Arizona’s Workers’ Comp Law – The Basics
Arizona Workers’ Comp Requirements for Contractors – Who Needs Coverage?
If you’re a contractor operating in Arizona and have even
one employee, workers’ compensation coverage is legally required. That applies whether the employee is full-time, part-time, or temporary. There’s no threshold above zero.
Under Arizona law, once you pay someone to perform labor, you’re an employer—and you’re expected to carry a policy that covers workplace injuries. This includes all trades: from general contractors in Phoenix to roofers in Prescott to electricians in Glendale.
Who’s Considered an Employee in Arizona?
Not everyone who works for you can be considered an “independent contractor.” Arizona uses several tests—like the level of control you have over the worker—to determine whether someone is a true independent contractor or actually an employee. If you direct how and when someone works, provide tools, or they only work for you, they likely need to be treated as an employee.
Misclassifying laborers to avoid workers' comp coverage can result in serious penalties.
Who Can Opt Out of Workers’ Comp Coverage?
Sole Proprietors & Partners
You’re not legally required to cover yourself under Arizona workers’ comp law. That said, you can opt in and purchase a policy to protect yourself—but it’s voluntary. Some sole proprietors get a ghost policy to meet certificate requirements without paying for coverage they don’t want.
Corporate Officers & LLC Members
Arizona does consider officers and LLC members as employees—but they can file a rejection form to exclude themselves from coverage. This helps reduce the premium cost. If you file this waiver, and you’re injured on the job, you won’t be covered, so make that decision carefully. Forms are available through the Industrial Commission of Arizona at azica.gov.
Independent Contractors
If you truly work independently (you have your own entity, work for multiple clients, and set your own hours), you don’t have to be covered under someone else’s policy. However, if a subcontractor is
not insured and gets injured, the hiring contractor might still be held liable. That’s why many general contractors require all subs—even solo ones—to carry WC or provide a signed waiver.
Penalties for Not Carrying Required Workers’ Comp
The consequences of ignoring Arizona’s comp laws aren’t minor. If you’re caught without required coverage:
- You could face
civil penalties and stop-work orders
- You’ll be financially responsible for all medical bills and lost wages if someone is injured
- In some cases, intentional avoidance can result in
felony charges
Bottom line: the state takes compliance seriously, and the financial fallout from an uninsured claim can ruin your business.
What’s the Worker’s Compensation Waiver Form?
For officers or LLC members opting out of coverage, Arizona allows you to file a
Worker’s Compensation Rejection form. This is a legal document stating that you understand you are waiving your right to benefits. You’ll need to file it properly with the ICA to ensure the exclusion is recognized.
Even if You’re Exempt—Coverage Might Still Be Smart
Just because you’re not required to carry workers’ comp doesn’t mean you shouldn’t. If you’re a solo contractor without health insurance, a serious injury on the job could leave you unable to work and facing high medical bills. Optional workers’ comp coverage gives you access to benefits like:
- Lost wage replacement
- Medical care for work injuries
- Coverage without relying on personal health insurance
It’s also a good business move: clients often feel more comfortable hiring contractors who are fully insured—even if it’s not legally mandated.
Compliant, Covered & Ready to Work
If you have any employees—even part-time—you need to carry workers’ comp. If you’re a one-person operation, you have choices:
opt out, carry coverage, or use a
ghost policy if required to show proof. We’ll walk you through the right option for your business.
Need Help Navigating Workers’ Comp Law in Arizona?
JP Insurance Group is here to help. We’ll explain your legal obligations, assist with waivers or exemptions, and get your policy issued fast—whether you're based in Tempe, Buckeye, Tucson, or beyond.
Frequently Asked Questions – Arizona Workers’ Comp Rules for Contractors
Do all Arizona contractors need workers’ comp insurance?
If you have even one employee, yes—you’re legally required to carry workers’ comp in Arizona. This includes part-time, seasonal, and temporary workers. There’s no minimum payroll threshold.
I’m a sole proprietor with no employees. Am I required to carry workers’ comp?
No. Sole proprietors (and partners) are exempt under Arizona law. However, if you want to be covered personally, you can choose to opt into coverage or use a ghost policy if you're just trying to meet jobsite requirements.
What about LLC members or corporate officers—are they considered employees?
Yes, unless they file a formal exemption with the Industrial Commission of Arizona (ICA). Many small business owners opt out to save premium costs, but they’ll have no coverage if injured.
Do I need to cover 1099 subcontractors under my policy?
Not if they are true independent contractors with their own business and insurance. But if they don’t carry their own comp and get injured on your job, you could be held liable. It’s a good idea to collect proof of coverage or a signed waiver.
What are the penalties for not having required workers’ comp?
Arizona can issue fines, stop-work orders, or even felony charges for knowingly operating without required coverage. You could also be held personally liable for 100% of the injured worker’s medical bills and lost wages.
Where do I get the opt-out or exemption form for owners?
The Workers’ Compensation Rejection Form is available at azica.gov. It must be signed and filed properly to be valid. JP Insurance can help make sure the form is completed and submitted correctly.
Let’s Make Sure You’re Covered
Not sure if your contracting business needs workers’ comp insurance? Contact JP Insurance Group today. We’ll help you determine your legal status and set you up with the proper coverage—or the proper form—so you’re compliant and confident.