Ariz. Admin. Code § R6-3-1723 - Employee Defined
A.
"Employee" means any individual who performs services for an employing unit,
and who is subject to the direction, rule or control of the employing unit as
to both the method of performing or executing the services and the result to be
effected or accomplished. Whether an individual is an employee under this
definition shall be determined by the preponderance of the evidence.
1. "Control" as used in A.R.S. §
23-613.01,
includes the right to control as well as control in fact.
2. "Method" is defined as the way, procedure
or process for doing something; the means used in attaining a result as
distinguished from the result itself.
B. "Employee" as defined in subsection (A)
does not include:
1. An individual who
performs services for an employing unit in a capacity as an independent
contractor, independent business person, independent agent, or independent
consultant, or in a capacity characteristic of an independent profession,
trade, skill or occupation. The existence of independence shall be determined
by the preponderance of the evidence.
2. An individual subject to the direction,
rule, control or subject to the right of direction, rule or control of an
employing unit ". . . . solely because of a provision of law regulating the
organization, trade or business of the employing unit". This paragraph is
applicable in all cases in which the individual performing services is subject
to the control of the employing unit only to the extent specifically required
by a provision of law governing the organization, trade or business of the
employing unit.
a. "Solely" means, but is not
limited to: Only, alone, exclusively, without other.
b. "Provision of law" includes, but is not
limited to: statutes, regulations, licensing regulations, and federal and state
mandates.
c. The designation of an
individual as an employee, servant or agent of the employing unit for purposes
of the provision of law is not determinative of the status of the individual
for unemployment insurance purposes. The applicability of paragraph (2) of this
subsection shall be determined in the same manner as if no such designated
reference had been made.
C. The following services are exempt
employment under this Chapter, unless there is evidence of direction, rule or
control sufficient to satisfy the definition of an employee under subsection
(A) of this Section, which is distinct from any evidence of direction, rule or
control related to or associated with establishing the nature or circumstances
of the services considered pursuant to this subsection:
1. Services by an individual for an employing
unit which are not a part or process of the organization, trade or business of
the employing unit, and the individual is not treated by the employing unit in
a manner generally characteristic of the treatment of employees.
a. Services by an individual not treated by
the employing unit in a manner generally characteristic of the treatment of
employees means the individual performing the services is not treated by the
employing unit in substantially the same manner as employees of that employing
unit.
b. The words "part" and
"process" are not synonymous. If the individual performs services which are
either a part of or process in the organization, trade or business, the
conditions of this paragraph are not met and the services cannot be exempt
under this paragraph. "Process" refers to those services which are directly
responsible for carrying out the fundamental purpose or purposes for which the
organization, trade or business exists; e.g., painting and repairing automobile
bodies in an automobile body paint and repair shop. "Part" refers to any other
services which are essential to the operation or maintenance of the
organization, trade or business; e.g., routine cleaning of premises and
maintenance of tools, equipment and building. In addition to services which are
a part of or process in the organization, trade or business, there are those
services which are for the purposes of the organization, trade or business but
are merely ancillary or incidental and are not essential or necessary to the
conduct of the organization, trade or business; e.g., landscaping area around
the automobile body paint and repair shop.
2. Services by an individual for an employing
unit through isolated or occasional transactions, regardless of whether such
services are a part or process of the organization, trade or business of the
employing unit.
a. The phrase "isolated or
occasional" has its commonly understood meaning. The intent of the relationship
between the employing unit and the individual performing the services is to be
considered with the intent of the parties being that it is on a permanent basis
or for a long period; e.g., an individual employed who either quits or is
discharged after a brief period of employment, would not be considered an
isolated or occasional transaction regardless of how brief the period of
employment may be.
b. An individual
who performs services on less than thirteen days in a calendar quarter will be
presumed to be performing isolated or occasional transactions. An individual
who performs services on thirteen days or more in a calendar quarter will be
presumed not to be performing isolated or occasional transactions. In all cases
in which there is a standing or continuing arrangement with an individual to
perform required services on either a regularly scheduled basis or on call as
requested, it will be presumed the individual is not performing isolated or
occasional transactions.
D. In determining whether an individual who
performs services is an employee under the general definition of subsection
(A), all material evidence pertaining to the relationship between the
individual and the employing unit must be examined. Control as to the result is
usually present in any type of contractual relationship, but it is the
additional presence of control, as determined by such control factors as are
identified in paragraph (2) of this subsection, over the method in which the
services are performed, that may create an employment relationship.
1. The existence of control solely on the
basis of the existence of the right to control may be established by such
action as: reviewing written contracts between the individual and the employing
unit; interviewing the individual or employing unit; obtaining statements of
third parties; or examining regulatory statutes governing the organization,
trade or business. In any event, the substance, and not merely the form of the
relationship must be analyzed.
