Proposition 206, the Fair Wages and Healthy Families Act (the “Act”), was a ballot initiative on the November 8, 2016 Arizona ballot. It was approved by over 58% of voters. The Act establishes a new state minimum wage effective January 1, 2017, and entitles employees to accrue earned paid sick time beginning July 1, 2017.

• For more information about minimum wage requirements, click here.
• For more information about earned paid sick time requirements, click here.
• To view the entire text of Proposition 206, click here.

No. On December 15, 2016, a group of Arizona businesses, Chambers of Commerce, and individual citizens filed a lawsuit, challenging the constitutionality of Proposition 206, the Fair Wages and Healthy Families Act (the “Act”).  On December 21, 2016, the trial court denied a motion to temporarily halt implementation of the Act pending resolution of the legal challenge.  The trial court’s ruling was appealed to the Arizona Supreme Court.  On March 14, 2017, the Supreme Court declined to overrule the trial court’s determination, stating that the Court “rejects [the] challenges to the constitutionality of Proposition 206 and denies the requested special action relief.”  The Supreme Court indicated that it will issue a written opinion further explaining the Courts decision. As a result, the Act remains in effect and Arizona employers are subject to its provisions, including minimum wage and earned paid sick time. The Industrial Commission will promptly update this FAQ as further information is available.

Proposition 206, the Fair Wages and Healthy Families Act (the “Act”), applies to all “employers.”

In the minimum wage context, Arizona law broadly defines “employer” as any corporation, proprietorship, partnership, joint venture, limited liability company, trust, association, political subdivision of the state, individual or other entity acting directly or indirectly in the interest of an employer in relation to an employee, but does not include the state of Arizona, the United States, or a small business. Of note, “small businesses” are excluded from the definition and are exempt from the minimum wage requirements. For further information about the small business exemption, see Which employers are subject to the Arizona’s minimum wage laws?

Notably, the Act does not change the definition of “employer” for purposes of minimum wage. Therefore, in general, if an employer was subject to Arizona’s minimum wage laws prior to approval of Proposition 206, the employer will be subject to the Act’s new minimum wage requirements.

In the earned paid sick time context, “employer” is defined similarly, but does not exempt “small businesses.” Under the Act, an “employer” for purposes of earned paid sick time is any corporation, proprietorship, partnership, joint venture, limited liability company, trust, association, political subdivision of the state, individual or other entity acting directly or indirectly in the interest of an employer in relation to an employee, but does not include the state of Arizona or the United States. For further information, see Which employers are subject to earned paid sick time laws? Therefore, even “small businesses” that are exempt from the minimum wage requirements are subject to the Act’s earned paid sick time requirements.

Yes. Employers subject to Arizona’s minimum wage laws are required to comply with notice, posting, and recordkeeping requirements pertaining to minimum wage. The requirements include: (1) posting minimum wage notices in the workplace; (2) providing employees with the employer’s business name, address, and telephone number in writing upon hire; and (3) maintaining payroll records in accordance with Arizona’s statutes and rules. For more information about these requirements, see What kind of recordkeeping is required by Arizona’s minimum wage laws? For more information about which employers are subject to Arizona’s minimum wage laws, see Which employers are subject to the Arizona’s minimum wage laws?

The Industrial Commission’s 2017 model minimum wage notice is available here.

Employers subject to earned paid sick time laws are similarly required to comply with notice, posting, and recordkeeping requirements pertaining to earned paid sick time. The requirements include: (1) posting earned paid sick time notices in the workplace; (2) providing employees with the employer’s business name, address, and telephone number in writing upon hire; (3) providing employees with a notice that informs them of their rights and responsibilities under the Fair Wages and Healthy Families Act; and (4) maintaining payroll records in accordance with Arizona’s statutes and rules. For more information about which employers are subject to Arizona’s earned paid sick leave laws, see Which employers are subject to earned paid sick time laws?

The Industrial Commission’s 2017 model earned paid sick time notice can be found here

Proposition 206 permits the Industrial Commission to adopt rules to reduce or waive posting and recordkeeping requirements for “small employers” who would be unreasonably burdened by the statutory requirements. Current Arizona rules permit a “small employer” to request relief from recordkeeping requirements in the minimum wage context. See A.A.C. R20-5-1220. “Small employer” is defined as a corporation, proprietorship, partnership, joint venture, limited liability company, trust, or association that has less than $500,000 in gross annual revenue. For further information about requesting exemption from recordkeeping requirements, see Are any businesses exempt from recordkeeping and posting requirements?

A request for relief from the recordkeeping requirements must be submitted in writing to the Labor Department of the Industrial Commission of Arizona and must contain the following:

• The reasons for the request for relief;
• An alternate manner or method of making, keeping, and preserving records that will enable the Labor Department to determine hours worked and wages paid; and
• The signature of the employer or an authorized representative of the employer.

Employers can direct requests for relief from recordkeeping requirements to:
Industrial Commission of Arizona, Labor Department
800 W Washington St.
Phoenix, AZ 85007

Note:  The Industrial Commission is proposing rules that would exempt small employers (defined as a corporation, proprietorship, partnership, joint venture, limited liability company, trust, or association that has less than $500,000 in gross annual revenue) from the Act’s posting requirements. The Industrial Commission will update this FAQ as the rulemaking process progresses.

No.  The Fair Wages and Healthy Families Act (the “Act”) does not apply to tribal employers on tribal land unless a tribe voluntarily subjects itself to the Act.

