Although Arizona generally follows federal wage law, state minimum wage laws are more favorable, providing a higher minimum wage, an extended statute of limitations for minimum wage violations, and the potential for employees to recover triple damages on claims for unpaid (or underpaid) back wages. Federal law allows for double damages for unpaid overtime and unpaid minimum wage.
Enacted in 2007, the Arizona Minimum Wage Act, A.R.S. § 23-364, requires employees be paid at least minimum wage for ALL hours worked. Neither state nor federal wage laws can be waived. An employee cannot “opt out” of these requirements. Interestingly, this statute allows an employee to seek unpaid, or underpaid, minimum wages as far back as 2007 if the violations are “part of a continuous course of action by the employer”. The penalty for failure to pay at least minimum wage for all hours worked is the unpaid sum, plus the same amount doubled, resulting in treble damages for unpaid minimum wages. In addition, an employee is entitled to recover costs and attorney’s fees. In November 2016, voters passed Proposition 206 annually increasing the Arizona minimum wage statewide. Effective January 1, 2021, the minimum wage in Arizona will be $12.15, while the federal minimum wage remains $7.25 an hour.
Under the state statute, when an employer claims a tip credit, it may reduce the minimum wage by up to $3.00 per hour less to employees who customarily and regularly receive tips. The tipping credit under the FLSA may allow a higher offset, but again, an employee is entitled to the benefit of the most favorable law, in this case, Arizona state wage law.
The state minimum law applies to the vast majority of employers, although some individuals are exempt from Arizona’s minimum wage, including:
- Employees who work for a parent or sibling;
- Employees who provide babysitting services in the employer’s home on a casual basis; and
- Employees employed by the government of the United States or by the State of Arizona.
City of Flagstaff Minimum Wage
The City of Flagstaff’s Minimum Wage Law, passed in 2017, set a schedule of annual increases. Effective January 1, 2021, the minimum wage jumps to $15.00 an hour for all covered employees, those who worked or are expected to work 25 hours or more in any given calendar year within the city limits of Flagstaff, Arizona. The law also provides annual incremental increases for tipped employees, those individuals in positions that regularly or customarily receive $30 or more in tips per month. Tipped employees are often subject to a “tip credit” reducing their hourly minimum wage by $3. As such, as of the New Year, tipped employees working in Flagstaff must be paid no less than $12.00 an hour. In 2022, the Flagstaff minimum wage again rises to $15.50 an hour (or $2 above the State of Arizona minimum wage, whichever is higher), and the tipped employee credit is incrementally reduced by .50 a year until it is eliminated entirely.
Arizona follows federal overtime law. Employers must pay all non-exempt employees overtime pay for all hours worked in excess of 40 in a workweek at 1.5 times the employee’s regular wage. For hourly employees, this is fairly straightforward, 1.5 times their hourly rate for all hours worked in excess of 40 in a 7-day workweek. If an employee is paid a different hourly rate for various tasks throughout the workweek, the weighted average applies. Salaried non-exempt employees are a bit trickier: divide the annual salary (which as of January 2020, must be at least $35,568), by 2080 hours (40 hours a week for 52 weeks) for the effective hourly rate which is then multiplied by 1.5 for all hours worked in excess of 40 in a workweek. Time worked does not include sick time, vacation time or holidays. It is only time actually worked.
Exemptions from Overtime
If an employee’s job duties fall within an exemption from the FLSA’s overtime requirement, the employer does not have to pay overtime, or in most cases, the federal minimum wage. An employer must still nonetheless comply with the state (or local) minimum wage law. The most common (and most misunderstood and misapplied) exemptions to the federal overtime pay requirement are:
- Administrative employees;
- Executive employees; and
- Professional employees.
Numerous additional exemptions exist, but these are the most common, and the most often misunderstood and misapplied. Although salaried Administrative, Executive, and Professional employees may be exempt under federal law, they are not exempt from the Arizona (or local) minimum wage regulations. This means these employees must be paid a salary that equates to at least minimum wage for all hours worked. This could result in a higher salary requirement than federal law. For example, as of 2020, the Arizona minimum wage was $12/hour. If an Administrative, Executive, or Professional employee was required to work at least 60 hours per week, their salary would have to be at least $720/week which would be higher than the 2020 federal salary requirement of $684/week.
Under both state and federal law, it is unlawful for an employer to retaliate against an employee exercising their rights under any of these wage statutes. Arizona law provides, in addition to all other remedies, a court can award assess a penalty of not less than $150 per day from the date of the initial act of retaliation through the date of judgment or any settlement. A.R.S. § 23-364(G).
Holidays / Vacation / Sick Leave
Arizona employers are not required to offer paid holiday or paid vacation time. Employers that do offer these discretionary benefits, may do so on a “use-it-or-lose-it” basis. Accrued but unused vacation need not be paid out upon separation absent a written policy requiring payout, or evidence that it is the employer’s practice to pay it out upon separation.
The Fair Wages and Healthy Families Act, passed November 2016, requires paid sick leave. Arizona employers with 15 or more employees must provide up to 40 hours of earned paid sick time per year, accrued at 1 hour of paid sick time for every 30 hours worked. Employers with fewer than 15 employees must provide up to 24 hours paid sick time, accrued at 1 hour of paid sick time for every 30 hours worked. Retaliation for taking paid sick leave is prohibited. https://faulknerlaw.net/reminder-arizonas-paid-sick-leave-requirements-and-primer/
Meal Breaks / Rest Periods
Arizona law does not require employee breaks or lunch periods. If breaks are given, employers must follow federal law which mandates breaks of 20 minutes or less must be paid. Meal breaks of 30 minutes or more may be unpaid, provided the employee is relieved of all job duties.
Employers are not required to pay employees for jury duty. Although employees may opt to use paid time available for jury duty, an employer may not require it. Employees may not lose seniority or be subjected to retaliation for serving on a jury.
Reporting Time Pay
Neither Arizona nor federal law requires payment if an employee reports to work expecting to work for a certain number of hours but does not get to work their full schedule.
Under Arizona law, all Arizona-based employers must pay their employees at least twice per month, no more than 16 days apart. If a payday falls on a holiday, payday must occur prior to the holiday.
Arizona does not require employers to provide severance pay. Discharged employees must be paid all due wages within 7 working days or at the end of the next regular pay period, whichever is sooner. Employees who quit must be paid all due wages by the next payday.
Arizona does not address specific types of deductions that may be taken but the FLSA prohibits deductions that reduce an employee’s wage below the minimum for items such as shortages, uniforms, trade tools, or damaged goods.
Statute of Limitations
Overtime claims must be brought within 2 years, or 3 years when the violation is “willful.” Under Arizona’s wage law, timeframes to bring wage claims are:
- 1 year to seek treble damages (3x backpay) for wrongfully withheld earned wages;
- 1 year for failure to pay wages in breach of an employment agreement; and
- 2 years to seek unpaid or underpaid minimum wages, 3 years in the case of a willful violation, and the claim may encompass all violations that occurred as part of a continuing course of employer conduct regardless of their date, as far back as 2007.
State Law Remedies / Penalties
Arizona wage law can be more favorable to workers than federal law (as detailed above), in some cases allowing treble damages and allowing minimum wage violations to go back more than 2-3 years where there is a “continuing course of conduct”.
Federal law provides liquidated damages equal to the amount of unpaid overtime, allowing double the amount of unpaid overtime. An employee can also be awarded attorney’s fees and expenses for any of these wage claims.
If you have not been paid all that you are due, don’t delay. Contact an experienced employment lawyer today. The lawyers at Faulkner Law Offices, PLLC have decades of wage and hour experience.