2.
The following are some common indicia of control over the method of performing
or executing the services:
a. Authority over
individual's assistants. Hiring, supervising, and payment of the individual's
assistants by the employing unit generally shows control over the individuals
on the job. Sometimes, one worker may hire, supervise, and pay other workers.
He may do so as the result of a contract in which he agrees to provide
materials and labor and under which he is responsible only for the attainment
of a result; in which case he may be independent. On the other hand, if he does
so at the direction of the employing unit, he may be acting as an employee in
the capacity of a foreman for or representative of the employer.
b. Compliance with instructions. Control is
present when the individual is required to comply with instructions about when,
where and how he is to work. Some employees may work without receiving
instructions because they are highly proficient in their line of work and can
be trusted to work to the best of their abilities; however, the control factor
is present if the employer has the right to instruct or direct. The
instructions may be oral or may be in the form of manuals or written procedures
which show how the desired result is to be accomplished.
c. Oral or written reports. If regular oral
or written reports bearing upon the method in which the services are performed
must be submitted to the employing unit, it indicates control in that the
worker is required to account for his actions. Periodic progress reports
relating to the accomplishment of a specific result may not be indicative of
control if, for example, the reports are used to establish entitlement to
partial payment based upon percentage of completion. Completion of forms
customarily used in the particular type of business activity, regardless of the
relationship between the individual and the employing unit, may not constitute
written reports for purposes of this factor; e.g., receipts to customers,
invoices, etc.
d. Place of work.
Doing the work on the employing unit's premises is not control in itself;
however, it does imply that the employer has control, especially when the work
is of such a nature that it could be done elsewhere. A person working in the
employer's place of business is physically within the employer's direction and
supervision. The fact that work is done off the premises does indicate some
freedom from control; however, it does not by itself mean that the worker is
not an employee. In some occupations, the services are necessarily performed
away from the premises of the employing unit. This is true, for example, of
employees in the construction trades, or employees who must work over a fixed
route, within a fixed territory, or at any outlying work station.
e. Personal performance. If the services must
be rendered personally it indicates that the employing unit is interested in
the method as well as the result. The employing unit is interested not only in
getting a desired result, but, also, in who does the job. Personal performance
might not be indicative of control if the work is very highly specialized and
the worker is hired on the basis of his professional reputation, as in the case
of a consultant known in academic and professional circles to be an authority
in the field. Lack of control may be indicated when an individual has the right
to hire a substitute without the employing unit's knowledge or
consent.
f. Establishment of work
sequence. If a person must perform services in the order of sequence set for
him by the employing unit, it indicates the worker is subject to control as he
is not free to follow his own pattern of work, but must follow the established
routines and schedules of the employing unit. Often, because of the nature of
an occupation, the employing unit does not set the order of the services, or
sets them infrequently. It is sufficient to show control, however, if the
employing unit retains the right to do so.
g. Right to discharge. The right to
discharge, as distinguished from the right to terminate a contract, is a very
important factor indicating that the person possessing the right has control.
The employing unit exercises control through the ever present threat of
dismissal, which causes the worker to obey any instructions which may be given.
The right of control is very strongly indicated if the worker may be terminated
with little or no notice, without cause, or for failure to use specified
methods, and if the worker does not make his services available to the public
on a continuing basis. An independent worker, on the other hand, generally
cannot be terminated as long as he produces an end result which measures up to
his contract specifications. Many contracts provide for termination upon notice
or for specified acts of nonperformance or default, and may not be indicative
of the existence of the right to control. Sometimes, an employing unit's right
to discharge is restricted because of a contract with a labor union or with
other entities. Such a restriction does not detract from the existence of an
employment relationship.
h. Set
hours of work. The establishment of set hours of work by the employing unit is
a factor indicative of control. This condition bars the worker from being
master of his own time, which is a right of the independent worker. Where fixed
hours are not practical because of the nature of the occupation, a requirement
that the worker work at certain times is an element of control.
i. Training. Training of an individual by an
experienced employee working with him, by required attendance at meetings, and
by other methods, is a factor of control because it is an indication that the
employer wants the services performed in a particular method or manner. This is
especially true if the training is given periodically or at frequent intervals.
An independent worker ordinarily uses his own methods and receives no training
from the purchaser of his services.
j. Amount of time. If the worker must devote
his full time to the activity of the employing unit, the employing unit has
control over the amount of time the worker spends working and, impliedly,
restricts him from doing other gainful work. An independent worker, on the
other hand, is free to work when and for whom he chooses. Full time does not
necessarily mean an 8-hour day or a 5- or 6-day week. Its meaning may vary with
the intent of the parties, the nature of the occupation and customs in the
locality. These conditions should be considered in defining "full time".
