The Declaration of Independent Business Status Under Arizona Law

It is critical for a business to know whether a given worker is an employee or an independent contractor under the law. This determination affects a wide range of issues, including eligibility for overtime pay, access to benefits and workers’ compensation coverage. Different states utilize different standards when it comes to a worker’s status, and there are even situations where the same individual is classified differently under the applicable state and federal laws.

Arizona law does offer a relatively simple solution known as the Declaration of Independent Business Status (DIBS). Pursuant to Section § 23-1601 of the Arizona Revised Statutes, a business and a worker can execute a document declaring that they are parties to a contract for services, rather than an employer and employee. If a question exists, a completed DIBS creates a rebuttable presumption of independent contractor status. 

The DIBS contains several statements that support a contractor classification, such as a declaration that the contractor controls how and when work is performed. Another statement says that the contractor is responsible for their own taxes, licenses and insurance.

Should both sides sign, Arizona courts and agencies start from the position that the worker is an independent contractor. However, this is not a final determination. A judge or administrator might find that the facts on the ground clearly show that the worker is an employee, overcoming the presumption. Moreover, the DIBS does not affect a person’s classification under federal law. For example, a worker’s status in a matter pertaining to the Fair Labor Standards Act depends on the “economic realities” of the situation, not the any declaration by the parties. 

Proper use of a DIBS can be valuable in various Arizona labor and employment matters. If you’re a hiring entity and want to make sure that your DIBS is appropriate and enforceable, a qualified attorney can review the facts and prepare the necessary document. 

The Law Offices of Donald W. Hudspeth P.C. in Phoenix handles various labor and employment concerns for Arizona businesses, providing personalized guidance to a diverse group of companies. To schedule a consultation regarding your legal needs, please call 866-696-2033 or contact us online.