A solid majority of Arizonans who voted in the November election favored Proposition 206, and as a result, approximately 800,000 minimum wage earners in our state will get a raise on January 1, 2017, and they, along with hundreds of thousands of other Arizona employees, will be entitled to Earned Paid Sick Time starting July 1, 2017. The following Q&As should help employers prepare now to be in full compliance with the new minimum wage and paid sick time laws on their effective dates and should also help employees understand their rights.
Do all AZ employers have to comply with the new minimum wage requirement? Nearly all employers with employees in Arizona (except federal or AZ State employees) must comply. The only businesses exempted are those that gross less than $500,000 annually and do not engage in interstate commerce or the production of goods for interstate commerce.
What is the new minimum wage and when must employers start to pay it? The current minimum wage in Arizona is $8.05, and that required minimum hourly rate will increase incrementally to $12.00 as follows:
- $10.00 per hour by no later than January 1, 2017
- $10.50 per hour by no later than January 1, 2018
- $11.00 per hour by no later than January 1, 2019
- $12.00 per hour by no later than January 1, 2020
- Increases in line with the cost of living starting in 2021
Are there any Arizona employees (working for an employer subject to these laws, as explained in the first Q&A above) NOT required by law to be paid the minimum wage? All Arizona employees — whether they are full-time, part-time, seasonal, temporary, or recipients of public benefits engaging in “work activity” as a condition of receiving public assistance — must be paid the minimum wage, except:
- Employees working for a parent or sibling, and
- Tipped employees — Employees who customarily receive tips may be paid $3.00 per hour less than the minimum wage, however employers must ensure that the tipped employee’s hourly rate plus received tips is at least minimum wage.
Earned Paid Sick Time
Under the new Earned Paid Sick Time law, employees will accrue EPST hours, which will allow them to take time off with pay for various health related circumstances recognized by law.
Do all AZ employers have to comply with the new EPST requirements? The answer here is the same as that provided for the first question in the Minimum Wage section above.
What accrual rate is required by the new law? Every AZ employee (working for an employer subject to these laws, as explained in the first Q&A above) — regardless of the size of the company and regardless of whether the employee is full-time, part-time, temporary, seasonal, exempt or non-exempt under the FLSA, or a recipient of public benefits — will accrue one hour of paid sick time for every 30 hours he or she works, until he or she reaches an annual cap.
Employers with 15 or more employees may cap (limit) the accrual to 40 hours per year; employers with fewer than 15 employees may cap the accrual at 24 hours per year.
For purposes of accrual, employees classified as exempt under the Fair Labor Standards Act must be presumed to work 40 hours per week unless his or her regular schedule is for fewer hours, and then of course the normal hours worked can be used.
For purposes of the accrual cap and utilization limits, employers may select any consecutive 12 month period to define a year. The normal practice is to either adopt a calendar year for all employees or use each employee’s anniversary year.
When must accrual begin? EPST must begin to accrue on the first day an employee works or on July 1, 2017, whichever is later.
When must employees be allowed to begin using their accrued hours? Employees must be allowed to use Earned Paid Sick Time (for authorized reasons) as soon as it is accrued, except that an employer may require an employee hired after July 1, 2017, to wait till the 90th calendar day after starting work to use EPST.
May the employer require EPST to be taken in certain increments? Employees may take EPST in hourly increments or the smallest increment the employer’s payroll system uses to account for absences (or other time recordation purposes, such as overtime).
What does the law allow or require regarding unused EPST? Unused hours may be carried from one year to the next (rolled over) or the employer may but need not pay employees for unused hours at the end of the defined year. However, if the employer elects to pay out unused EPST (thereby zeroing out hours available to the employee to take), the employee must be allowed to take his or her next full year’s allotment of hours (24 or 40) prior to accruing them and with no obligation to reimburse the company should the employment relationship end before the used hours can be earned and repaid.
The law does not require payout of unused EPST at termination, however employers should make clear in their policy manuals that EPST will not be paid out upon termination if that is their practice. Be aware that the law requires forfeited EPST hours be reinstated for any employee who returns to service within nine months.
Does the law allow a cap on the number of hours that can be taken in a year, especially given that unused hours can be rolled into the next year? Despite the roll-over provisions, the law requires only that employees be allowed to take either 24 or 40 hours (depending on company size) of EPST per year.
For what purposes can employees take EPST? The law details the medical and other needs of the employee, and of the individuals in various types of relationships with the employee, for which EPST may be used. In brief, EPST absences are allowed (1) for the employee’s own mental or physical illness, injury or health condition, for medical diagnosis and for “preventive medical care”; (2) for the employee to care for a family member for these same purposes; (3) for building closures, based on a public health emergency announcement, at the employee’s workplace or the facility of a family member; and (4) to address various medical or legal issues related to domestic or sexual violence or stalking.
