and Industrial Relations Code, providing that a franchisee and its employees are not considered employees of the franchisor for any purpose. Named the “Protecting Georgia Small Business Act” (PGSBA), the amendment goes into effect on January 1, 2017 and does not apply to Georgia’s Workers’ Compensation Code.


Georgia Small Business Act


According to a recent OnGeorgia article, the PGSBA was passed in response to an action taken by the National Labor Relations Board (NLRB) in August of 2015, which refined the standard used for determining joint-employer status. The NLRB reasoned that the changing environment of today’s workplace and economy called for increasing a company’s control over contractors and subcontractors. The definition of a joint-employer was broadened by the NLRB to include any company that (1) could exercise control over another company’s terms and conditions of employment – whether or not it actually does so; or (2) exercises this control through a third party.


The PGSBA specifically addresses and prohibits franchisors from interfering in a franchisee’s day-to-day management, such as hiring and firing. Because federal law trumps state law, the PGSBA would only apply to matters concerning state law – such as workers’ compensation insurance.


Georgia is not alone in pursuing legislative efforts regarding the NLRB’s definition change. Similar bills have been introduced across the nation including the states of: California, Massachusetts, Colorado, Oklahoma, Pennsylvania, Virginia and Vermont. Beyond these states, legislators in North Carolina, Wyoming, Arizona are evaluating similar legislative action.


Independent Contract Worker versus Employee


It is important to understand your work classification, particularly if you are seeking Georgia workers’ compensation benefits. This is because independent contractors – unlike employees – are not covered for on-the-job injuries by workers’ compensation insurance.


If a majority of one’s income comes from one company, the relationship with the company appears permanent, and the worker has no bargaining power regarding his or her terms of employment, he or she is likely an employee. This would be the case even if the company categorizes the individual as an  “independent contract worker.”


An independent contract worker is someone who has the right to control and direct the most important aspects of his or her job. A contract worker generally receives a 1099 at the end of the year, pays his or her own self-employment tax as well as income tax. Conversely, an individual is an employee if he or she receives a W2 at the end of the year and the paying entity has the right to direct and control the worker’s activity regarding finances, behavior and the relationship between the parties.


Savannah Workers’ Compensation Help


Workers’ compensation law is complicated. Moreover, the claims process is a tedious and lengthy. If you or someone you know has suffered a work-related injury, contact an experienced Savannah workers’ compensation attorney today to discuss your case. The knowledgeable Savannah Workers’ Compensation attorneys at the Bader Scott Injury Lawyers can advise you of your legal rights, including if you are eligible for workers’ compensation benefits. Call today to schedule your initial case evaluation.

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Seth Bader
(678) 562-5595