Georgia Workers’ Comp Law: HB 87 Changes for 2026

Georgia’s legal framework for classifying workers has seen significant updates, directly impacting how businesses manage their obligations, particularly concerning workers’ comp. The recent passage of House Bill 87 (HB 87) introduces critical changes to the independent contractor definition, creating both opportunities and potential pitfalls for employers across the state. Are you confident your current classifications comply with this new standard?

The New Landscape: House Bill 87 and O.C.G.A. Section 34-8-38.1

The legislative session of 2025 brought forth a pivotal change for Georgia businesses and the individuals they engage. House Bill 87, signed into law and effective January 1, 2026, fundamentally alters the definition of an independent contractor within the state. This isn’t just another tweak; it’s a comprehensive overhaul designed to provide clarity and, frankly, to curb what some saw as exploitative misclassification practices. Specifically, HB 87 creates a new, exclusive test for determining independent contractor status for the purposes of unemployment insurance and, crucially, workers’ comp coverage. This new test is enshrined in O.C.G.A. Section 34-8-38.1, which now serves as the singular standard. Prior to this bill, Georgia, like many states, grappled with a multi-factor common law test, often leading to inconsistent rulings and a good deal of uncertainty for businesses trying to do the right thing. I’ve seen firsthand the headaches this caused. We had a client in Alpharetta, a small tech startup, who thought they had properly classified their developers, only to face a Department of Labor audit that reclassified several, leading to thousands in back unemployment taxes. It was a mess, all because the old test was so subjective. This new statute aims to provide a more definitive framework, reducing ambiguity for both businesses and the Georgia Department of Labor (GDOL) and the State Board of Workers’ Compensation (SBWC).

Who is Affected by This Change?

Every Georgia business that engages individuals as independent contractors needs to pay close attention. This includes, but is not limited to, construction companies, tech firms, delivery services, consulting agencies, and even small businesses relying on freelance help. If you have anyone performing services for your company who isn’t on your payroll as a W-2 employee, this law applies directly to you. The impact is dual-edged: it offers a clearer path to legitimate independent contractor classification, but it also raises the stakes for those who might be cutting corners. The most significant impact will be felt by businesses that have historically relied on a loose interpretation of independent contractor status. If your current contracts or working relationships don’t clearly delineate independence, you’re now at a much higher risk of misclassification penalties. Remember, the burden of proof often falls on the business to demonstrate a legitimate independent contractor relationship. This isn’t a minor administrative hurdle; it’s a fundamental aspect of your operational compliance.

The Ten-Factor Test: Decoding O.C.G.A. Section 34-8-38.1

The heart of HB 87 lies in its ten-factor test, which replaces previous, more nebulous guidelines. For an individual to be considered an independent contractor under O.C.G.A. Section 34-8-38.1, all ten conditions must be met. This “all or nothing” approach is a significant shift, leaving little room for partial compliance. I strongly advise businesses to print this list and go through it point by point with their legal counsel. Here are the ten factors, as outlined in the new statute:

1. The individual must maintain a separate bona fide business enterprise, including, but not limited to, maintaining a separate business checking account, federal employer identification number, and business license, if applicable.
2. The individual must have the ability to work for other companies or hold other contracts during the same period the individual is working for the contracting entity.
3. The individual must furnish his or her own tools, equipment, and materials, or pay for the use of such items.
4. The individual must be paid by the job or on a commission basis, rather than by the hour or week.
5. The individual must be responsible for his or her own overhead and operating expenses.
6. The individual must have the opportunity for profit or loss as a result of the services performed.
7. The individual must have the ability to set his or her own hours and schedule for performing the work.
8. The individual must have the ability to determine the methods and means of performing the work.
9. The individual must perform the work without direct supervision or control by the contracting entity.
10. The individual must enter into a written contract with the contracting entity specifying the terms of the independent contractor relationship.

It’s critical to understand that these factors are not weighted equally in some subjective analysis; they are all mandatory. If even one factor is missing, the individual will likely be considered an employee. This is a much stricter standard than many businesses are accustomed to. For example, factor number ten, requiring a written contract, might seem obvious, but you’d be surprised how many businesses operate on handshake agreements or overly simplistic statements of work. That won’t cut it anymore.

Concrete Steps Businesses Must Take NOW

Proactive measures are absolutely essential. Waiting for an audit or a claim is a recipe for disaster. I can’t stress this enough: review your current practices immediately.

