In the modern world of Uber and the freelance economy, it is increasingly difficult to determine whether someone classifies as an independent contractor or an employee. Here is why the classification matters.
Why the Employee vs. Contractor Distinction Matters
If an employee is misclassified as a contractor, companies can face legal liability for:
• Payroll taxes
• Overtime that was not paid
• Workplace injuries
• State and federal discrimination/wrongful termination claims
Arizona recently put a new independent contractor law into effect that should alleviate some of the employee vs. independent contractor confusion.
Declaration of Independent Business Status Law
Arizona’s new law that took effect in August of 2016 is the first of its kind, and it permits independent contractors to sign a Declaration of Independent Business Status (DIBS), which acknowledges, the contractor:
• Operates an independent business
• Is responsible for all taxes owed on payments received
• Is not entitled to unemployment benefits or other rights associated with an employment relationship
• Is responsible for licenses and similar authorization for services provided
A signed declaration can be used as evidence that the worker is properly classified as a contractor, but the worker may provide evidence that rebuts this presumption.
Schedule a consultation with an Arizona employment attorney at Tyler Allen Law Firm to avoid employee and/or independent contractor classification issues.