The Fair Wages and Healthy Families Act (the “Act”) does not address whether employees of Arizona employers who work on tribal lands are subject to the Act’s minimum wage and earned paid sick time provisions. Additional legislative and/or judicial guidance on this issue is possible. Absent additional guidance, the Industrial Commission does not intend to enforce the Act against Arizona employers for employees who work on tribal lands.

Proposition 206, The Fair Wages and Healthy Families Act (the “Act”), enables counties, cities, and towns to regulate minimum wages and benefits within its geographic boundaries, provided that a county, city, or town does not permit a lower minimum wage than required by the Act. Flagstaff’s Proposition 414, passed in 2016, created an ordinance that requires employers to pay employees a minimum wage higher than the State’s minimum wage. The Flagstaff ordinance defines “employee” as any individual who works or is expected to work 25 hours or more in any given calendar year within the geographic boundaries of the City of Flagstaff.

The Industrial Commission does not enforce Flagstaff city ordinances. You can find the full text of Flagstaff’s city ordinances here.

Until January 1, 2017, Arizona’s minimum wage will remain $8.05 per hour. Beginning January 1, 2017, the Arizona minimum wage will be increased to $10.00 per hour. The Industrial Commission’s 2017 model minimum wage notice is available here.

Under Proposition 206, the Fair Wages and Healthy Families Act (the “Act”), Arizona minimum wage will increase to $10.50 per hour in 2018; $11.00 per hour in 2019; and $12.00 per hour in 2020. On January 1, 2021, the Arizona minimum wage will increase each year by the cost of living.

Employers required to comply with the Act’s minimum wage requirements will be required to pay each employee wages not less than the applicable minimum wage for each hour worked. For more information about which employers are subject to Arizona’s minimum wage laws, see Which employers are subject to the Arizona’s minimum wage laws? Arizona does not allow a sub-minimum wage for different classes of employees (e.g., young workers, students, etc.). Minimum wage must be paid for all hours worked, regardless of the frequency of payment and regardless of whether the wage is paid on an hourly, salaried, commissioned, piece rate, or any other basis.

Note: Employers will still be permitted to pay employees receiving tips up to $3.00 per hour less than the minimum wage, provided that the employees earn at least minimum wage for all hours worked each week (when tips are included). For further information regarding payment of minimum wages to tipped employees, see What is the Arizona minimum wage for tipped employees?

Beginning January 1, 2017, the Arizona minimum wage will increase from $8.05 per hour to $10.00 per hour. The Industrial Commission’s 2017 model minimum wage notice is available here.

Under Proposition 206, the Fair Wages and Healthy Families Act, Arizona minimum wage will increase to $10.50 per hour in 2018; $11.00 per hour in 2019; and $12.00 per hour in 2020. On January 1, 2021, the Arizona minimum wage will increase each year by the cost of living.

Note: Employers will still be permitted to pay employees receiving tips up to $3.00 per hour less than the minimum wage, provided that the employees earn at least minimum wage for all hours worked each week (when tips are included). For further information regarding payment of minimum wages to tipped employees, see What is the Arizona minimum wage for tipped employees?

Arizona’s minimum wage laws apply to all “employers.” Arizona law defines an “employer” in the minimum wage context as any corporation, proprietorship, partnership, joint venture, limited liability company, trust, association, political subdivision of the state, individual or other entity acting directly or indirectly in the interest of an employer in relation to an employee, but does not include the state of Arizona, the United States, or a small business. The definition of “employer” in the minimum wage context was not changed by Proposition 206, the Fair Wages and Healthy Families Act.

“Small businesses,” as the term is defined by Arizona law, are excluded from the definition of employer and are exempt from the minimum wage requirements. Arizona law defines a “small business as any corporation, proprietorship, partnership, joint venture, limited liability company, trust, or association that has less than five hundred thousand dollars in gross annual revenue and that is exempt from having to pay a minimum wage under section 206(a) of title 29 of the United States Code.” Section 206(a) of title 29 of the United States Code is a subsection of the federal Fair Labor Standards Act (FLSA) that requires employers whose employees or enterprises are engaged in “commerce” to pay their employees a minimum wage.

Under the FLSA, “commerce” is a broad term that refers to any form of commercial interstate interaction. “Commerce” includes (but is not limited to) taking payments from out-of-state customers; processing payments that come from out-of-state banks or credit card issuers; using a telephone, fax machine, U.S. Mail, or email to communicate with someone in another state; driving or flying to another state for job duties; and loading, unloading, or using goods that come from an out-of-state supplier (assuming that the goods were purchased from the out-of-state supplier).

Due to these restrictive requirements, few businesses in today’s economy would qualify as exempt from having to pay minimum wage under either the FLSA or Arizona minimum wage statutes. Examples of small businesses that the ICA Labor Department has determined may meet the exemption are barbers and janitors who buy all of their supplies locally and accept only cash or checks from Arizona banks.

Unlike the Federal Fair Labor Standards Act (which governs the payment of minimum wage on a federal level), Arizona’s minimum wage laws have very few exemptions. Arizona’s minimum wage requirements apply to any employee except the following:

• A person who is employed by a parent or a sibling.
• A person who is employed performing babysitting services in the employer’s home on a casual basis.
• A person employed by the State of Arizona or the United States government.
• A person employed in a “small business” grossing less than $500,000 in annual revenue, if that small business is not required to pay minimum wage under the Federal Fair Labor Standards Act. This exclusion for small businesses under Arizona minimum wage law is very limited. Given current economic realities, most Arizona businesses who gross less than $500,000 will still be subject to the Arizona minimum wage laws. For additional discussion of the “small business” exemption, see the preceding question.

