Arizona Aims to Clarify Independent Contractor Issues

Date: March 15, 2016 Last Edit: March 16, 2016

New bill would provide additional security for businesses.

Arizona Aims to Clarify Independent Contractor Issues

Arizona business owners often face a difficult task in defining who is and is not an independent contractor. The rules are established by a variety of agencies, leaving businesses open to accusations of misclassifying workers. In the event of an audit, small businesses could be liable for fees and back taxes.

“The question is, if you’re a small businessperson and you want to follow the law and be sure you’re following the law, how do you do that?” says NFIB Arizona State Director Farrell Quinlan.

House Bill 2114—sponsored by state Rep. Warren Peterson—would help remedy this situation by providing a clear understanding of what an independent contractor relationship is, as well as an optional agreement between a business and independent contractor.

This Declaration of Independent Business Status (DIBS) helps shift the burden of proving classification to the auditing agency, rather than the business owner, through rebuttable presumption—which means that it is assumed an independent contractor relationship exists until the agency can prove otherwise.

“We believe that burden-shifting will protect the rights of small business employing units in terms of these audit investigations by various government agencies,” says Justin Niedzialek, an attorney with the Cavanagh Law Firm and a co-author of the bill.

Small business owners could choose to take advantage of the statute or not, and it would not be used against them in determining the type of relationship.

The bill also provides greater flexibility in tailoring a DIBS by providing a number of factors that can prove an independent contractor relationship exists, requiring that only six of ten factors can be met, making it more usable for different industries, Niedzialek says.

“As far as the business side of things go, we are hopeful that this encourages the continued growth of our economy, with allowing employing units to have a little more certainty, a little more knowledge when it comes to using independent contractors,” Niedzialek says.

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