ARIZONA STATE SENATE
Forty-seventh Legislature, Second Regular Session
VETOED
FINAL REVISED
FACT SHEET FOR H.B. 2478
workers’ compensation; vehicle lessors; scope
Purpose
Exempts certain taxi or livery vehicle companies from being liable for workers’ compensation coverage for drivers who are sole proprietors or independent contractors.
Background
Statute states that every employee who is injured in the course of employment, unless the injury was purposely self-inflicted, is entitled to receive and shall be paid workers’ compensation for loss sustained on account of the injury and such medical services as provided in the law.
A sole proprietor may waive the sole proprietor’s rights to workers’ compensation coverage and benefits if both the sole proprietor and the insurance carrier of the sole proprietor’s employer sign and date a waiver as specified in statute. Additionally, an independent contractor and the business the independent contractor is doing work for may prove the existence of an independent contractor relationship by executing a written agreement evidencing that the business does not have the authority to supervise or control the actual work of the independent contractor, exempting the independent contractor from workers’ compensation coverage provided by the business. Statute specifies the requirements for the agreement including that the agreement show the business does not require the independent contractor to perform work exclusively for the business, does not pay the independent contractor a salary or hourly rate instead of an amount fixed by contract, and does not dictate the time of performance.
According to a report by the Department of Weights and Measures, there are approximately 1,985 valid taxis, limousines or livery vehicles operating on Arizona streets. A taxi is available for hire for a fare determined primarily on the basis of distance traveled and does not operate on a regular route or between specified places. A livery vehicle, such as a shuttle van, provides passenger services for a fare determined by a flat rate or flat hourly rate between geographic zones or within a geographic area.
According to the Transportation Representatives Insuring Public Safety, the taxi industry has moved towards a business model where companies lease vehicles to independent contractor drivers. The drivers pay the taxi companies a certain amount to lease the vehicle and the driver can use the vehicle for whatever purpose the driver chooses; the driver is not required to respond to dispatch calls, to be in specific locations or to work certain hours. The taxi company does not set the fares and does not pay the driver a salary or hourly rate. Taxi companies have found themselves in litigation over disputes with these drivers who have signed independent contractor contracts and then file for workers’ compensation benefits.
In 2005, S.B. 1237, which has similar provisions to H.B. 2478, was adopted by the Legislature. The Senate bill was vetoed by the Governor. In her veto message, the Governor stated that under current case law, taxi drivers are often considered employees and are entitled to workers’ compensation and that S.B. 1237 would have reversed that precedent, leaving a vast majority of drivers without protection for work related injuries. The Governor was also concerned with having a definition of independent contractor that is unique for taxi drivers, fearing that the new definition might be used in other areas of workers’ compensation law.
There is no anticipated fiscal impact to the state General Fund associated with H.B. 2478.
Provisions
1. States a business that leases vehicles to drivers of taxis and livery vehicles is not liable for workers’ compensation coverage or the payment of premiums for the driver if the business does all of the following:
a) does not require the driver to perform work exclusively for the business even though the driver may choose to work exclusively for the business.
b) does not pay the driver a salary, hourly rate or other financial remuneration.
c) obtains from the driver either a sole proprietorship waiver or an independent contractor agreement.
2. Considers the drivers of taxis or livery vehicles under the specified conditions to be sole proprietors or independent contractors and states they are not employees of the business and the business is not the employer of the driver for workers’ compensation purposes.
3. States a determination of employment status for a driver of a taxi or livery vehicle for workers’ compensation purposes is not evidence of an employment status for any other purpose.
4. Makes technical changes.
5. Becomes effective on the general effective date.
Governor’s Veto Message
· The Governor indicates in her veto message that, although the scope of H.B. 2478 is more narrow than S.B. 1237 from the 2005 legislative session, she continues to believe it is unwise to eliminate workers’ compensation for taxi drivers. She also notes constitutional concerns.
House Action Senate Action
COM 2/1/06 DP 8-1-0 CED 3/8/06 DP 5-2-1-0
3rd Read 3/1/06 38-20-2 3rd Read 4/4/06 20-10-0-0
Vetoed by the Governor 4/11/06
Prepared by Senate Research
May 22, 2006
BP/ac