Yes. The Arizona minimum wage laws make no distinction between full-time, part-time, or temporary employees.

Except for the exemptions described here, the Arizona minimum wage laws apply only to the payment of wages to employees. Arizona’s minimum wage laws do not apply to independent contractors.

No. An individual that works for another person without any express or implied compensation agreement is not an employee under Arizona minimum wage laws. This may include an individual that volunteers services for civic, charitable, or humanitarian reasons that are offered freely and without direct or implied pressure or coercion from an employer, provided that the volunteer is not otherwise employed by the employer to perform the same type of services as those for which the individual proposes to volunteer.

No. Unless included by a bona fide collective bargaining agreement applicable to the particular employee, an employer may not claim a credit towards minimum wage for the cost of any tools, equipment, uniforms, or any other garment worn by an employee as a condition of employment. This also includes the cleaning or maintenance of uniforms and tools.

Yes. Minimum wage shall be paid for all hours worked regardless of the frequency of payment and regardless of whether the wage is paid on an hourly, salaried, commissioned, piece rate, or any other basis. If in any workweek the combined wages of an employee are less than the applicable minimum wage, the employer shall pay, in addition to sums already earned, no less than the difference between the amounts earned and the minimum wage as required under Arizona’s minimum wage laws.

To determine whether an employer has paid a commissioned employee minimum wage for each hour worked in a given workweek, the employer may combine all monetary compensation (including commissions) earned by the employee during the applicable workweek. If the combined compensation is less than the applicable minimum wage multiplied by the hours that the employee worked that workweek, the employer must make up the difference between the amount actually earned and the current minimum wage multiplied by the hours worked.

For example, if a commissioned employee earns $200 in a 40-hour workweek (including all commissions) and the current minimum wage is $10 per hour, Arizona’s minimum wage laws require that the employee earned at least $400 (40 hours x $10 per hour). In this example, the employer would be responsible for paying the employee an additional $200 to make up the difference between the employee’s actual earnings and the required minimum wage.

For more information about the current minimum wage, see What is Arizona’s minimum wage?

For minimum wage purposes, “wage” is defined as “monetary compensation due to an employee by reason of employment, including an employee's commissions, but not tips or gratuities.” Arizona Revised Statutes (“A.R.S.”) section 23-362. Corresponding administrative rules define “monetary compensation” as “cash or its equivalent due to an employee by reason of employment.” Therefore, commissions and incentives (paid in cash, or an equivalent thereof, and by reason of employment) may count towards minimum wage. A.R.S. § 23-363(C) permits tips and gratuities to be added to an employee’s wage for the purposes of determining whether an employer paid minimum wage.

Yes. The Fair Wages and Healthy Families Act makes no distinction made between adults and minors in Arizona’s minimum wage laws.  See Labor Department – Youth Employment for information about Arizona’s youth employment laws.

In addition to paying minimum wage, employers are required to:

• Keep accurate records of employee wages and hours (unless the employer is granted an exception to the recordkeeping requirements). Employers generally maintain these records in their ordinary business practice.
• Provide their business name, address, and telephone number in writing to employees upon hire.
• Allow inspection at the worksite of all payroll records by the Labor Department of the Industrial Commission of Arizona (hereafter, the “Labor Department”).
• Furnish copies of payroll records requested by the Labor Department.
• Cooperate with the Labor Department’s investigation into complaints of violation of Arizona minimum wage laws.
• Allow the Labor Department to interview employees.
• Post the Industrial Commission’s minimum wage notice in a conspicuous place where employees can read the notice. This notice is available as a free download here. Versions are available in both English and Spanish.

Note:  The Industrial Commission is currently proposing rules that would exempt small employers (defined as a corporation, proprietorship, partnership, joint venture, limited liability company, trust, or association that has less than $500,000 in gross annual revenue) from the Act’s posting requirements. The Industrial Commission will update this FAQ as the rulemaking process progresses.

Current Arizona rules permit a “small employer” to request relief from recordkeeping requirements in the minimum wage context. See A.A.C. R20-5-1220. A “small employer” is defined as a corporation, proprietorship, partnership, joint venture, limited liability company, trust, or association that has less than $500,000 in gross annual revenue.

Note: There is a difference between the defined terms “small employer” and “small business.” Unlike “small business,” which applies to exempting an employer altogether from minimum wage requirements, the definition of “small employer” does not restrict the employer from engaging in interstate commerce. For more information about the definition of “small business,” see Which employers are subject to Arizona’s minimum wage laws?

A request for relief from minimum wage recordkeeping requirements must be submitted in writing to the Labor Department of the Industrial Commission of Arizona and must contain the following:

• The reasons for the request for relief;
• An alternate manner or method of making, keeping, and preserving records that will enable the Labor Department to determine hours worked and wages paid; and
• The signature of the employer or an authorized representative of the employer.

Employers can direct requests for relief from recordkeeping requirements to:
Industrial Commission of Arizona, Labor Department
800 W Washington St.
Phoenix, AZ 85007

Note:  The Industrial Commission is currently proposing rules that would exempt small employers (defined as a corporation, proprietorship, partnership, joint venture, limited liability company, trust, or association that has less than $500,000 in gross annual revenue) from the Act’s posting requirements. The Industrial Commission will update this FAQ as the rulemaking process progresses.

