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Employment Law for Contractors

Passage of Prop. 206 Raises Arizona’s Minimum Wage,
Imposes Paid Sick Leave

While the minimum wage increase has garnered most of the attention, the new paid sick leave requirement may pose the greater burden for many Arizona employers.

  Construction Advisor

This article appeared in the December 2016 issue of Lang & Klain's "Construction Advisor" and was updated January 3, 2017, and July 1, 2017


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In November 2016, Arizona voters approved Proposition 206, which raises Arizona’s minimum wage to $10 per hour and requires employers to provide paid sick leave to all employees, full-time and part-time.[1]

Minimum Wage

On January 1, 2017, the minimum wage in Arizona increased to $10 per hour (from $8.05). It will increase each year thereafter, to $10.50 in 2018, $11.00 in 2019, and $12.00 in 2020, after which it will be adjusted annually for inflation.

The minimum wage levels are $3.00/hour less for employees who earn tips (provided the employee is earning at least minimum wage after tips are counted).

Paid Sick Leave

While the minimum wage hikes in Prop. 206 have received most of the publicity, the requirement for paid sick leave may prove to be a bigger strain for many private employers, who were not previously required by Arizona law to provide such a benefit.

That changed July 1, 2017, when Arizona workers began to accrue one hour of paid sick time for every 30 hours worked. Accrual began on the employee’s first day of employment or July 1, 2017, whichever was later.

Although an employee may begin to use his/her paid sick time as it is accrued, the employer can require an employee hired after July 1, 2017, to wait until the 90th calendar day after they began working before using their accrued paid sick time.

The paid sick leave requirement applies to all employers, but the amount of the requirement depends on the size of an employer’s work force:

  • Employers with fewer than 15 employees are required to allow employees to accrue and use a minimum of 1 hour of paid sick leave for every 30 hours worked for up to 24 hours per year.

  • Employers with 15 or more employees must allow employees to use and accrue a minimum of 1 hour of paid sick leave for every 30 hours worked for up to 40 hours per year.

Everyone, including an owner, who performs work for the employer for compensation — whether salary, wages or commissions — is considered an employee for purposes of determining the size of the company’s work force.

For purposes of paid sick leave accrual, employees who are exempt from receiving overtime pay are assumed to work 40 hours per week. If their normal work week is less than 40 hours, paid sick leave accrues based on their normal work week.

Employees who have unused paid sick leave at the end of a year may carry over the unused accrual to the next year, unless their employer chooses to pay them for their unused sick time.

For some employers, there may be one glimmer of good news: Under the new statute (A.R.S. § 23-372), if the employer is providing enough paid time off to cover the minimum amount of paid sick time, and if the employer allows its workers to use that time off in the same way and for the same purposes as paid sick leave, then the employer does not need to provide additional paid sick time.

Compliance and Penalties

The Industrial Commission of Arizona, which already provided minimum wage enforcement, is charged with enforcing the paid sick leave requirements.

Employers are required to comply with certain recordkeeping, posting and other requirements of minimum wage provisions. Failure to comply carries a minimum $250 fine for the first violation and at least $1,000 for a subsequent violation. Those penalties also apply to violations of the paid sick leave provisions.

Employers are also required to keep payroll records showing compliance with the new law for four years. Failure to do so will raise a rebuttable presumption that the employer did not comply with the minimum wage and paid sick leave requirements.

Employers who fail to pay the proper wages or earned paid sick leave will be required to pay the employee the unpaid balance of the wages or earned paid sick leave owed, including interest, plus an additional amount equal to twice the underpaid wages or earned paid sick leave.

Impact

For many employers, both of Prop. 206's provisions are likely to increase overhead and drive up prices. In particular, the paid sick leave requirement will force many smaller employers to deal with new record-keeping requirements along with the added costs.

Employers should make sure that their employee handbooks and policies accommodate the new law and that they are complying with the new requirements.

If you have questions about either provision of Prop. 206, contact Lori Guner at 480-947-1911 or lguner@lang-klain.com.

[1] For employers with more than 15 employees, the paid sick leave requirements apply to salaried and hourly employees.