Labor and Employment Law - W. Melvin Haas, Iii, William M. Clifton, Iii, and W. Jonathan Martin, Ii

• Jurisdiction: Georgia,United States
• Publication year: 2006
• Citation: Vol. 58 No. 1

Labor and Employment Lawby W. Melvin Haas, III^* William M. Clifton, III^** and W. Jonathan Martin, II^***

I. Introduction

This Article surveys recent developments in state statutory and common law that affect labor and employment relations of Georgia employers. Accordingly, it surveys published decisions from the Georgia Court of Appeals and Georgia Supreme Court from June 1, 2005 to May 31, 2006. This Article also highlights specific revisions to the Official Code of Georgia Annotated.

II. Recent Legislation

A. Employment Security Law

Without regard to the General Assembly's changes to the "Workers' Compensation" section¹ of the Georgia Labor and Industrial Relations Code ("Labor Code"),² the General Assembly passed one significant amendment to the employment security section of the Georgia Labor Code during the survey period. The General Assembly limited the definition of employment for purposes of employment security law by amending Official Code of Georgia Annotated ("O.C.G.A.") section 34-835.³ In doing so, the General Assembly added an additional paragraph to the statute that excludes from the definition of "employment" certain types of "direct sellers."⁴ Specifically, the new paragraph excludes from the definition of "employment":

(18) Services performed by a direct seller, provided that:

(A) Such individual:

(i) Is engaged in the trade or business of selling or soliciting the sale of consumer products, including services or other intangibles, to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis for resale by the buyer or any other person in the home or otherwise than in a permanent retail establishment; or

(ii) Is engaged in the trade or business of selling or soliciting the sale of consumer products, including services or other intangibles, in the home or otherwise than in a permanent retail establishment;

(B) Substantially all the remuneration, whether or not paid in cash, for the performance of the services described in subparagraph (A) of this paragraph is directly related to sales or other output, including the performance of services, rather than to the number of hours worked; and

(C) The services performed by the individual are performed pursuant to a written contract between such individual and the person for whom the services are performed and such contract provides that the

individual will not be treated as an employee for federal and state tax purposes.⁵

The United States Internal Revenue Service has recognized a distinction between such direct sellers and "common retailers" for some time, addressing the issue in IRS Publication 911 and providing that "direct sellers are self-employed."⁶ The recent amendment brings Georgia's labor code into accord with the United States Internal Revenue Code, as it applies to direct sellers.⁷

While the amendment has not been controversial to date, it does raise a series of questions as to its necessity and clarity. Regarding the necessity of the amendment, it seems intuitive that direct sellers are in business for themselves, and not employees of their respective corporate suppliers. As to clarity, the amendment advances, without apparent explanation, a significantly lower standard of scrutiny for individuals to qualify as direct sellers when compared to the immediately preceding paragraph, which deals with individuals performing services for common carriers.⁸ Although substantially similar to the definition of direct seller, in order to qualify for exemption from the term employment under O.C.G.A. section 34-8-35(n)(17), individuals performing certain services for common carriers must, inter alia, have "a written contract with the common carrier" that "does not prohibit such individual from the pickup, transportation, or delivery of property for more than one common carrier or any other person or entity," and the individual must know that "the work is not covered by the unemployment compensation laws of Georgia."⁹ The new amendment, however, does not require direct sellers to pass any relatively stringent level of scrutiny.¹⁰ Finally, the recent amendment, while seemingly intended to define direct seller, may inspire unintended confusion as to who is a direct seller because the requirements for qualification under the statute may apply to occupations traditionally held to be included under the term "employment."¹¹ For example, an agent for an insurance broker, who would have previously been covered as an "employee," might now be excluded from the unemployment insurance safeguards if he or she works from home.¹²