Unless otherwise exempted from the recordkeeping requirements, employers subject to Arizona’s minimum wage laws are required to keep records that employers generally maintain in their ordinary business practice, and track records required under the Federal Fair Labor Standards Act. Employers are required to maintain payroll records showing the hours worked and wages paid, including basic time and earning cards or sheets, wage rate tables, records of additions to or deductions from wages paid and any written agreement relied upon to calculate credits toward the minimum wage. Separate recordkeeping requirements are permitted for employees on fixed schedules and employees who are compensated on a salary basis at a rate that exceeds the minimum wage required under the Fair Wages and Healthy Families Act and who, under The Federal Fair Labor Standards, are an exempt bona fide executive, administrative, or professional employee, including an employee employed in the capacity of academic administrative personnel or teachers in elementary or secondary schools, or in outside sales.

Four years.

An employer who violates The Fair Wages and Healthy Families Act’s recordkeeping and posting requirements is subject to a civil penalty of at least $250 for the first violation and at least $1000 for each subsequent or willful violation. Special monitoring and inspections may also be imposed.

Additionally, if an employer fails to maintain required records, it will be presumed that the employer did not pay the required minimum wage or earned paid sick time in a disputed case. An employer has the right to rebut this presumption with evidence that the employer paid the employee the required minimum wage.

Under federal law, a state may require payment of a minimum wage that exceeds the federal minimum wage.

Most employers are subject to both federal and state minimum wage laws. When there are different requirements between the laws, employers must follow the requirement that is the most beneficial to the employee. Because Arizona’s minimum wage laws require payment of a higher minimum wage than federal law, an Arizona employer who is subject to both laws must pay the Arizona minimum wage rate.

No. The minimum wage obligation cannot be waived by any verbal agreement, written agreement, or employment contract.

Employers are permitted to pay tipped employees a maximum of $3.00 per hour less than non-tipped employees, provided that the tipped employees earn at least minimum wage for all hours worked each week (when tips are included). However, if a tipped employee does not earn the required minimum wage after including tips, the employer is required to make up the difference. For more information about who qualifies as a tipped employee, see What is a tipped employee? For information about steps that an employer must take to assert a tip credit of up to $3.00, see What steps must an employer take to assert a “tip credit” of up to $3.00 per hour for tipped employees?

A tipped employee is an employee who customarily and regularly receives tips, including the occupation of waiter, waitress, bellhop, busboy, car wash attendant, hairdresser, barber, valet, and service bartender. The employee must actually receive the tip free of any control by the employer. The tip must be the property of the employee.

Employers are permitted to pay tipped employees a maximum of $3.00 per hour less than non-tipped employees, provided that the tipped employees earn at least minimum wage for all hours worked each week (when tips are included). If an employer elects to utilize this tip credit provision, the employer must:

• Provide written notice to each employee prior to exercising the tip credit.
• Be able to show that the employee received at least the minimum wage when direct wages and the tip credit are combined.
• Permit the tipped employee to retain all tips, whether or not the employer elects to take a tip credit for tips received, except to the extent the employee participates in a valid tip pooling arrangement.

Employers are permitted to pay tipped employees a maximum of $3.00 per hour less than non-tipped employees, provided that the tipped employees earn at least minimum wage for all hours worked each week (when tips are included). In calculating whether a tipped employee has earned at least minimum wage, tips must be counted in the workweek in which the tip is earned. Employers utilizing a tip credit must maintain a record of any tips the employer considered for purposes of paying minimum wage.

If a tipped employee does not earn the required minimum wage after including tips, the employer is required to pay the difference. Employers must always pay tipped employees a base wage of no less than three dollars below minimum wage.

Yes. Employees who customarily and regularly receive tips may pool, share, or split tips between them. Where employees pool, share, or split tips, the amount actually retained by each employee is considered the tip of the employee who retained it.

Yes, but the tips received by the employee who does not customarily and regularly receive tips may not be credited toward that employee’s minimum wage.

Employers are permitted to pay tipped employees a maximum of $3.00 per hour less than non-tipped employees, provided that the tipped employees earn at least minimum wage for all hours worked each week (when tips are included). The tip credit is available only for hours an employee works in the tipped occupation. Where a tipped employee is routinely assigned to duties associated with a non-tipped occupation, such as maintenance or general preparation work, no tip credit may be taken for the hours worked in performing such duties.

Maybe. A compulsory charge for service constitutes a tip only if it is actually distributed by the employer to the employee in the pay period in which the charge is earned. A compulsory charge for service imposed on a customer by an employer is not a tip if it is considered part of the employer’s gross receipts and is not distributed to the employee in the pay period in which the charge is earned.

Earned paid sick time is sick time accrued by an employee that is compensated at the same hourly rate and with the same benefits, including health care benefits, as the employee normally earns during hours worked.

Employees can begin accruing earned paid sick time at the commencement of employment or July 1, 2017, whichever is later. For more information, see How soon can an employee begin using accrued earned paid sick time?

Employees may use earned paid sick time for themselves or for family members (see Arizona Revised Statutes § 23-373 to see who qualifies as a family member) in the following circumstances:

• Medical care or mental or physical illness, injury, or health condition;
• A public health emergency; (see Arizona Revised Statutes § 23-373 for more information about what qualifies as a public health emergency) ; and
• Absence due to domestic violence, sexual violence, abuse, or stalking.

See Arizona Revised Statutes § 23-373 for further detail concerning authorized uses for earned paid sick time and definitions of family members.

Absent statutory or judicial guidance, the Industrial Commission is proposing  a rule that would define a “public health emergency” as a state of emergency declared by the governor in which there is an occurrence or imminent threat of an illness or health condition caused by bioterrorism, an epidemic or pandemic disease or a highly fatal infectious agent or biological toxin and that poses a substantial risk of a significant number of human fatalities or incidents of permanent or long-term disability. The Industrial Commission will update this FAQ as the rulemaking process progresses.

