Victories from the 53rd Arizona State Legislature (2017-2018)

Date: July 05, 2018

Regulatory relief, protection of independent contractors highlight NFIB accomplishments for small business

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.

From the 2018 half

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.

From the 2017 half

Won New Law Curbing Drive-By Lawsuits
NFIB/Arizona worked with a broad coalition of business groups, advocates for the disabled, and key legislators to develop and pass legislation (Senate Bill 1406) designed to halt gross abuse of the state’s version of the civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public.

Throughout the first half of 2016, thousands of Americans With Disability Act-based “drive-by” lawsuits were filed in state courts against Arizona small businesses for alleged violations of ADA parking lot rules. NFIB/Arizona responded on behalf of its members by first working with Attorney General Mark Brnovich to save more than 1,100 small-business owners from having to pay a $3,500 to $7,500 shakedown settlement price to predatory lawyers.

By early 2017, state courts had ruled in favor of the targeted small businesses after the attorney general petitioned the court to intervene in all the open cases on the grounds that the state’s ADA law specifically empowers the attorney general’s office to enforce the law. Though the attorney general’s court victory was total, nothing in state law discouraged or prohibited other ‘entrepreneurial’ lawyers from developing new schemes that abuse the ADA—like non-compliant websites or other hyper-technical violations.

Before the legislative session, NFIB/Arizona proactively reached out to the disability rights community to develop comprehensive legislation that would end the abuse of the state’s ADA law. With the leadership of Rep. Maria Syms of Paradise Valley, NFIB drafted consensus legislation limiting who may file an enforcement lawsuit to an actual aggrieved person rather than literally any person in the world. The proposal also instituted tough new legal sanctions on the lawyers who abuse the ADA as a shakedown scheme, effectively removing the profit motive for drive-by lawsuits.

After two competing versions of reform stalled, compromise legislation ending drive-by ADA lawsuits in Arizona was ultimately forged and signed into law by Gov. Doug Ducey. The final legislation combines the main provisions of the Syms legislation detailed above with those of another bill authored by Sen. John Kavanagh of Scottsdale that establishes a 30-day notice and cure period allowing a business to come into compliance before any ADA-based lawsuit could be filed. A longer 60-day notice and cure period is also available to a business that is required to obtain a building permit or similar form of government approval in order to make the changes necessary to comply or cure the violation.

Obtained ADA Compliance Costs Write-Off
NFIB authored a new law (House Bill 2214) that allows small businesses to immediately write-off the costs of complying with the Americans With Disability Act on their state income taxes in the tax year they are incurred rather than over the normal 39-years allowed for amortization under the IRS tax code.

Secured Municipal Tax Reform for Property Owners
Gov. Doug Ducey signed a pair of important bills that help protect small businesses from municipalities placing the interests of the city government or favored special interests ahead of the property taxpayer. House Bill 2011 reforms county and municipal bond levies (funded by property taxes) so excess tax collections are not allowed to be higher than 10 percent of the annual payments of principal and interest. This law became necessary because some Arizona cities had allowed large fund balances to accumulate thereby allowing them to divert excess dollars to projects not included in the original bond question. Lawmakers also passed NFIB/Arizona-backed legislation (House Bill 2213) limiting the power of cities to shift the property tax burden to small businesses through the abatement of taxes for redevelopment projects.

Helped Pass Clarification of Joint Employer Relationships
A new state law backed by NFIB/Arizona (House Bill 2322) clarifies the definition of joint employment relationships for franchises and their franchisees. The legislation was in response to an Obama-era National Labor Relations Board ruling that could make a franchiser have control over a franchisee’s employment decisions, and a business hiring a subcontractor could essentially be taking on all the subcontractors’ employees as their own.

Championed Federal Balanced Budget Amendment
NFIB/Arizona successfully partnered with the Balanced Budget Amendment Task Force to make Arizona the 28th state to pass (34 states are required) the necessary resolution calling for a convention of the states to propose a federal balanced budget amendment. House Concurrent Resolution 2013 states:

That, pursuant to Article V of the Constitution of the United States, the Legislature of the State of Arizona formally applies to the Congress of the United States to call a convention of the states only for the purpose of proposing an amendment to the Constitution of the United States requiring that, in the absence of a national emergency, the total of all federal appropriations made by the Congress for any fiscal year may not exceed the total of all estimated federal revenue for that fiscal year, together with any related and appropriate fiscal restraints.

“Arizona is sending a message that if the federal government can’t get their fiscal house in order, the states will do it for them, just as our Founding Fathers envisioned,” said HCR 2013’s sponsor, Speaker of the House J.D. Mesnard of Chandler.  “Arizona is at the forefront of efforts urging states to flex their muscles by exercising their constitutionally prescribed powers to push back against the federal government. I look forward to talking with our counterparts in other states to begin work organizing an Article V amendments convention that will finally put our national government on a more solvent fiscal path.”

Defeated Big Labor Agenda
NFIB/Arizona successfully opposed the perennial Big Labor agenda items from moving forward in 2017. Their top priority, the Employment Omnibus (House Bill 2347 and Senate Bill 1353), would have required all employers to create an elaborate new employee training program that includes workplace counseling, sexual harassment training, and information on relevant professional employment organizations (i.e., promote union membership); and, employers would only be allowed to terminate if the employee commits at least four violations of the employer’s policies or if they commit sexual harassment or a felony. Moreover, employers would be guilty of a Class 2 misdemeanor if they “retaliate against, harass or intimidate” someone for joining a union.

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