Arizona — Hiring & Onboarding

Prior to January 1, 2026

Arizona law required every employer to verify the employment eligibility of each employee hired after December 31, 2007, through the federal E-Verify program. This universal mandate applied to all Arizona employers under the Legal Arizona Workers Act and was codified at A.R.S. § 23-214(A).

Effective January 1, 2026 (HCR 2060 amendment)

Beginning January 1, 2026, the prior blanket requirement for E-Verify on all new hires is repealed. Under the new law (A.R.S. § 23-214 as amended by HCR 2060), E-Verify is only mandatory when an employer enters into a contract for labor or services if the total value of the contract is $600 or more in any calendar year. In addition, the expansion now covers many independent contractors as well as employees, subject to enumerated exceptions. The new requirement excludes (a) certain subcontractors, (b) licensed professionals whose lawful presence was previously verified, (c) individuals with qualifying state or federal ID, and (d) individuals previously E-Verified under the law.

Key points for practitioners

• The original 2008–2025 rule (all new hires) sunsets at year-end 2025.
• As of 2026, employers must determine E-Verify obligations based on the value and nature of the labor/services contract, not merely new hire status.

Source: A.R.S. § 23-214 (pre-2026 requirement) Source: A.R.S. § 23-214 (as amended by HCR 2060, eff. Jan. 1, 2026)

Arizona requires every employer to report each newly hired and rehired employee to the Arizona New Hire Reporting Center within 20 days after the employee is hired, rehired, or returns to work. This obligation is imposed under A.R.S. § 23-722.01(D) and applies to all employers. The statute defines "employer" to have "the same meaning prescribed in section 3401(d) of the internal revenue code of 1986 and includes any governmental entity and any labor organization."

Who must be reported

The statute defines "employee" to mean "a person who is employed within the meaning of chapter 24 of the internal revenue code of 1986." The requirement covers both new hires and rehires—employees who return to work after being laid off, furloughed, separated, granted a leave without pay, or terminated from employment.

The statute provides one narrow exemption: "Employee does not include an employee of a federal or state agency performing intelligence or counterintelligence functions if the head of the agency has determined that reporting with respect to the employee could endanger the safety of the employee or compromise an ongoing investigation or intelligence mission."

Required information

A.R.S. § 23-722.01(D) specifies that "[t]he report shall contain all of the following":

1. The employee's name, address and social security number.
2. The employer's name, address and federal tax identification number.
3. The date the employee first performed services for pay.

Under subsection C, "[e]mployers shall report by submitting a W-4 form or an equivalent form at the option of the employer."

How and when to report

Employers must submit the reports within 20 days after the employee is hired, rehired, or returns to work. Subsection C permits submission "magnetically, electronically or by first class mail, telefacsimile or any other means that are authorized by the department of economic security."

Employers who submit reports magnetically or electronically face a different timing rule: they "shall submit the reports in two monthly transmissions not more than sixteen days apart." This alternative replaces the individual 20-day deadline for those employers.

Multi-state employers

Subsection E provides a single-state reporting option for multi-state employers: "An employer who has employees who are employed in two or more states and who transmits new hire reports magnetically or electronically may comply with the new hire reporting requirements by designating one state in which the employer has employees to transmit the report." The employer must notify the United States Secretary of Health and Human Services of the designated state.

Processing and child support enforcement

The Department of Economic Security operates a state directory of new hires and must enter reported information within five business days of receipt. The information is forwarded to the national directory of new hires within three business days. The Department conducts an automated comparison of reported social security numbers against the state case registry of child support orders. When a match is found for an obligor required to pay support in a Title IV-D case, the Department, within two business days, must issue an income withholding order to the employer.

Source: A.R.S. § 23-722.01

2026 Expansion: E-Verify now applies to many independent contractors

Through December 31, 2025, Arizona's E-Verify mandate applies only to new employees as defined by A.R.S. § 23-211(4), excluding "independent contractors." The prior law required employers to use the federal E-Verify system for employees hired after December 31, 2007, and did not cover independent contractors (see prior A.R.S. §§ 23-211(4), 23-214(A)).

Material Change Effective January 1, 2026

Effective January 1, 2026, Arizona law expands mandatory E-Verify to most independent contractor arrangements. Under the new law (as amended by HCR 2060):

• Employers must E-Verify not only traditional employees but also anyone with whom the employer enters into a contract for labor or services if the total value of the contract is $600 or more for any period in a calendar year.
• The new requirement excludes certain individuals:
• Individuals who are being engaged through a subcontract between an employer and another employer or independent contractor.
• Individuals licensed by any agency of this state, another state, or the federal government, provided the license was issued after verifying lawful presence.
• Individuals with a valid Arizona driver license (or equivalent from another state with similar verification provisions), issued after verifying lawful presence.
• Individuals whose status was previously E-Verified in compliance with this law.

