Beginning August 6, 2016, Arizona law on independent contractor employment relationships changed for most industries when A.R.S. § 23-1601 went into effect. Section 23-1601 (which is the byproduct of House Bill 2114) is a new statute that allows certain businesses and workers to create a rebuttable presumption of a lawful independent contractor relationship by: (1) having the worker execute a statutorily prescribed Declaration of Independent Business Status; and (2) the business acting in a manner substantially consistent with the Declaration. But general contractors and subcontractors need to be aware that, for all intents and purposes, § 23-1601 does not apply to their businesses. This important limitation has gone unmentioned in the multiple publications/articles I have read on this new law, which is why I am writing this post.
Subsection C of A.R.S. § 23-1601 substantially limits the applicability of the rest of the statute in the context of those who perform construction work. Specifically, Subsection C provides that the statute does not apply to general contractors and subcontractors unless they are “contracting with an independent contractor to perform services that do not require a license pursuant to Title 32, Chapter 10.” This means that generals and subcontractors are not able to use a Declaration of Independent Business Status to create a rebuttable presumption of a lawful independent contractor relationship with any workers that actually perform construction work. Rather, generals and subcontractors are apparently limited to using § 23-1601 in connection with office workers and/or support staff, if the circumstances otherwise permit.
At bottom, general contractors and subcontractors need to know that they cannot use A.R.S. § 23-1601 to create rebuttable presumptions of independent contractor relationships with construction workers. Instead, there are numerous factors that need to be considered with regard to: (1) hiring a construction worker as an independent contractor; and (2) determining whether that construction worker ultimately satisfies the legal definition of an independent contractor. These factors are identified and explained in the Arizona Registrar of Contractors’ Substantive Policy Statement 102, which can be found here. Among other things, generals and subcontractors must always remember that if they are going to hire a construction worker as an independent contractor, that construction worker must have his or her own ROC license.