On August 6, 2016, a new Arizona law (A.R.S. §23-1601) will go into effect that provides a mechanism for a business and an independent contractor who furnishes services to that business to establish a “rebuttable presumption of an independent contractor relationship.” This rebuttable presumption exists if the independent contractor signs a “Declaration” of independent business status that “substantially complies” with the list of 14 representations set forth in the statute. For example, the Declaration must specify that the relationship is non-exclusive and the contractor is not entitled to any employee benefits from the contracting business.
This statute underscores the importance of ensuring that an independent contractor relationship is properly documented so that a business and its independent contractors can benefit from the “rebuttable presumption” created by this new law. However, obtaining a signed Declaration that complies with A.R.S. 23-1601 does not mean the business is immune from an independent contractor misclassification challenge. The court or government authority investigating such a challenge will necessarily look past the Declaration and examine the economic reality of the relationship.