Short answer: Yes. Under A.R.S. §23-902, Arizona employers that regularly employ anyone in the usual course of business, even one part-time worker, must carry workers' compensation or be approved to self-insure. Independent contractors, casual workers and domestic servants are generally excluded. Arizona also lets employees reject coverage in writing before an injury, a rare rule.
Who's covered by law
Arizona Revised Statutes §23-902 makes an employer subject to the workers' compensation law when it has one or more workers regularly employed in the same business, whether they work full-time or part-time. The Industrial Commission of Arizona (ICA) administers the system and enforces compliance.
Who's generally excluded
- Independent contractors who are truly independent, meaning they control how the work is done.
- Casual workers whose employment is occasional and not part of your usual trade or business.
- Domestic servants, such as some household employees.
- Business owners without employees, for themselves.
Classifying someone as a contractor doesn't decide the question. If you control the work and it's part of your regular business, Arizona may treat the person as an employee.
Arizona's unusual employee waiver
Arizona is one of the few states that lets an employee give up workers' comp. Under A.R.S. §23-906, an employee can reject the workers' compensation law by giving the employer a signed, dated written notice before any injury. An employee who rejects keeps the right to sue the employer instead.
The statute also requires employers to post a notice telling employees that they're deemed to have accepted the law unless they reject it in writing, and that rejection forms are available. Rejections are uncommon, and an employer still needs coverage for the rest of its workforce. Talk with an attorney before relying on one.
What happens without coverage
If an employee of a noncomplying employer is injured, the worker can file a claim with the ICA, which can pay through its Special Fund and then pursue the employer for the cost. The employee may also sue the employer directly. The ICA can seek penalties, and the employer can be ordered to stop doing business until it complies.
Buying coverage in Arizona
Arizona's market is private and competitive. CopperPoint Mutual Insurance Company, formerly the State Compensation Fund (SCF Arizona), became a private mutual insurer on January 1, 2013, and writes coverage alongside other insurers. Large, financially strong employers can self-insure with ICA approval.
What a policy pays
Workers' comp pays medical care, a portion of lost wages, permanent disability benefits and death benefits for job-related injuries and illnesses. The employer's liability section (Part Two) responds to certain lawsuits tied to workplace injuries. In exchange, workers who accept the system generally can't sue their employer for covered injuries. See our workers' compensation insurance page.
Premiums and audits
Arizona premiums are based on payroll, job classification and, for larger employers, an experience modification factor. Expect a year-end audit that reconciles estimated payroll with actual payroll. Seasonal businesses, such as landscaping and pool service, should update payroll estimates as staffing changes to avoid a large audit bill.
Common scenarios
You hire a part-time office assistant for 15 hours a week. That's regular employment. You need coverage.
A neighbor helps you move office furniture once. That's likely casual employment, outside your usual business.
An employee hands you a written rejection. The employee keeps the right to sue but gives up workers' comp benefits. File the notice and keep coverage for everyone else.
Your pool company hires summer help. Update your payroll estimate with your insurer.
Key terms
- Regularly employed: work that's part of the usual course of your business, even part-time.
- Employee rejection: the A.R.S. §23-906 written notice that opts an employee out before injury.
- Special Fund: the ICA fund that can pay claims when an employer is uninsured.
- Self-insurance: ICA-approved arrangement to pay claims directly.
Bottom line
If you regularly employ anyone in Arizona, even part-time, you need workers' compensation. Arizona's employee waiver is real but rare, and it doesn't excuse the employer from covering everyone else.
Contact Alishahi Insurance or call (877) 711-4545. See insurance in Arizona and our business owners policy (BOP) guide.
Frequently asked questions
Is workers' comp required in Arizona?
Yes, for employers that regularly employ anyone in the usual course of business, including one part-time worker.
Can an Arizona employee reject workers' comp?
Yes. Under A.R.S. §23-906, an employee can reject it with a signed written notice before any injury and keep the right to sue.
Who is exempt in Arizona?
Generally independent contractors, casual workers, domestic servants and owners without employees.
What is CopperPoint?
The former State Compensation Fund, which became a private mutual insurer on January 1, 2013.
What happens if an Arizona employer is uninsured?
The ICA can pay the claim through its Special Fund and pursue the employer, and the employee may sue directly.
Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. This isn't legal, tax or financial advice or a coverage determination. Coverage depends on policy language and underwriting, and rules vary by state.