On May 12, 2016, our Arizona Governor signed a new law by which employers can create a rebuttable presumption that a worker is an independent contractor rather than an employee. In light of the federal campaign to classify workers as employees for additional tax revenue and mandated employment benefits, this legislation assists employers in defining the working conditions.
New A.R.S. §23-1601 sets forth recommended language for a signed written agreement, entitled a “Declaration of Independent Business Status” (“Declaration”). A Declaration in substantially the language of the statute will create a rebuttable presumption that the worker is an independent contractor rather than an employee. However, failure to execute a Declaration does not create a presumption at all and is not admissible in litigation.
The Declaration must provide:
“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.”
In addition the Declaration must state that 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.”
(It certainly doesn’t hurt to include all of these provisions, as long as they are true and accurate in describing the working relationship.)
And finally, the Declaration must include that “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.”
However, if the employer and worker are required to be licensed by the Registrar of Contractors, none of the above applies. In addition, this new law states that it does not replace the written contract required by the Arizona Department of Economic Security for independent contractor status specified in A.R.S. §23-902. (See our Spring newsletter, page 6.)
Most importantly for real estate agencies, the new statutes specifically provide that supervision and control over workers, which is required by federal or state statutes or local ordinances, licensing or professional standards, does not negate the independent contractor status of the worker. Thus, despite the Arizona statutes, which require brokers’ supervision over their agents, agents may remain independent contractors. We highly recommend a written agreement, straight from the Declaration, to establish your rebuttable presumption of independent contractor arrangements.