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Are they an Independent Contractor or an Employee?

The presumption is that anyone working for you is an employee and if you are hiring someone to work in your home or for your business and you want them to be treated as an independent contractor, you should have an agreement in place that is signed by both of you. The agreement, in and of itself, won’t settle the issue; but without it, it is harder to argue that the person working for you is not an employee.

You may ask, “Why does it matter?”  An employee is entitled to paid time off, a minimum hourly wage, employer contributions to social security and to collect unemployment insurance against their recent employer(s), among other benefits. In California, it Is now very hard to qualify as an independent contractor, but in Arizona this is still a very typical working relationship when the conditions fit the relationship and the parties have a signed agreement.

The relevant statutes, at a minimum, are Arizona Revised Statutes (A.R.S.) 23-1601 and 23-902 D.

23-1601 provides that the employing unit may prove that the relationship is that of an independent contractor by the independent contractor executing a declaration of independent business status, and by the employing unit acting in a manner substantially consistent with the declaration.  In simple language that means there is an independent contractor’s agreement signed by the parties.  Once you have this agreement or declaration, this creates a rebuttable presumption that the work is being done as an independent contractor.

23-902 D sets out the conditions that must be stated in the contract that is signed by both parties and are present in the relationship. The Business:

Does not require the independent contractor to perform work exclusively for the business.

Does not provide the independent contractor with any business registrations or licenses required to perform the specific services set forth in the contract.

Does not pay the independent contractor a salary or hourly rate instead of an amount fixed by contract.

Will not terminate the independent contractor before the expiration of the contract period unless the independent contractor breaches the contract or violates the laws of this state.

Does not provide tools to the independent contractor.

Does not dictate the time of performance.

Pays the independent contractor in the name appearing on the written agreement.

Will not combine business operations with the person performing the services rather than maintaining these operations separately.

If you are thinking of hiring someone or have someone working for you already, you should define the terms of your relationship to them as an employee or independent contractor.  Both relationships should be covered by key terms and conditions, but if you want to ensure you do not find yourself subject to employment claims and penalties, having an independent contractor’s agreement in place is critical.

Disclaimer – This article is for information purposes only. It is not intended to provide legal advice to anyone. If you require advice, you should reach out to our firm or another lawfirm to discuss your facts and circumstances to obtain legal advice.

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Meet Margaret Tritch Buonocore

Margaret Tritch Buonocore began her legal career in Los Angeles as a litigator. She then moved to London where, after completing her LLM, she worked in international business and finance for almost a decade structuring corporate finance transactions, equity offerings, debt, and derivative instruments focusing on contract and securities law issues. Learn More…

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