Georgia Garnishments, Florida Minimum Wage and Misclassification of Employees as Independent Contractors
Since we have all been overloaded with immigration issues, I will be looking at 3 separate issues in this post. First, the Georgia Supreme Court adopted an opinion issued by the Georgia Bar Standing Committee on the Unlicensed Practice of Law (UPL) finding that responding to a garnishment by a corporation is a legal proceeding, and corporations must be represented by counsel in doing so. Employers in Georgia have 30 days to serve and file an answer to a garnishment, and must respond every 30 days during the life of a continuing garnishment. If a response is not timely filed, the employer may be found in default and may be liable for the entire debt of the employee. In Georgia, as in Alabama, a corporation cannot represent itself in a judicial proceeding. Georgia has an exception for cases involving claims of less than $15,000, which are filed in Magistrate Court, where any full time officer or employee of a corporation may represent the corporation.
Practice pointer. Using an attorney to respond to garnishments in Georgia will result in additional costs to corporations. However, not using an attorney may result in civil and/or criminal charges for the unauthorized practice of law, and may result in a default being entered against the corporation for the entire amount of the employee's debt.
Effective January 1, 2012, the minimum wage in Florida will increase from $7.31 per hour to $7.67 per hour. This increase is the result of 2004 constitutional amendment that requires a new wage calculation every year on September 30, based on the Consumer Price Index.
Practice pointer. Effective January 1, it will cost more to pay employees in Florida, and I expect that there will be a roll-up, although slight, for workers who are making more than minimum wage as new employees are hired.
The IRS recently announced that is is offering a new "Voluntary Classification Settlement Program" (VCSP) allowing employers who agree to reclassify their improperly classified "independent contractors" as "employees" in exchange for paying significantly reduce penalties. Aimed at small employers, but open to all, the VCSP allows employers to treat their misclassified independent contractors as employees going forward and the IRS will assess employment taxes, at a reduced rate, only for the tax year before the agreement was entered into, with no penalties, interest or audits. There are some hidden pitfalls that employers must be aware of. First, the IRS has entered into a Memorandum of Understanding with the Department of Labor concerning referrals and sharing of information in worker classification cases. The DOL, or the employee, may come in seeking back benefits and wage and hour benefits (either minimum wage and/or overtime) against the employer. This is after the employer admits to the IRS that it has misclassified it's employees as independent contractors. The Office of Federal Contract Compliance Programs and the Occupational Safety and Health Administration will also be receiving and sharing this information. There may also be potential ERISA violations, unemployment compensation issues, workers' compensation insurance issues and other hidden landmines for employers.
Practice pointer. As I have written before, it is important for workers to be properly classified, either as employees or independent contractors. Whether or not an employer decides to take part in the VCSP program, workers need to be properly classified. The IRS's VCSP sounds good, but there are dangers involved in participating in it. Before doing so, it would be wise to consult with legal counsel and/or an accountant.