Review Existing Independent Contractor Agreements

Every single contract with an independent contractor needs to be pulled out and scrutinized against the new ten-factor test. This isn’t a task for an intern; it requires legal expertise. Look for clauses that might inadvertently imply an employer-employee relationship. Does your contract explicitly state the contractor can work for others? Does it confirm they provide their own equipment? Many older templates will fall short. If you’re using generic online templates, chances are they are now inadequate for Georgia law.

Update Your Internal Policies and Practices

It’s not enough to just have a compliant contract. Your actual working relationship must mirror the terms of that contract. If your contract says the independent contractor sets their own hours, but you’re dictating their start and end times, you have a problem. This is where many businesses trip up. Training for managers and supervisors is critical here. They need to understand the boundaries. They can’t treat independent contractors like employees, even if it feels more convenient. My firm recently advised a logistics company near Hartsfield-Jackson Airport to completely revamp their dispatcher training because their dispatchers were inadvertently exercising too much control over their independent delivery drivers’ routes and schedules, which would have been a direct violation of factors seven and eight.

Assess Potential Misclassification Risks

Conduct an internal audit to identify any individuals who might now be misclassified under the new law. This might involve a difficult conversation and potentially converting some contractors to employees. While this can come with increased payroll taxes and the need for workers’ comp insurance, it’s far less costly than facing penalties for willful misclassification. The Georgia Department of Labor has shown increased vigilance in this area, and with a clearer statutory definition, their enforcement actions will likely become more direct and frequent. According to a recent report from the Georgia Department of Labor, misclassification investigations increased by 15% in 2025, and with the new law, that trend is expected to accelerate.

Ensure Workers’ Compensation Compliance

For any individuals now deemed employees under O.C.G.A. Section 34-8-38.1, you are legally obligated to provide workers’ comp insurance coverage. The State Board of Workers’ Compensation (sbwc.georgia.gov) is very clear on this. Failure to carry workers’ compensation insurance for statutory employees can result in severe penalties, including fines up to $5,000 per violation and even criminal charges in some instances. Don’t risk it. If you’re unsure about your obligations, consult with an attorney specializing in Georgia workers’ compensation law.

The “Why”: Benefits of Compliance (and Risks of Non-Compliance)

Compliance with HB 87 isn’t merely about avoiding penalties; it’s about establishing clear, defensible business practices. When you properly classify your workers, you protect your business from significant financial and legal exposure. This includes avoiding back taxes for unemployment insurance, wage and hour claims, and, critically, workers’ comp claims from individuals who should have been covered. Consider this hypothetical, yet entirely plausible, scenario: A landscaping company in Athens, Georgia, engages a “contractor” to operate heavy machinery. This contractor uses the company’s equipment, works fixed hours, and is directly supervised. Under the old system, there might have been some grey area. Under O.C.G.A. Section 34-8-38.1, this individual is almost certainly an employee. If that individual suffers a serious injury on the job and the company hasn’t provided workers’ compensation coverage, the company faces not only the direct costs of the injury but also substantial fines from the SBWC, potential lawsuits, and reputational damage. The financial hit can be crippling for a small to medium-sized business. This is why getting it right from the start is paramount. The State Board of Workers’ Compensation provides detailed information on employer obligations for workers’ compensation at their official website.

A Word of Caution and an Editorial Aside

While HB 87 aims for clarity, no law is entirely without its nuances. Businesses should be wary of simply changing job titles without altering the underlying relationship. Calling someone an “independent consultant” when they function as a full-time employee is a transparent attempt to circumvent the law, and it will likely fail under scrutiny. The courts and regulatory bodies will look at the substance of the relationship, not just the label you put on it. My professional opinion? This bill, while stringent, is a net positive for legitimate businesses. It levels the playing field against those who gain an unfair competitive advantage by misclassifying workers and shirking their legal responsibilities. It forces clarity, and clarity, in business, usually leads to better decisions. The new Georgia Independent Contractor Bill, HB 87, fundamentally reshapes the landscape for how businesses engage and classify their workforce, particularly regarding workers’ comp obligations. Businesses must conduct a thorough review of their independent contractor relationships and agreements against the new ten-factor test outlined in O.C.G.A. Section 34-8-38.1 to ensure compliance and avoid severe penalties.