WHAT THE STATE LAW SAYS ABOUT 1099 CONTRACTORS

FROM Substantive Policy Statement: 102 First Issued: 05/17/2013 Last Revised: 03/15/2016

If the individual is an employee, the licensee must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid. On the other hand, if the person is an independent contractor, the person needs to have their own ROC license. 

• A.R.S. § 32-1154(A)(4) – Failure to comply with the statutes or rules governing social security, workers' compensation or unemployment insurance. Page 1 of 3 Registrar of Contractors • 

A.R.S. § 32-1154(A)(9) – Aiding or abetting a licensed or unlicensed person to evade this chapter, knowingly or recklessly combining or conspiring with a licensed or unlicensed person, allowing one's license to be used by a licensed or unlicensed person or acting as agent, partner, associate or otherwise of a licensed or unlicensed person with intent to evade this chapter. • 

A.R.S. § 32-1154(A)(11) – Failure of a contractor to comply with any safety or labor laws or codes of the federal government, state or political subdivisions of the state. 

• A.R.S. § 32-1154(A)(13) – Knowingly entering into a contract with a contractor for work to be performed for which a license is required with a person not duly licensed in the required classification. In summary, licensees that hire employees must comply with laws governing social security, workers' compensation, unemployment insurance, income taxes, and withholding taxes. Licensees that hire independent contractors must hire only ROC licensed subcontractors.  Violation of any of these statutes may result in a license being suspended or revoked.  Additionally, the licensure violation of aiding and abetting an unlicensed contractor in 

A.R.S. § 32-1154(A)(9) may also be a class 1 misdemeanor under A.R.S. § 32-1164(A). A person hired through a Professional Employer Organization (PEO) is considered an employee of both the PEO and the licensee.