August 31, 2016
A new Arizona law, the “Declaration of Independent Business Status” law, effective August 6, 2016, permits Arizona employing entities and independent contractors to establish a rebuttable presumption that an independent contractor relationship exists if certain criteria are met. A.R.S. § 23-1601-02.
The law provides a form of Declaration of Independent Business Status (“DIBS”) that must be signed by the independent contractor, dated, and declare the following:
This declaration of independent business status is made by (contractor) in relation to services performed by the contractor for or in connection with (contracting party). The contractor states and declares the following:
1. The contractor acknowledges that the contractor operates the contractor’s own independent business and is providing services for or in connection with the contracting party as an independent contractor.
2. The contractor acknowledges that the contractor is not an employee of the contracting party and the services rendered for or in connection with the contracting party do not establish any right to unemployment benefits or any other right arising from an employment relationship.
3. The contractor is responsible for all tax liability associated with payments received from or through the contracting party and the contracting party will not withhold any taxes from payments to the contractor.
4. The contractor is responsible for obtaining and maintaining any required registration, licenses or other authorization necessary for the services rendered by the contractor.
5. The contractor acknowledges at least six of the following:
(a) That the contractor is not insured under the contracting party’s health insurance coverage or workers’ compensation insurance coverage.
(b) That the contracting party does not restrict the contractor’s ability to perform services for or through other parties and the contractor is authorized to accept work from and perform work for other businesses and individuals besides the contracting party.
(c) That the contractor has the right to accept or decline requests for services by or through the contracting party.
(d) That the contracting party expects that the contractor provides services for other parties.
(e) That the contractor is not economically dependent on the services performed for or in connection with the contracting party.
(f) That the contracting party does not dictate the performance, methods or process the contractor uses to perform services.
(g) That the contracting party has the right to impose quality standards or a deadline for completion of services performed, or both, but the contractor is authorized to determine the days worked and the time periods of work.
(h) That the contractor will be paid by or through the contracting party based on the work the contractor is contracted to perform and that the contracting party is not providing the contractor with a regular salary or any minimum, regular payment.
(i) That the contractor is responsible for providing and maintaining all tools and equipment required to perform the services performed.
(j) That the contractor is responsible for all expenses incurred by the contractor in performing the services.
6. The contractor acknowledges that the terms set forth in this declaration apply to the contractor, the contractor’s employees and the contractor’s independent contractors.
A.R.S. § 23-1601(B).
Compliance with the law and execution of a DIBS is not mandatory in order to establish the existence of an independent contractor relationship. “The failure of a party to execute a declaration in compliance with this section does not create any presumptions and is not admissible to deny the existence of an independent contractor relationship.” A.R.S. § 23-1601(A).
The rebuttable presumption is not available to an employing unit that is licensed or is required to be licensed pursuant to title 32, chapter 10 unless the employing unit is contracting with an independent contractor to perform services that do not require a license pursuant to title 32, chapter 10 for or in connection with the employing unit. A.R.S. § 23-1601(C). The DIBS is also not a substitute for the written agreement referred to in A.R.S. § 23-902(D) that may be used to establish a rebuttable presumption of independent contractor status for purposes of workers compensation benefits. A.R.S. § 23-1601(E).
A.R.S. § 23-1602 provides, “[e]xcept for the enforcement of chapter 2, article 10 of this title, any supervision or control exercised by an employing unit to comply with any statute, rule or code adopted by the federal government, this state or a political subdivision of this state or any requirement of licensing, professional or ethical standards may not be considered for the purposes of determining the independent contractor or employment status of any relationship or individual for the purposes of this title. This section does not otherwise affect any investigatory or enforcement authority related to the determination of the independent contractor or employment status of any relationship as provided by this title or federal law.”
It is important to note that these changes and the benefit of the DIBS rebuttable presumption only apply to the determination of independent contractor status under Arizona law, not federal law.
Sherry Janssen Downer is the owner of the Law Office of Sherry J. Downer PLLC, an employment and labor law firm. Ms. Downer has been recognized as one of the Best Lawyers in America for Employment Law-Management since 2014, is rated AV-Preeminent, the highest Martindale-Hubbell peer rating available, and has been recognized as a Southwest Super Lawyers “Rising Star” in Employment Litigation: Defense since 2013.