Arizona’s “Declaration of Independent Business Status” law went into effect earlier this month. The new law, which appears to be the first of its kind, aims to provide independent contractors and the businesses that engage them greater certainty with respect to their employment status.
Under the new law, independent contractors may sign a Declaration of Independent Business Status (“DIBS”). The DIBS must be signed and dated by the contractor and contain express acknowledgments that the contractor:
Operates an independent business;
Is not entitled to unemployment benefits or any other right arising from an employment relationship;
Is responsible for all taxes owed on payments received from the contracting party; and
Is responsible for any registration, license, or other ization necessary for the services rendered.
The DIBS must also state that the worker meets six of ten specific criteria that are commonly used to assess a worker’s status. These factors include that the contractor is not insured under the contracting party’s health or workers’ compensation insurance coverage; that the contracting party expects the contractor to provide services for other parties; and that the contractor is not economically dependent on the services performed for or in connection with the contracting party. The DIBS creates a rebuttable presumption that the worker is an independent contractor if the worker’s independent contractor status is ever challenged.
The use of the DIBS is optional, and the statute specifically states that choosing not to execute such a declaration cannot be evidence that an independent contractor relationship does not exist. In addition, the execution of the DIBS does not mean the worker can never be found to be an employee. It merely creates a rebuttable presumption to the contrary which the worker will have to overcome to establish employment status.
Even so, businesses in Arizona should take advantage of this new and unique feature of Arizona law that will make it easier to defend their contractor relationships. This is particularly helpful because the Arizona Minimum Wage Act places the burden of proof for establishing an independent contractor relationship upon the party for whom the work is performed, i.e., the business owner.