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

From JDSupra, David Farren from Jasburg Wilk discusses the attention being given to the proper classification of workers as employees or independent contractors by both state and federal authorities.  He describes some of the various tests including Arizona’s “Right To Control” test, the Economic Reality test used for the Fair Labor Standards Act (FLSA), the common law agency test used for Title VII complaints, and the IRS “20-Factors” test.   He summarizes the Arizona as follows:

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 the right 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]

via Employers Beware! Government Agencies Are Out To Bust You For Misclassifying Your Employees As Independent Contractors | Jaburg Wilk – JDSupra.

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