The definition of "contractor" and terms remain fact-specific. The expanded E-Verify requirement aims to cover most common-law independent contractor arrangements but continues to hinge on the substance of the work relationship and exceptions as detailed above.

Citation and Notes

• Pre-2026 law: No E-Verify mandate for independent contractors; see A.R.S. § 23-211(4) ("employee" does not include independent contractor).
• 2026 forward: Expansion under HCR 2060 (2024 Second Regular Session).

Source: A.R.S. § 23-211(4) Source: A.R.S. § 23-214 (as amended by HCR 2060, eff. Jan. 1, 2026) Source: HCR 2060 Bill Summary, House Engrossed

State penalties

Arizona law does not impose civil or criminal penalties on employers who fail to comply with the state's new hire reporting requirements. The controlling statute, A.R.S. § 23-722.01, states clearly: "This section does not allow the department to impose penalties on employers for failing to comply with this section's reporting requirements." As a result, Arizona's Department of Economic Security may not assess fines, seek damages, or take legal action against employers solely for missing or incorrect new hire reports under state law.

Federal penalty ceiling (but not active in Arizona)

While Arizona itself does not impose penalties, federal law sets an outer limit on what states are permitted to impose. 42 U.S.C. § 653a(d)(1)-(2) authorizes states to assess civil penalties of up to $25 per unreported hire, and up to $500 per violation if an employer and employee conspire to avoid reporting. As of now, Arizona has not exercised this authority, so these penalty amounts do not apply in practice here. Employers operating in multiple states should be aware that other states may enforce penalties as permitted under the federal law.

Summary

In plain terms: Arizona employers are required to report new and rehired employees, but there are currently no state penalties for failing to do so. The federal authorization for penalties exists, but Arizona does not impose them. Refer to the federal hiring and onboarding guide for further federal compliance context.

Source: A.R.S. § 23-722.01(L) Source: 42 U.S.C. § 653a(d)

Penalties for failure to use E-Verify and unlawful hiring, including 2026 expansion

Arizona's Legal Arizona Workers Act (LAWA) requires employers to verify the work authorization of employees using E-Verify. Until December 31, 2025, all Arizona employers must use E-Verify for all new employees hired after December 31, 2007. Beginning January 1, 2026, the E-Verify mandate is materially expanded: employers must now use E-Verify when entering into any contract for labor or services totaling $600 or more in a calendar year—this includes both new employees and most independent contractor arrangements, subject to statutory exceptions. (A.R.S. § 23-214 as amended by HCR 2060)

Penalties and enforcement mechanics

• If an employer is found to have "knowingly" hired unauthorized workers, the court must order: (1) termination of all unauthorized workers; (2) the employer to file a sworn affidavit promising future compliance (license suspension if not filed in 3 business days); (3) three years' probation on the business location, with quarterly reporting of all new hires to the county attorney; and (4) potential suspension of all business licenses for up to 10 business days based on statutory factors. A second knowing violation at the same business location during probation results in permanent revocation of all business licenses. (A.R.S. § 23-212)

• For "intentional" employment of unauthorized workers, penalties are steeper: five years' probation and mandatory license suspension for at least 10 business days; a second intentional violation during probation means permanent license revocation. (A.R.S. § 23-212.01)

• If the employer uses E-Verify for an employee or contractor, there is a rebuttable presumption they did not knowingly or intentionally employ an unauthorized alien. Complaints are investigated by the Attorney General or county attorney, and enforcement actions proceed in expedited court processes, with notifications to ICE and local law enforcement as required.

Important 2026 change: The expansion of E-Verify obligations to certain independent contractor arrangements, with enforcement via the same penalty structure as for unlawful hiring of employees, is effective for agreements entered on or after January 1, 2026.

Source: A.R.S. § 23-212 Source: A.R.S. § 23-212.01 Source: A.R.S. § 23-214 (as amended by HCR 2060, eff. Jan. 1, 2026)

Arizona employers must comply with federal Form I-9 requirements—there are no Arizona-specific deviations. Under the Immigration Reform and Control Act, every employer must complete Form I‑9, Employment Eligibility Verification, for each employee hired to work in the United States after November 6, 1986. This requirement covers all employees, regardless of citizenship or immigration status.

Timing requirements:

• Section 1 (employee attestation): The employee must complete and sign Section 1 of the I‑9 form no later than their first day of employment, but not before accepting a job offer.
• Section 2 (employer verification): The employer (or an authorized representative) must examine the employee’s original identity and work authorization documents, and complete Section 2 within three business days of the employee’s first day of employment.

Retention requirements: Employers must retain the completed Form I-9 for either three years after the date of hire or one year after the date employment ends, whichever is later. Employers are not required to submit I-9 forms to government agencies, but must make them available for inspection by DHS, DOL, or DOJ officers upon request.

In summary: every Arizona employer must complete Form I‑9 for all new employees, following federal deadlines for completion and retention. Arizona law does not alter these federal obligations. Source: USCIS Form I-9 Instructions Source: 8 C.F.R. § 274a.2