Update on Challenges to Arizona’s Minimum Wage Increase

Mar 10, 2017

Update on Challenges to Arizona’s Minimum Wage Increase

The Arizona Supreme Court has agreed to hear a challenge to the minimum wage increase that went into effect earlier this year. The court agreed to hear arguments from business groups on a single, narrow issue. While the challengers are disappointed that the court refused to block the implementation of the law, they are pleased to get the chance to present their case.

Brief History of the Fair Wages and Healthy Families Act

In November 2016, voters passed Proposition 206, also known as the Fair Wages and Healthy Families Act. This new law raises the minimum wage in Arizona for most workers to $10 an hour and requires minimum amounts of paid sick leave. The ballot measure received support of 58% of the voters.

This new law went into effect January 1st of this year. The law also calls for the minimum wage to increase to $10.50 in January 2018, and other steady increases until reaching $12 an hour in 2020.

Several business groups immediately challenged the law in court on several different grounds. They also requested that the court block the law until the court challenge could be heard in full. The Arizona Supreme Court declined to block the law earlier this year, which many supporters of the law took to be a sign that the court was unlikely to strike it down.

Opponents of the law initially argued that Prop. 206 should be struck down for two reasons. One, they argued that the measure unlawfully included two separate issues; they claim that the mandatory sick leave and the raise in the minimum wage should be counted as two different issues. Those two issues should have been the subject of two different ballot measures. The court has declined to hear that argument.

However, the court has agreed to hear another argument from Prop 206 opponents, one which they feel violates the state’s Revenue Source Rule.

The Court and the Revenue Source Rule

According to the Arizona Constitution, any citizen initiatives such as Prop 206 that require the expenditure of state funds must specify in the initiative where the funds will come from. This is called the Revenue Source Rule.

The supporters of Prop. 206 claim that the Revenue Source Rule does not apply because the measure specifically excludes state employees from both the increased minimum wage and sick leave provisions. But, backers point out that the state will still have to expend more money because the measure does apply to state contractors.

One example of the increased state expenditures that the critics of the Fair Wages and Healthy Families Act point to is the estimated $75 million increase the state will have to pay to contract care providers for the state’s disabled population.

What Happens Next?

Right now, the law is already in effect. Employers not exempted from the increase are required to pay employees the new minimum wage of $10 an hour and comply with the new paid sick time requirements.

The court will hear arguments in the case on March 9th. The court will not only consider if the law violates the Revenue Source Rule, but also what the remedy should be if a violation is found.
Experts suggest that the court will almost certainly not make an immediate ruling about the future of Prop. 206, but all sides hope the court will issue a ruling and guidance quickly. The court has several different options.

The court could rule that Prop. 206 does not violate the Revenue Source Rule because it exempted state employees and that the increased contractor costs are either speculative or incidental.
Another option is that the court could find that Prop 206 does violate the Revenue Source Rule, is unconstitutional, and throw out the law. The court could also come down somewhere in the middle. It could find that the law violates the Revenue Source Rule only as it applies to contractors and either exempt state contractors from the law or come up with some other remedy.

Both sides of the Prop. 206 issue hope that the court ends the uncertainty of the law soon so that businesses and employees can make the needed adjustments and move forward.

Diversified Human Resources (DHR) is the leading full-service HR solutions provider based in Arizona, with offices in Denver. Since 1996, DHR has served thousands of Arizona and regional companies with payroll, benefits, HR administration, retirement, and workers compensation solution. Contact us today and learn how easy it is to tailor a plan to upgrade your HR function and improve your bottom line.

Todd Miller

Written by Todd Miller

Director of Marketing, DHR

Todd leads DHR’s marketing department and is responsible for overall marketing strategy and execution. With nearly 15 years in the sourcing services and solutions space, Todd provides interesting insight on a variety of topics in this fast-paced and ever-changing industry.

Todd lives in Scottsdale with his two daughters and Collie/Shepard. One is a good boy.

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