5 Keys to New AZ IC Law

By John Alan Doran

We have repeatedly blogged on the Pushmi-Pullyu world of independent contractor relationships, a world in which employers can do no right.   (DOL Says Employers Are Morons)    Well, Arizona recently enacted a law providing at least some level of clarity to independent contractor status. HB 2114 creates a purely voluntary mechanism through which a service provider can self-identify as an independent contractor to a hiring entity. Once the service provider fulfills the self-identification requirements, there is a rebuttable presumption that an independent contractor relationship exists. The rebuttable presumption is a huge help to hiring entities in Arizona, who would otherwise bear the burden of proving “by clear and convincing evidence” that an independent contractor relationship exists. The voluntary self-identification process requires the service provider to sign a Declaration that contains certain requirements and typical indices of independent contractor status, all of which is specifically laid out in HB 2114.

There are 5 points of note with respect to HB 2114.

  1. Once again, it is purely voluntary—you don’t have to have a Declaration in place, and the lack of a Declaration will not be used against you when determining whether an independent contractor relationship exists.  But, you lose the rebuttable presumption if you don’t have one.
  2. It only applies to compliance with Arizona laws.  It does not trump independent contractor tests from the IRS, DOL, NLRB, etc., nor does it help you in other states in which you do business.
  3. You must actually comply with the terms of the Declaration.  It is not a mere paper hurdle.  If the reality of the relationship does not align with the representations in the Declaration, you will lose the rebuttable presumption.
  4. HB 2114 throws hiring entities (particularly staffing agencies and PEOs) a bone by providing that any supervision or control of the contracting party by the hiring party that occurs because it is required by law or a licensing requirement cannot be considered when determining whether an independent contractor relationship exists.
  5. HB 2114 takes effect tomorrow, so the time to get your independent contractor relationships in proper working order with respect to Arizona law is now.