Employers Beware! Government Agencies Are Out To Bust You For Misclassifying Your Employees As Independent Contractors

Arizona

From  Jaburg Wilk,  David N. Farren discusses risks of misclassification of workers and provides an excellent overview of the FLSA “Economic Reality” test, the Title VII common law Agency test, the IRS 20-factors test, and Arizona’s right to control test. David writes:

Arizona’s “Right to Control” Test

Arizona courts and state agencies use a “right to control test.”  This test, found in A.R.S. ¶23-902, examines: (1) whether an employer “procures work to be done for the employer by a contractor over whose work the employer retains supervision or control,” and (2) whether “the work is a part or process in the trade or business of the employer.” A.R.S. ¶23-902(B).  If these criteria are met, the person doing the work is an employee.  Conversely, if someone is “not subject to the rule or control of the business for which the work is done, but is engaged only in the performance of a definite job or piece of work, and is subordinate to that business only in effecting a result in accordance with that business design,” the person doing the work is an independent contractor.  A.R.S. ¶23-902(C).

Courts consider the “totality of the circumstances of the work and various indicia of control between the parties” to apply this test.  Reed v. Indus. Comm’n, 23 Ariz.App. 591, 593, 534 P.2d 1090, 1092 (1075).  The “indicia of control between the parties,” or factors that agencies and courts consider when applying the test, include:

  1. The duration of the employment;
  2. The method of payment;
  3. Who furnishes necessary equipment;
  4. The right to hire and fire;
  5. Who bears responsibility for workmen’s compensation insurance;
  6. The extent to which the employer may exercise control over the details of the work; and
  7. Whether the work was performed in the usual and regular course of the employer’s business.

Read, 534 P.2d at 1092, citing Home Ins. Co. v. Indus. Comm’n, 123 Ariz. 348, 350, 599 P.2d 801, 803 (1979).  It is important to remember that it is the existence of theright to control, not the actual control of, a worker’s activities that determines the issue.  Scott v. Rhyan, 78 Ariz. 80, 82, 275 P.2d 891, 892 (1954).[1]

Read the full story at  Employers Beware! Government Agencies Are Out To Bust You For Misclassifying Your Employees As Independent Contractors | Jaburg Wilk

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