Under The Fair Wages and Healthy Families Act (the “Act”), “employers” are subject to Arizona’s earned paid sick time laws. Earned paid sick time accrual rates, however, differ based on an employer’s number of employees.

Under the Act, “employer” is defined as any corporation, proprietorship, partnership, joint venture, limited liability company, trust, association, political subdivision of the state, individual or other entity acting directly or indirectly in the interest of an employer in relation to an employee, but does not include the state of Arizona, the United States. Notably, this definition differs slightly from the definition of “employer” in the minimum wage context because it has no exemption for “small businesses.” Therefore, even “small businesses” that are exempt from the minimum wage requirements are subject to the Act’s earned paid sick time requirements.

No. The Fair Wages and Healthy Families Act does not exempt any professions or ranges of salary from the earned paid sick time provisions.

Because the Fair Wages and Healthy Families Act does not address this issue, additional legislative and/or judicial guidance is possible. Absent additional guidance, the Industrial Commission does not intend to enforce the Act against employers whose employees work outside of Arizona.

For employers with 15 or more employees: Employees must accrue a minimum of one hour of earned paid sick time for every 30 hours worked, but employees are not entitled to accrue or use more than 40 hours of earned paid sick time per year, unless the employer selects a higher limit.

For employers with fewer than 15 employees: Employees must accrue a minimum of one hour of earned paid sick time for every 30 hours worked, but they are not entitled to accrue or use more than 24 hours of earned paid sick time per year, unless the employer sets a higher limit.

See Is an employer with employees outside of Arizona required to include those employees when calculating its total employees for earned paid sick time purposes?

Under the Act, a “year” is defined as a regular and consecutive 12-month period as determined by the employer. An employer may, therefore, designate its “year” as it sees fit (e.g., calendar year, fiscal year, year from an employee hire date, etc.).

In the absence of statutory and judicial guidance on the issue, the Industrial Commission will permit an employer whose selected “year” ends less than 365 days after The Fair Wages and Healthy Families Act’s (the “Act”) earned paid sick time effective date (July 1, 2017) to prorate employees’ annual earned paid sick time accrual and usage caps based on the number of days remaining in the employer’s “year.” Prorated accrual and usage caps should be rounded up to the nearest hourly increment or the smallest increment that the employer’s payroll system uses to account for absences or use of other time, whichever is smaller. An employee’s accrual rate, however, may not be prorated. See What is a “year,” for earned paid sick time purposes?

Example 1: Employer A’s selected “year” runs from January 1 through December 31.  The employer will have 184 days remaining between the Act’s earned paid sick time effective date (July 1, 2017) and the end of the employer’s selected “year.” Employer A may prorate the amount of earned paid sick time that its employees are entitled to accrue and use during the partial year at a rate of .504 (184/365 = .504). Assuming that Employer A has 15 or more employees and the smallest increment that the employer’s payroll system uses is one-tenth of an hour, employees of Employer A would be entitled to accrue and use at least 20.2 hours of earned paid sick time (.504 x 40 hours, rounded up to nearest tenth of an hour) in the 184 days following July 1, 2017 (the remainder of the employer’s “year”).

Example 2: Employer B’s selected “year” runs from June 1 through May 31.  The employer will have 335 days remaining between the Act’s earned paid sick time effective date (July 1, 2017) and the end of the employer’s selected “year.” Employer B may prorate the amount of earned paid sick time that its employees are entitled to accrue and use during the partial year at a rate of .918 (335/365 = .918). Assuming that Employer B has fewer than 15 employees and the smallest increment that the employer’s payroll system uses is half of an hour, employees of Employer B would be entitled to accrue and use at least 22.5 hours of earned paid sick time (.918 x 24 hours, rounded up to the nearest half of an hour) in the 335 days following July 1, 2017 (the remainder of the employer’s “year”).

The Fair Wages and Healthy Families Act (the “Act”) counts everyone performing work for compensation, whether full-time, part-time, or on a temporary basis, as an employee. For purposes of determining the number of employees, an employer has 15 or more employees if it maintained 15 or more employees on the payroll for some portion of a day in each of 20 different calendar weeks (the weeks do not have to be consecutive) in the current or preceding year.

The Fair Wages and Healthy Families Act’s minimum wage and earned paid sick time provisions apply only to Arizona employees. Therefore, in the absence of further statutory or judicial guidance on the issue, the Industrial Commission will not include an employer’s non-Arizona employees in an employer’s total employee count for earned paid sick time purposes.

Example: Employer A has ten California employees, three Colorado employees, and four Arizona employees. Though Employer A has 17 employees across three states, it has just four employees for earned paid sick time purposes. Because Employer A has fewer than 15 employees in Arizona, its four Arizona employees are entitled to accrue and use at least 24 hours of earned paid sick time per year (whereas an employee of an employer with 15 or more employees in Arizona would be entitled to accrue and use at least 40 hours of earned paid sick time per year). See How much earned paid sick time must an employer offer an employee?

The Fair Wages and Healthy Families Act  does not draw a distinction between year-round and partial-year employees. An employee’s accrual and usage caps are based solely on the size of the employer and are not based upon whether an employee works a full or partial year.  See How much earned paid sick time must an employer offer an employee? for more information.