For purposes of the EPST law, family member means a biological, adopted or foster child, stepchild or legal ward; a domestic partner’s child; a child or adult to whom the employee stands or stood In Loco Parentis; a biological, foster, step or adopted parent or legal guardian; a spouse or a domestic partner; a grandparent, grandchild or sibling of the employee or his/her domestic partner or spouse; any individual related by blood or affinity whose close association is the equivalent of a family relationship.
Does the law allow employers to require an employee to provide notice before taking EPST? Employers may require employees who have a foreseeable need for a leave to make a reasonable effort to schedule his or her absence at a time that won’t unduly disrupt the company’s operations and to provide notice of the upcoming absence. However, employers may not require the employee provide detail of the health condition or the violence or stalking circumstances. The employee may provide notice in writing, orally or via email/text.
In the events of leaves that are not foreseeable likely make giving prior notice impossible, the law allows employers to create a written policy that contains procedures for employees to provide notice of an unforeseen EPST absence, and provides that any employer who fails to create and disseminate such policy is precluded from denying the employee EPST based on non-compliance with notice policies.
Employers are prohibited from requiring employees disclose details relating to their own or their family member’s health condition, domestic or sexual abuse or stalking issue as a condition of granting an EPST absence.
Does the law allow the employer to require documentation to verify the need for the EPST absence? If an employee has missed or will miss three or more consecutive days of work, the employer may require medical documentation, or for abuse or stalking purposes, a court order, or an attorney’s or domestic violence counselor’s signed statement.
Can an employer discipline an employee for misusing or abusing EPST? As an initial matter, employers may not count or consider EPST absences against an employee (similar to the FMLA). Given the minimal burden on employees to validate the need for EPST, in order to discipline an employee for misuse the employer is forewarned to have airtight evidence (e.g., the employee who took EPST for three days due to a serious illness is caught on camera skiing the black runs on the toughest, coldest mountain).
Does the law require employers to inform employees of the new law or post notice of it? Employers must post notice of the EPST provisions so that they know their accrual and usage rates, the protections against discrimination and retaliation for exercising those rights, and their right to file a complaint. The notices must be in English and Spanish, and, if appropriate, other languages. The required notice should be included in the multipurpose EEOC poster. Workplaces with employee handbooks should also update them to include information on the EPST.
What are the recordkeeping and confidentiality requirements for the EPST? Employers must maintain payroll records for four years for each employee. The records must reflect the number of hours the employee worked each workday and week, rates of pay, and any additions or deductions made. Pursuant to the new law, employers now must also keep records reflecting each employee’s accrued and used EPST. The law requires that employers also record on each employee’s paycheck (or direct deposit notification) or in an attachment to the paycheck the amount of EPST the employee has available for that year, the amount of EPST the employee has used that year, and the amount of EPST credited to the employee in the relevant pay period.
As already noted, employers are prohibited from requiring employees disclose details relating to their own or their family member’s health condition, domestic or sexual abuse or stalking issue as a condition of granting an EPST absence. In the event the employee voluntarily or inadvertently discloses such information orally or in writing, the employer must treat it as confidential and may disclose it only with the employee’s permission.
What are the penalties for non-compliance with the EPST requirements? Employers who violate recordkeeping, posting or other requirements of the EPST law are subject to a civil penalty of at least $250 for the first violation, and at least $1,000 for each subsequent violation.
Employers who fail to pay EPST (or the minimum wage) will be required to pay the employee the balance of EPST (or wages) due with interest, and an additional amount equal to twice the unpaid EPST (or wages)
It probably goes without saying that the EPST law prohibits retaliating against an employee for asserting his or her rights under the law. Employers who retaliate against an employee for asserting rights relating to the EPST (or minimum wage) shall be required to pay the employee an amount determined by the commission or court, but not less than $150 for each day the violation continued. The commission or court may assess other civil penalties to be retained by the agency and also order other forms of relief.
Do Your Homework and Seek Advice If In Doubt
We’ve covered a lot of material here, but there is more detail in the new law than we could include, especially given that some businesses already may have more expansive paid sick leave policies than the law requires, leaving them with less work to do, and other businesses may be adopting a paid sick leave policy only now as a result of this new law. How this new state law aligns with the Family and Medical Leave Act (FMLA) and various other employment related laws should also be considered, especially for those companies with 50 or more employees. All companies with Arizona employees would be well advised to review their compensation and time keeping practices, as well as their handbooks, to make any necessary changes well before the implementation of the EPST law on July 1 2017, and the higher minimum wage on January 1, 2017.
For those companies who have employees in other states, there’s a strong chance that this election cycle brought new state-specific employment related laws to your doorstep. Faulkner Law Offices, PLLC has years of experience helping clients develop policies and practices to align with the myriad of new and old, competing and conflicting, federal and state employment laws. We welcome an opportunity to assist you with these new employment laws, or any employment matter.