Stopping local governments from imposing their own health-insurance mandates highlights victories for small businesses

The 53rd Arizona State Legislature adjourned May 4, 2018, with some big NFIB accomplishments for small business. The following bills were signed into law by Gov. Doug Ducey.

Stopped Local Governments from Imposing Health-Insurance Mandates
Senate Bill 1247 is a pre-emption bill that prohibits local governments from mandating employers to provide health insurance to their employees.  If left unchecked, it could have resulted in a patchwork of laws throughout the state that would have posed a hardship for many Arizona small businesses.

Won Needed Clarification for Independent Contractors
Senate Bill 1500 provides for a series of clarifications that will help ensure that a small business which contracts with independent contractors for their services will not be liable to pay unemployment insurance claims. This will ensure proper implementation of the Declaration of Independent Contractor Status rebuttable presumption that an independent contractor relationship exists. These

Secured New Avenue to Petition Governor’s Regulatory Review Council
Senate Bill 1273 provides an additional avenue for small businesses to petition the Governor’s Regulatory Review Council to review:

  • an existing state agency practice
  • a substantive policy statement
  • or a final rule or regulatory licensing requirement not specifically authorized by law based on a person’s belief that it is unduly burdensome or not demonstrated to be necessary to specifically fulfill a public health, safety or welfare concern.

Senate Bill 1273 can help small businesses fight back against unnecessary and burdensome regulations. 

Obtained Return-to-Work Incentives for the Unemployed
Senate Bill 1398 discontinues unemployment benefits for individuals who do not accept an offer of employment after the first four weeks of receiving unemployment compensation benefits if the job pays at least 120 percent of the individual’s weekly unemployment benefit.

SB 1398 also includes a return-to-work program that provides a supervised training opportunity to individuals for 20 to 32 hours per week for up to six weeks through employers who volunteer to participate in the program. Individuals participating in the program continue to receive unemployment compensation. SB 1398 should ultimately help get unemployed individuals back to work thus reducing the length and time of unemployment insurance claims and hopefully reducing UI rates paid by small businesses.

Secured Workers’ Compensation Change
House Bill 2047 expands mandatory workers’ compensation coverage to all working members of limited liability companies (LLCs) with less than 50 percent membership interest in the LLC, as well as to working shareholders of corporations who own less than 50 percent of the beneficial interest in the corporation. If the individual’s membership interest or beneficial interest is 50 percent or more, then workers’ compensation coverage may be extended “on the written acceptance, by endorsement, of an application for coverage” by the working member at the discretion of the insurance carrier for the LLC.

Made Hiring of Ex-Offenders Less Legally Challenging
House Bill 2311 limits liability for employers who hire an employee or contract with an independent contractor “who has previously been convicted of a criminal offense.” However, “criminal offense” is specifically defined not to include “violent offenses and sexual offenses.” The new law also prohibits claimants from introducing “the fact that the employee or independent contractor was previously convicted of a criminal offense before the employee’s employment or independent contractor’s contractual obligation began with the employer” into evidence.

The new law also puts limits on claims that an employer failed to provide adequate supervision, a claim sometimes used in such lawsuits against employers. HB 2311 will help protect Arizona small businesses from potential lawsuits should they hire employees with prior criminal records.

Challenges for the 2019 Session

A few pro-small-business proposals that NFIB supported and worked for came up short, making for a renewed effort in 2019.

Minimum Wage Freeze/Sick Leave Repeal
Senate Concurrent Resolution 1016 proposed placing a new referendum on the state ballot to freeze the minimum wage at $10.50 per hour, prohibiting counties and municipalities from establishing or otherwise requiring a higher minimum wage, and repealing statutes requiring paid sick time. Unfortunately, the resolution never got out of the Senate.

Federal Tax Reform and Jobs Act – State Conformity
This past winter, the Arizona Department of Revenue released its tax conformity report showing that Arizona taxpayers, because of the federal tax reform bill passed and signed into law by President Trump in December 2017, would end up paying as much as $250 million more in state income taxes in the Fiscal Year 2019 because of the federal changes. The number could climb to more than $300 million in FY 2020. NFIB and allied pro-taxpayer groups responded by advocating that Arizona change its tax conformity laws to ensure that such a tax increase would not happen. As of the end of the 2018 session, no action was taken. NFIB Arizona will continue to fight to make sure that such a tax increase does not befall Arizona taxpayers.

Presumption of Employer Retaliation
House Concurrent Resolution 2028 proposed putting a new referendum on the ballot to repeal a portion Proposition 206, which was approved by voters in 2016. In addition to increasing the minimum wage and mandating paid sick leave, Proposition 206, defined retaliation as the denial of minimum wage or earned paid sick time to an employee or any threat, discharge, suspension, demotion or reduction of hours against an employee for the request of minimum wage or earned, paid sick time and presumed employers to be guilty of retaliation if any adverse action is taken against an employee within 90 days of the employee’s request of minimum wage or paid sick time.

HCR 2028 repealed the presumption of employer retaliation established by an adverse action taken against an employee within 90 days of an assertion of wage or leave rights. The resolution was passed by the House but not acted upon by the Senate.

Business Personal Property Tax Exemption
House Concurrent Resolution 2029 (the Small Business Job Creation Act) proposed to place a referendum on the 2018 ballot asking voters to amend the state constitution to prohibit taxes from being levied on the first $2 million of full cash value of personal property that is initially acquired during or after 2019 and that is used for agricultural purposes or in trade or business.

Under current law, personal property used for agriculture, trade or business, which is adjusted for inflation and is currently valued at $167,130 in Tax Year 2018. Arizona small businesses suffer under this law not only because they are taxed on business equipment but also because the tax is a paperwork burden that is complex and time-consuming. The resolution was passed by the House but not acted upon by the Senate.

Local Regulation of Home-Based Businesses
Senate Bill 1397/House Bill 2333 would have prohibited local governments from prohibiting the operation of a no-impact “home-based business” or otherwise require a person to apply for or obtain a permit, license or other prior approval to operate a no-impact home-based business. The bill established a list of factors that qualify a residential property for use as a no-impact home-based business. The bill did permit counties and municipalities to establish reasonable regulations on a home-based business if the regulations are tailored for specified purposes, including protecting public health and safety. The bill was approved by the House but was not acted upon by the Senate.

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