Arizona recently passed a law that provides businesses greater certainty with respect to their independent contractors’ employment status. Specifically, it creates a mechanism for independent contractors to acknowledge they are not employees, and have no entitlement to unemployment benefits or any other right typically associated with an employment relationship.
Although the mechanism does not provide an absolute guarantee of independent contractor status, it creates a presumption that the parties did not intend to create an employment relationship.
Here are the key provisions of the new law:
- The contractor signs a Declaration of Independent Business Status (“DIBS”);
- The contractor expressly acknowledges in the DIBS that it is providing services for the business as an independent contractor, and disclaims any right to unemployment benefits or any other right associated with an employment relationship;
- The contractor agrees to be responsible for taxes, registration or licensing requirements, or any other authorizations necessary for the services to be rendered; and
- The contractor acknowledges meeting at least six of ten enumerated factors that are commonly used to assess whether an individual is an independent contractor or an employee.
The statute specifically notes that use of a DIBS is not required for purposes of establishing independent contractor status, and the failure to execute such a declaration cannot be used as evidence that the parties intended to create an employment relationship. Nevertheless, this is a helpful tool in an employer’s toolkit in an area with explosive growth in litigation in recent years; a DIBS may provide a disincentive for independent contractors deciding later to claim they were misclassified.
Please give the attorneys at BurnsBarton a call to find out how to utilize a DIBS to provide greater protection for your business.