B. Immigration Law

The most significant employment legislation passed by the Georgia General Assembly during the survey period was the Georgia Security and Immigration Compliance Act ("the Act"), commonly known by its Senate Bill acronym S.B. 529.¹³ The Act has been characterized as controversial and far-reaching, with provisions amending seven titles to the O.C.G.A. and creating several short titles.¹⁴ The Act seeks to ensure greater control over, and sanctions against, employers who hire persons not authorized to work in the United States.¹⁵ Three particular provisions directly impact employers, namely: (1) the imposition of criminal sanctions for trafficking a person for labor servitude;¹⁶ (2) the requirement that entities who contract with the State of Georgia or its political subdivisions register and participate in the federal work authorization program;¹⁷ and (3) income tax and tax withholding implications associated with the employment of persons not authorized to work in the United States.¹⁸ Opponents of the Act have threatened to challenge its legality with possible preemption and equal protection litigation.¹⁹

1. Criminal Sanctions

The Act adds a new criminal code section to the O.C.G.A. that provides criminal penalties for any person or corporation that "knowingly subjects or maintains another in labor servitude or knowingly recruits, entices, harbors, transports, provides, or obtains by any means another person for the purpose of labor servitude."²⁰ The activities that trigger the criminal provisions of the Act are broadly defined. For example, "labor servitude" is defined as "work or service of economic or financial value which is performed or provided by another person and is induced or obtained by coercion or deception."²¹ "Coercion" and "deception" are also broadly defined under the Act.²² "Coercion" includes any act resulting in bodily harm, threats of bodily harm, restraint, exposing or threatening to expose a person to criminal or immigration proceedings, or confiscating documents.²³ "Deception" includes conduct that is generally considered deceptive, such as creating or confirming another's false impressions or promising benefits not intended to be delivered.²⁴

The possible penalties for violating the criminal provision are significant. Convicted offenders will be classified as felons.²⁵ The statutory sentencing range varies depending upon the age of the victim.²⁶ Where the victim is over the age of eighteen, the sentence can range from a minimum of one year to a maximum of twenty years.²⁷ For victims under the age of eighteen, the punishment is a minimum of ten years to a maximum of twenty years.²⁸ The Act also specifically allows for the prosecution of a corporate entity when an agent of the corporation, acting within the scope of employment, performs the illegal conduct and that conduct is "authorized, requested, commanded, performed, or within the scope of . . . employment . . . or constitute[s] a pattern of illegal activity that an agent of the company knew or should have known was occurring."²⁹

2. Federal Work Authorization Program Requirement

The Act amends Title 13 of the O.C.G.A., adding two code sections related to contracts with the State of Georgia or its political subdivi-sions.³⁰ Together, these two code sections specifically prohibit these public entities from entering into contracts in connection with the "physical performance of services" within Georgia unless the contractor or subcontractor is registered and participates in the "federal work authorization program" to verify information pertaining to all new employees.³¹

The term "contractor" is not defined in the Act. However, the Act states that the term "'[s]ubcontractor' includes a subcontractor, contract employee, staffing agency, or any contractor regardless of its tier."³² Of particular note is the specific inclusion of "contract employees," which seems to indicate that an individual independent contractor would have to register and participate in the federal work authorization program.³³ Also, the inclusion of staffing agencies within the definition of "subcontractor" requires any of these entities supplying workers to public entities on a temporary basis to register and participate in the federal work authorization program as well.³⁴

The Act's requirement to register and participate in the "[f]ederal work authorization program" is not as clear cut as it may seem.³⁵ The Act defines "[f]ederal work authorization program" as "any of the electronic verification of work authorization programs operated by the United States Department of Homeland Security or any equivalent federal work authorization program operated by the United States Department of Homeland Security to verify information of newly hired employees . . . ."³⁶ Given that the Act has just recently been signed into law, and thus there are no rules or regulations, this provision will likely require participation in the federal employment verification pilot program currently operated by the Department of Homeland Security ("DHS") entitled "Basic Pilot."³⁷ Currently, employers may use the Basic Pilot program on a voluntary and free basis.³⁸ The Basic Pilot program started out in five states and has now been expanded to allow participation of employers throughout the United States.³⁹ However, there has been concern regarding whether DHS will be able to...