Full-time services may be required even though not specified in writing or
orally. For example, a person may be required to produce a minimum volume of
business which compels him to devote all of his working time to that business,
or he may not be permitted to work for anyone else, and to earn a living he
necessarily must work full time.
k.
Tools and materials. The furnishing of tools, materials, etc. by the employing
unit is indicative of control over the worker. When the worker furnishes the
tools, materials, etc., it indicates a lack of control, but lack of control is
not indicated if the individual provides tools or supplies customarily
furnished by workers in the trade.
l. Expense reimbursement. Payment by the
employing unit of the worker's approved business and/or traveling expenses is a
factor indicating control over the worker. Conversely, a lack of control is
indicated when the worker is paid on a job basis and has to take care of all
incidental expenses. Consideration must be given to the fact some independent
professionals and consultants require payment of all expenses in addition to
their fees.
E. Among the factors to be considered in
addition to the factors of control, such as those identified in subsection (D),
when determining if an individual performing services may be independent when
paragraph (1) of subsection (B) is applicable, are:
1. Availability to public. The fact that an
individual makes his services available to the general public on a continuing
basis is usually indicative of independent status. An individual may offer his
services to the public in a number of ways. For example, he may have his own
office and assistants, he may display a sign in front of his home or office, he
may hold a business license, he may be listed in a business directory or
maintain a business listing in a telephone directory, he may advertise in a
newspaper, trade journal, magazine, or he may simply make himself available
through word of mouth, where it is customary in the trade or
business.
2. Compensation on job
basis. An employee is usually, but not always, paid by the hour, week or month;
whereas, payment on a job basis is customary where the worker is independent.
Payment by the job may include a predetermined lump sum which is computed by
the number of hours required to do the job at a fixed rate per hour. Payment on
a job basis may involve periodic partial payments based upon a percent of the
total job price or the amount of the total job completed. The guarantee of a
minimum salary or the granting of a drawing account at stated intervals, with
no requirement for repayment of the excess over earnings, tends to indicate
that existence of an employer-employee relationship.
3. Realization of profit or loss. An
individual who is in a position to realize a profit or suffer a loss as a
result of his services is generally independent, while the individual who is an
employee is not in such a position. Opportunity for profit or loss may be
established by one or more of a variety of circumstances; e.g.:
a. The individual has continuing and
recurring significant liabilities or obligations in connection with the
performance of the work involved, and success or failure depends, to an
appreciable degree, on the relationship of receipts to expenditures.
b. The individual agrees to perform specific
jobs for prices agreed upon in advance, and pays expenses incurred in
connection with the work, such as wages, rents or other significant operating
expenses.
4. Obligation.
An employee usually has the right to end his relationship with his employer at
any time he wishes without incurring liability, although he may be required to
provide notice of his termination for some period in advance of the
termination. An independent worker usually agrees to complete a specific job.
He is responsible for its satisfactory completion and would be legally
obligated to make good for failure to complete the job, if legal relief were
sought.
5. Significant investment.
A significant investment by a person in facilities used by him in performing
services for another tends to show an independent status. On the other hand,
the furnishing of all necessary facilities by the employing unit tends to
indicate the absence of an independent status on the part of the worker.
Facilities include equipment or premises necessary for the work, but not tools,
instruments, clothing, etc., that are provided by employees as a common
practice in their particular trade. If the worker makes a significant
investment in facilities, such as a vehicle not reasonably suited to personal
use, this is indicative of an independent relationship. A significant
expenditure of time or money for an individual's education is not necessarily
indicative of an independent relationship.
6. Simultaneous contracts. If an individual
works for a number of persons or firms at the same time, it indicates an
independent status because, in such cases, the worker is usually free from
control by any of the firms. It is possible, however, that a person may work
for a number of people or firms and still be an employee of one or all of them.
The decisions reached on other pertinent factors should be considered when
evaluating this factor.
F. Whether the preponderance of the evidence
is being weighed to determine if the individual performing services for an
employing unit is an employee under the general definition of employee
contained in subsection (A), or may be independent when paragraph (1) of
subsection (B) is applicable, the factors considered shall be weighed in
accordance with their appropriate value to a correct determination of the
relationship under the facts of the particular case. The weight to be given to
a factor is not always constant. The degree of importance may vary, depending
upon the occupation or work situation being considered and why the factor is
present in the particular situation. Some factors may not apply to particular
occupations or situation, while there may be other factors not specifically
identified herein that should be considered.
G. An individual is an employee if he
performs services which are subject to the Federal Unemployment Tax Act or
performs services which are required by federal law to be covered by state
law.
Notes
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