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.
With the constant emergence of new technologies/business practices and an increasingly mobile workforce, some companies in the construction industry rely on restrictive covenants in employment agreements to safeguard their competitive advantages. The term “restrictive covenants” typically encompasses contractual provisions that: (1) require information to be kept confidential; (2) limit competition; and (3) limit the solicitation of customers. The Arizona Court of Appeals recently addressed how far companies can go in restricting the competitive activities of former employees in Orca v. Noder. For an explanation of the Orca decision, please read this article that I co-authored with my colleague, Bill Klain.