Arizona Employment Law Update – May 2016

Independent Contractor – Declaration of Independent Business Status

On May 12, 2016, Arizona Governor Doug Ducey signed legislation (H.B. 2114) establishing the Declaration of Independent Business Status, which prescribes the employer and independent contractor relationship.

The declaration creates a rebuttable presumption that an independent contractor relationship exists between the worker and the employing organization. The declaration includes statements that the independent contractor provides services to other organizations, is paid by the job and not on a salary or hourly basis, and is not covered on the employer’s health or workers’ compensation insurance. The completion of the declaration is voluntary. The absence of such a declaration does not raise a presumption that an independent contractor relationship does not exist.

The law goes into effect on August 6, 2016.

Read AZ H.B. 2114

Independent Contractor Criteria

On May 12, 2016, Arizona Governor Doug Ducey signed legislation (H.B. 2652) specifying the criteria that establish an independent contractor relationship for employment purposes, including services to third parties obtained through electronic format.

House Bill 2652:

  • Defines aqualified marketplace contractor as a person or organization entering into an agreement with a qualified marketplace platform using digital means to provide services to third parties or other entities.
  • Includes as aqualified marketplace platform an organization, individual, or entity that operates a digital platform to facilitate services by the contractors to third parties seeking services.
  • Establishes aqualified marketplace contractor as an independent contractor for purposes of state and local laws, ordinances, regulations, unemployment insurance, and workers’ compensation laws.
  • Outlines the specific qualifications as follows:
    • Payment for services includes substantially all of the services performed.
    • A written contract is in effect between the parties when all of the following apply:
      • The contractor provides services as an independent contractor, not as an employee.
      • Any payments to the contractor are for services rendered.
      • The contract may require work during the work hours/schedule set by the contractor.
      • The contract does not place restrictions on the contractor working for another company or person.
      • The contractor pays substantially all expenses related to the work or services.
      • The contractor is responsible for payment of all income-related taxes.
      • Either party may terminate the contract at any time, with reasonable notice.
    • Stipulates that before the effective date of this legislation, a qualified marketplace contractor is an independent contractor and must be treated as such if all payments to the contractor relate to the services actually performed. Additionally, there must be a written contract between the parties that conforms to this legislation.
    • States that in order to establish an independent contractor relationship, compliance with these provisions are not mandatory.
    • Excludes from the pertinent definitions contractors shipping freight, sealed envelopes, boxes, or other containers.
    • Describes exclusions, including nonprofit corporations, educational institutions, government entities, tribes, and any employment excluded from the Federal Unemployment Tax Act.

The law goes into effect on August 6, 2016.

Read AZ H.B. 2652

Pre-Emption of Local Nonwage Mandates

On May 11, 2016, Arizona Governor Doug Ducey signed legislation (H.B. 2579) that prohibits cities, towns, and other political subdivisions of the state from imposing nonwage compensation requirements on private employers. Nonwage compensation includes fringe benefits, welfare benefits, child/adult care plans, sick pay, vacation pay, severance pay, commissions, bonuses, retirement plan/pension contributions, other federal employment benefits, and other amounts more than the minimum compensation due to an employee.

The bill also:

  • Defines minimum wage as the nondiscretionary minimum compensation given to an employee, including commissions but excluding tips and gratuities.
  • Removes the following from the definition of wages: sick pay, vacation pay, severance pay, commissions, bonuses, and other amounts promised by the employer who has a policy or practice of making such payments.
  • Requires the Arizona Department of Labor to investigate all nonwage claims, if they are timely filed.

The law goes into effect on August 6, 2016.

Read AZ H.B. 2579