by Dinita L. James
Gonzalez Law, LLC
A new Arizona law going into effect on August 6 will allow independent contractors to provide a declaration of their independence to businesses using their services.
The law provides a form called a declaration of independent business status (DIBS) to help determine whether a worker should be classified as an independent contractor or an employee.
Proponents of the law want to encourage parties to establish the nature of their relationship at the outset. If they do so using a form that substantially complies with the law that states who is and isn’t an employee, then it will be up to the party that contests independent contractor status to prove that an employment relationship actually existed. The contesting party could be an auditing agency, an insurance carrier, or a private party.
The use of DIBS is optional, and the statute specifically states that choosing not to execute a DIBS cannot be evidence that an independent contractor relationship does not exist. A valid DIBS must be signed and dated by the contractor and contain express acknowledgments that the contractor:
- Operates an independent business;
- Is not an employee and has no entitlement to unemployment benefits or any other right arising from an employment relationship;
- Is responsible for all taxes owed on payments received from the business, from which no withholdings will be taken; and
- Is responsible for any registration, license, or other authorization necessary for the services rendered.
The statute also lists 10 factors that show a worker is an independent contractor, and a valid DIBS must state that six of the 10 factors are satisfied. The statute is a state law and isn’t binding on federal agencies like the U.S. Department of Labor (DOL).
For more information on the new independent contractor law, see the July issue of Arizona Employment Law Letter.
Dinita L. James is an attorney with Gonzalez Law, LLC in Tempe, Arizona, and the editor of Arizona Employment Law Letter. She can be reached at dinita.james@gnzlaw.com.