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Construction Employment Law

New Arizona Independent Contractor Law Is of Little Value to Contractors, Subs

In passing a law that formalizes independent contractor status, the Legislature made it largely irrelevant to Arizona’s construction industry.


Construction Advisor

This article appeared in the September 2016 issue of "The Construction Advisor" published by Lang & Klain, P.C.

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A new, well-publicized state law that went into effect August 6, 2016, provides guidelines for creating a lawful independent contractor relationship. Unfortunately, the recently enacted A.R.S. § 23-1601 generally excludes licensed contractors and subcontractors.

The statute provides guidelines for companies in other industries to create a “rebuttable presumption” of a lawful independent contractor relationship, by, among other things, having a worker complete a “Declaration of Independent Business Status.” But 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 [A.R.S.] Title 32, Chapter 10,” which governs contractors.

This means that generals and subs are likely able to use the newly created “Declaration of Independent Business Status” only to create the presumption of independent contractor relationships with workers that do not actually perform construction work (e.g., office workers and support staff, circumstances permitting).

When considering whether to hire a construction worker as an independent contractor, contractors and subs should instead consider the guidelines and requirements explained in the Arizona Registrar of Contractors (ROC) Substantive Policy Statement 102. They should also be mindful that a construction worker hired as an independent contractor must be properly licensed by the ROC.