Arizona Court of Appeals Division One holds that when a business agrees to be a co-employer of workers, the workers are not “leased employees” for purposes of the Arizona State Retirement System.

The Arizona State Retirement System (“ASRS”) requires participating employers to contribute to their workers’ pensions.  But that requirement does not apply if the workers are merely “leased employees.”  A.R.S. § 38-711(23)(f).

A participating employer attempted to use this exception by leasing workers from third parties.  But the ASRS Board ruled that the workers were not leased employees, based on the written agreements between the employer and the third parties.  The superior court agreed. 

The Court of Appeals affirmed.  A “leased employee” is one who works pursuant to a “leasing agreement between the employer and another person” and is “not otherwise an employee of the employer.”  A.R.S. § 38-711(23)(f).  Here, the agreements between the employer and the third parties were co-employment agreements, not leasing agreements.  The agreements specified that the employer was a co-employer of the workers, and the agreements did not mention the leasing of employees.  Moreover, the third parties told ASRS that they were not leasing companies.  Thus, the employer owed pension contributions for the workers.

Judge Howe wrote the opinion; Judges Jones and Morse Jr. joined.