In the absence of statutory and judicial guidance, the Industrial Commission is proposing rules consistent with the following methods for determining hourly wage rate:

• For employees with a single hourly rate. For employees paid on the basis of a single hourly rate, an employer is required to pay the employee the same hourly rate that the employee would have earned for the period of time in which sick time is used. For example, if an employee’s hourly rate is $15 per hour, the employer is required to pay the employee $15 for each hour of earned paid sick time.
• For employees with multiple hourly rates. If known, an employer is required to pay a multi-rate employee the actual hourly wages that the employee would have been paid for the period of time in which sick time is used. If unknown, an employer must pay an hourly rate equivalent to the weighted average of all hourly rates of pay during the previous pay period.  
• For salaried employees. Employers must pay a salaried employee an hourly rate equal to the employee’s total wages earned during the pay period covered by the salary divided by the number of hours agreed to be worked in the pay period for which the salary is intended to compensate. If a salaried employee’s hours of work vary from work week to work week, for the purpose of calculating the same hourly rate to be used for the payment of earned paid sick time, the employee is presumed to work 40 hours per workweek.
• For commissioned, piece-rate, or fee-for-service employees. Such employees’ hourly rates are determined in the following order of priority:

1. The hourly rate of pay agreed upon by the employer and the employee, if an hourly rate of pay was previously established.
2. The wages that the employee would have been paid, if known, for the period of time in which earned paid sick time is used.
3. A reasonable estimation of the wages that the employee would have been paid for the period of time in which the earned paid sick time is used.
4. The weighted average of all hourly rates of pay during the previous 90 days, if the employee worked regularly during the previous 90-day period.

NOTE: Shift differentials and premiums meant to compensate an employee for work performed under differing conditions (such as hazard pay or a shift differential for working at night) shall be included when computing an employee’s hourly rate. Additionally, overtime, holiday pay, bonuses, other types of incentive pay, tips, and gifts do not need to be included in an hourly wage rate determination. Pursuant to the Act, in no case may an employer pay less than minimum wage per hour of earned paid sick time.

In the absence of statutory and judicial guidance, the Industrial Commission is proposing rules consistent with the following:  

Shift differentials and premiums meant to compensate an employee for work performed under differing conditions (such as hazard pay or a shift differential for working at night) should be included when computing an employee’s hourly rate. On the other hand, overtime, holiday pay, bonuses, other types of incentive pay, tips, and gifts do not need to be included in an hourly rate determination.

In the absence of statutory and judicial guidance, the Industrial Commission is proposing rules consistent with the following:

Overtime, holiday pay, bonuses, other types of incentive pay, tips, and gifts do not need to be included in an hourly rate determination. On the other hand, shift differentials and premiums meant to compensate an employee for work performed under differing conditions (such as hazard pay or a shift differential for working at night) should be included when computing an employee’s hourly rate.

Yes. Employers must give employees written notice of the following at the commencement of employment or by July 1, 2017, whichever is later:

• Employees are entitled to earned paid sick time;
• The amount of earned paid sick time that employees are entitled to accrue;
• The terms of use guaranteed by Arizona’s earned paid sick time laws;
• That retaliation against employees who request or use earned paid sick time is prohibited;
• That each employee has the right to file a complaint if earned paid sick time is denied by the employer or the employee is subjected to retaliation for requesting or taking earned paid sick time; and
• Contact information for the Industrial Commission.

The Industrial Commission’s 2017 model earned paid sick time notice can be found here.

An employer must also provide employees either in or on an attachment to the employee’s paycheck:

• The amount of earned paid sick time available to the employee;
• The amount of earned paid sick time taken by the employee to date in the year; and
• The amount of pay time the employee has received as earned paid sick time.

Yes, at the employer’s discretion.

An employee may use earned paid sick time as soon as it is accrued. However, an employer may require an employee hired after July 1, 2017 to wait 90 calendar days after the start of employment before using accrued earned paid sick time.

No. Employees must accrue earned paid sick leave immediately upon hire. The employer, however, may require that employees hired after July 1, 2017 wait 90 days before they can use earned paid sick time.

An employee who is exempt under the Fair Labor Standards Act is presumed to have worked 40 hours per workweek, unless the employee’s normal workweek is less than 40 hours (in which case accrual of earned paid sick time is based on the employee’s normal workweek).

Because The Fair Wages and Healthy Families Act does not address this issue, additional legislative and/or judicial guidance is possible. Absent additional guidance, the Industrial Commission will not pursue enforcement when an employer designates an employee’s time off from work as earned paid sick time, provided that the employer has a good faith belief that the absence meets the requirements of earned paid sick time usage. If an employer who has in good faith designated leave time as earned paid sick time learns that it did so in error, it should take prompt action to correct the error.

The Fair Wages and Healthy Families Act provides that earned paid sick time shall be carried over to the following year, subject to usage limitations based on employer size. Alternatively, in lieu of carry over, an employer may pay an employee for unused earned paid sick time pursuant to A.R.S. § 23-372(D)(4).  Absent statutory or judicial guidance, the Industrial Commission is proposing rules consistent with the following:

An employee of an employer with 15 or more employees may carry over to the following year a maximum of 40 hours of unused earned paid sick time. An employee of an employer with fewer than 15 employees may carry over to the following year a maximum of 24 hours of unused earned paid sick time. Alternatively, in lieu of carry over, an employer may pay an employee for unused earned paid sick time pursuant to A.R.S. § 23-372(D)(4). Carry over shall not affect accrual or use rights under the Act. See May an employer offer more generous earned paid sick time policies than those required by the Act?

