On November 8, 2016, Arizona voters passed the Minimum Wage and Paid Sick Time Off Initiative (Proposition 206), which will increase the state's minimum wage to $10.00 in January 1, 2017 Thereafter, the minimum wage will be raised to $10.50 effective January 1, 2018, $11.00 effective January 1, 2019, and $12.00 per hour effective January 1, 2020. Beginning in 2021, the minimum wage will continue to be adjusted annually based on Arizona’s cost of living. Employers with employees who customarily and regularly receive tips as part of their income may continue to pay employees $3.00 less than the minimum wage in accordance with Arizona’s minimum wage act if the employer can prove the employee is earning at or beyond the minimum wage after tips are counted.
Prop 206 will also require businesses with 15 or more employees to provide at least 40 hours of annual paid sick time to employees. Businesses with fewer than 15 employees will be required to provide at least 24 hours of paid sick time per year to each employee. This portion of the law does not go into effect until July 1, 2017.
Accrued paid sick time may be used for the employee for his or her own mental or physical illness, injury or health condition; or to care for a family member’s – as the term family member is defined under the statute – mental or physical illness, injury or health condition.
Here are the major points of emphasis:
- All employees will accrue paid sick time at a minimum rate of one hour for every 30 hours worked for the employer.
- Employees of an employer with 15 more employees may cap maximum annual accrual of paid sick time at 40 hours, while smaller employers may cap the maximum annual accrual at 24 hours.
- Employees who are exempt under the Fair Labor Standards Act of 1938 (“FLSA”) will be assumed to work 40 hours in each work week for purposes of calculating paid sick time accrual, unless their normal work week is less than 40 hours, in which case earned paid sick time accrues based on actual hours worked.
- Unused earned paid sick time must be carried forward to the following year consistent with the accrual limits of the statute. Employers may forego this requirement by following a procedure specified in the statute.
- A 90-day probationary period for new employees may apply to the use, but not accrual, of paid sick time.
- The new law includes specific employee protections making it unlawful for an employer to retaliate or discriminate against an employee for exercise of his or her use of paid sick time.
Employers can do away with the accrual method in favor of simply providing employees at the beginning of the year all earned paid sick time that an employee is expected to accrue during the year. (This is similar to California’s paid sick time law.) The new Arizona law contains other provisions explaining issues such as an employer’s ability to pay its employees for earned, unused paid sick time rather than carrying it forward to the next year; notice required by the employee for use of paid sick time; and the employer’s ability to request documentation to verify proper use of paid sick time. Notably, the law does not require the payment of accrued but unused paid sick time upon termination of employment.
Employers should note that the provisions of the new paid sick time law are minimum requirements, and nothing in the new law prevents an employer from establishing a more generous policy or continuing one already in place.
Given the July 1, 2017 implementation date of the sick leave provision, DHR will be hosting a webinar in the early spring to further discuss these requirements and how it impacts Arizona businesses. Sign up for DHR News & Updates to be informed of the webinar.