Are You Utilizing a Declaration of Independent Business Status (DIBS) for Independent Contractors?
Arizona businesses can request a DIBS declaration from independent contractors in accordance with A.R.S. § 23-1601. If the employer complies with all the provisions of the statute, it creates a rebuttable presumption that the worker is in fact an independent contractor and not an employee under state law.
A DIBS declaration should be signed by the independent contractor and acknowledge that the contractor is:
- an independent contractor, not an employee;
- not entitled to unemployment benefits or any other right arising from an employment relationship;
- responsible for all tax liability associated with payments received from or through the contracting party; and
- responsible for maintaining any required registration, licenses, or other authorization necessary to perform the services rendered.
The contractor must also acknowledge at least six of the following:
- The contractor is not insured under the contracting party’s health insurance coverage or workers’ compensation insurance coverage.
- The contracting party does not restrict the contractor’s ability to perform services for or through other parties.
- The contractor has the right to accept or decline requests for services by or through the contracting party.
- The contracting party expects that the contractor provides services for other parties.
- The contractor is not economically dependent on the services performed for the contracting party.
- The contracting party does not dictate the performance, methods or process the contractor uses to perform services.
- The contracting party has the right to impose quality standards or a deadline for completion of services performed, or both, but the contractor is authorized to determine the days worked and the time periods of work.
- The contractor will be paid by or through the contracting party based on the work the contractor is contracted to perform and the contracting party is not providing the contractor with a regular salary or any minimum, regular payment.
- The contractor is responsible for providing and maintaining all tools and equipment required to perform the services performed.
- The contractor is responsible for all expenses incurred by the contractor in performing the services.
Finally, the contractor must acknowledge that the terms set forth in the DIBS declaration apply to the contractor’s employees and independent contractors.
Employers obviously should not use a DIBS declaration when there is an employment relationship. Employers may not misclassify an employee for any reason, even if the employee agrees. Also note that the declaration does not affect the federal independent-contractor tests used by the U.S. Department of Labor, the Internal Revenue Service, or the National Labor Relations Board. Stay tuned for our next post, Classifying Employees: Independent Contractors (1099) v. Employees (W-2).
Important Disclaimer: The foregoing is not legal advice and does not create an attorney-client relationship. If you have any questions or require any assistance, please contact a member of our Labor & Employment team.