Example 1. Employer with 15 or more employees. Employee A accrues 40 hours of earned paid sick time in Year 1 and does not use any of the accrued time. The proposed rule would allow Employee A to carry forward the 40 hours of accrued but unused earned paid sick time to Year 2 (unless the employer exercises its buy back option pursuant to A.R.S. § 23-372(D)(4)). Assuming the employer did not buy back hours pursuant to A.R.S. § 23-372(D)(4), Employee A remains entitled to accrue another 40 hours of earned paid sick time in Year 2 (for a maximum of 80 hours). If, at the end of Year 2, Employee A has 80 hours of unused earned paid sick time and the employer does not exercise its buyback option pursuant to A.R.S. § 23-372(D)(4), Employee A may only carry forward 40 hours of earned paid sick time into Year 3 (though they may accrue another 40 hours in the course of Year 3). NOTE: Employee A may only use 40 hours of earned paid sick time in any given year.

Example 2. Employer with fewer than 15 employees. Employee B accrues 24 hours of earned paid sick time in Year 1 and does not use any of the accrued time. The proposed rule would allow Employee A to carry forward the 24 hours of accrued but unused earned paid sick time to Year 2 (unless the employer exercises its buy back option pursuant to A.R.S. § 23-372(D)(4)). Assuming the employer did not buy back hours pursuant to A.R.S. § 23-372(D)(4), Employee B remains entitled to accrue another 24 hours of earned paid sick time in Year 2 (for a maximum of 48 hours). If, at the end of Year 2, Employee B has 48 hours of unused earned paid sick time and the employer does not exercise its buyback option pursuant to A.R.S. § 23-372(D)(4), Employee B may only carry forward 24 hours of earned paid sick time into Year 3 (though they may accrue another 24 hours in the course of Year 3). NOTE: Employee B may only use 24 hours of earned paid sick time in any given year.

Because The Fair Wages and Healthy Families Act (the “Act”) does not address this issue, additional legislative and/or judicial guidance is possible. In the absence of additional guidance, the Industrial Commission is proposing rules that provide that carry over shall not affect accrual or use rights under the Act. This means that, regardless of the amount of earned paid sick time carried over to a subsequent year, an employee retains the right to accrue additional earned paid sick time in the subsequent year. Accrued earned paid sick time, however, remains subject to yearly usage limits. See May an employer offer more generous earned paid sick time policies than those required by the Act?

Example 1. Employer with 15 or more employees. Employee A accrues 40 hours of earned paid sick time in Year 1 and does not use any of the accrued time. The proposed rule would allow Employee A to carry forward the 40 hours of accrued but unused earned paid sick time to Year 2 (unless the employer exercises its buy back option pursuant to A.R.S. § 23-372(D)(4)). Assuming the employer did not buy back hours pursuant to A.R.S. § 23-372(D)(4), Employee A remains entitled to accrue another 40 hours of earned paid sick time in Year 2 (for a maximum of 80 hours). If, at the end of Year 2, Employee A has 80 hours of unused earned paid sick time and the employer does not exercise its buyback option pursuant to A.R.S. § 23-372(D)(4), Employee A may only carry forward 40 hours of earned paid sick time into Year 3 (though they may accrue another 40 hours in the course of Year 3). NOTE: Employee A may only use 40 hours of earned paid sick time in any given year.

Example 2. Employer with fewer than 15 employees. Employee B accrues 24 hours of earned paid sick time in Year 1 and does not use any of the accrued time. The proposed rule would allow Employee A to carry forward the 24 hours of accrued but unused earned paid sick time to Year 2 (unless the employer exercises its buy back option pursuant to A.R.S. § 23-372(D)(4)). Assuming the employer did not buy back hours pursuant to A.R.S. § 23-372(D)(4), Employee B remains entitled to accrue another 24 hours of earned paid sick time in Year 2 (for a maximum of 48 hours). If, at the end of Year 2, Employee B has 48 hours of unused earned paid sick time and the employer does not exercise its buyback option pursuant to A.R.S. § 23-372(D)(4), Employee B may only carry forward 24 hours of earned paid sick time into Year 3 (though they may accrue another 24 hours in the course of Year 3). NOTE: Employee B may only use 24 hours of earned paid sick time in any given year.

The employee retains all accrued earned paid sick time already accrued at the prior division, entity, or location.

If rehire occurs within nine months of separation from the same employer, any previously-accrued earned paid sick time that was not used must be reinstated and the employee is entitled to use and accrue earned paid sick time immediately at the re-commencement of employment.

All employees of the original employer still employed by the successor employer are entitled to previously-accrued earned paid sick time and are entitled to use that earned paid sick time. The Industrial Commission will follow existing Arizona case law concerning liability assumption in asset-only transactions.

Yes. Pursuant to Arizona Revised Statutes § 23-378, nothing in Arizona’s earned paid sick time provisions should be construed to discourage or prohibit an employer from adopting or retaining an earned paid sick time policy that is more generous than that required by the Fair Wages and Healthy Families Act (the “Act”). Additionally, the provisions of the Act do not diminish an employer’s obligation to comply with any contract, collective bargaining agreement, employment benefit plan, or other agreement that provides more generous paid sick time to an employee than that required by the Act.

If an employer has a paid leave policy that provides an amount of paid leave that meets or exceeds Arizona’s earned paid sick time minimum requirements (and can be used for the same purposes and under the same conditions as the statutorily-required earned paid sick time), the employer is not required to provide additional earned paid sick time.See also May an employer offer more generous earned paid sick time policies than those required by the Act?

