“An umbrella of liability”: Arizona Court of Appeals Sets Aside Industrial Commission Decision for not Evaluating the Liability of Each Contractor in a Workers’ Compensation Claim

Who is responsible for payment of a workers’ compensation claim arising from framing work that has been subcontracted at least 4 times on a residential construction project?  That is the question that Division One of the Arizona Court of Appeals recently tackled in Meno’s Construction, LLC v. Industrial Commission of Arizona, No. 1 CA-IC 18-0041 and 1 CA-IC 18-0042 (Consolidated).  The Court ultimately set aside the Industrial Commission of Arizona’s underlying decision that only two of the relevant subcontractors were responsible.  In doing so, the Court held that the administrative law judge (the “ALJ”) below “did not evaluate the liability of each contractor and subcontractor made party to [the] workers’ compensation claim,” in violation of the “umbrella of liability” concept for statutory employers contemplated by Arizona’s Workers’ Compensation Act. read more

Arizona’s New Independent Contracting Law: A Potential Trap for General Contractors and Subcontractors

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. read more

Contractors as Employers: Restrictive Covenants in Employment Agreements

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. read more