No. The Fair Wages and Healthy Families Act (the “Act”) provides that “an employer with a paid leave policy . . . who makes available an amount of paid leave sufficient to meet the accrual requirements of this section that may be used for the same purposes and under the same conditions as earned paid sick time under this article is not required to provide additional paid sick time.” Arizona Revised Statutes section 23-372(E). Therefore, provided that an employer’s equivalent paid leave policy provides paid leave that may be used for the same purposes and under the same conditions enumerated in the Act, it need not offer additional leave when an employee utilizes the available time for purposes other than those enumerated in the Act. See also May an employer offer more generous earned paid sick time policies than those required by the Act?

No.

A request to use earned paid sick time may be made orally, in writing, by electronic means, or by any other means acceptable to the employer. When possible, the request to use earned paid sick time must include the expected duration of the absence.

No. The Fair Wages and Healthy Families Act permits an employee to use any available option (orally, in writing, by electronic means, or by any other means acceptable to the employer) when requesting earned paid sick time.  An employer is not permitted to interfere with an employee’s right to use any of the available options.

When foreseeable, an employee must make a good faith effort to provide notice of the need to use earned paid sick time in advance and should schedule the leave in a manner that does not unduly disrupt the employer’s operations.

Yes, provided that the employer provides a written policy that contains procedures for providing notice. If the employer does not provide an employee with a copy of the written policy, the employer cannot deny the use of earned paid sick time for the employee’s failure to follow the policy.

No.

Earned paid sick time can either be used in hourly increments or the smallest increment that the employer’s payroll system uses to account for absences or use of other time, whichever is smaller. For example, if an employer’s payroll system accounts for absences or use of other time in 6 minute increments (a tenth of an hour), an employee may use earned paid sick time in this same increment.

Yes, but only if an employee uses earned paid sick time on three or more consecutive work days. Where earned paid sick time is used on three of more consecutive work days, an employer can require reasonable documentation that the earned paid sick time was used for purposes permitted by Arizona’s earned paid sick time laws. For further information about permitted uses of earned paid sick time, see What can earned paid sick time be used for?

Reasonable documentation includes documentation signed by a health care professional indicating that the earned paid sick time is necessary. In the case of domestic violence, sexual violence, abuse or stalking, the following documents are considered reasonable:

• A police report;
• A protective order, injunction against harassment, general court order, or other evidence from a court or prosecuting attorney;
• A signed statement from a domestic violence or sexual violence program, or victim services organization affirming that the employee or employee’s family member is receiving services related to domestic violence, sexual abuse, or stalking;
• A signed statement from a witness advocate concerning services from a victim services organization affirming that the employee or employee’s family member is receiving services related to domestic violence, sexual abuse, or stalking;
• A signed statement from an attorney, member of the clergy, or a medical or other professional affirming that the employee or employee’s family member is receiving services related to domestic violence, sexual abuse, or stalking ; or
• An employee’s legible, written statement concerning status of the employee or the employee’s family member as a victim of domestic violence, sexual violence, abuse, or stalking that signals the employee’s identity and (if applicable) relationship to the family member.

No. Although an employer can require reasonable documentation of absences of three of more consecutive work days, an employer may not require that an employee specify the relevant health condition or the details of domestic violence, sexual violence, abuse or stalking. See Can an employer require employees to document absences in which earned paid sick time was used?

No.

Unless otherwise exempted from the recordkeeping requirements, employers subject to Arizona’s earned paid sick time laws are required to comply with notice, posting, and recordkeeping requirements pertaining to earned paid sick time. The requirements include: (1) posting earned paid sick time notices in the workplace; (2) providing employees with the employer’s business name, address, and telephone number in writing upon hire; (3) providing employees with a notice that informs them of their rights and responsibilities under the Fair Wages and Healthy Families Act; and (4) maintaining payroll records in accordance with Arizona’s statutes and rules. For more information about which employers are subject to Arizona’s earned paid sick leave laws, see Which employers are subject to earned paid sick time laws?

The Industrial Commission’s 2017 model earned paid sick time notice can be found here.

Note:  The Industrial Commission is currently proposing rules that would exempt small employers (defined as a corporation, proprietorship, partnership, joint venture, limited liability company, trust, or association that has less than $500,000 in gross annual revenue) from the Act’s posting requirements. The Industrial Commission will update this FAQ as the rulemaking process progresses.

Four years.

Employees who believe that their employer is violating the Fair Wages and Healthy Families Act may file a complaint with the Labor Department of the Industrial Commission of Arizona or file a civil lawsuit. To file a complaint with the Labor Department online, please click here. To file a claim in writing, send the completed claim form (available here) to: 

Industrial Commission of Arizona, Labor Department
800 W Washington St.
Phoenix, AZ 85007

Any person or organization may file a complaint with the Labor Department of the Industrial Commission alleging a minimum wage or earned paid sick time violation.

An administrative complaint concerning minimum wage must be filed within one year of the date that the wages were due. In the absence of statutory and judicial guidance, the Industrial Commission is proposing rules that would also require administrative complaints concerning unpaid earned paid sick time to be filed within one year of that the date that the earned paid sick time payment was due.

As concerns claims for minimum wage retaliation, an administrative complaint must be filed with the Labor Department of the Industrial Commission within one year from the date the alleged violation occurred or when the employee knew or should have known of the alleged violation. In the absence of statutory or judicial guidance, the Industrial Commission is proposing rules that would permit a person or organization alleging minimum wage or earned paid sick time retaliation, discrimination, or a violation of A.R.S. § 23-377 to file a complaint with the Labor Department within one year from the date the alleged violation occurred or when the employee knew or should have known of the alleged violation.

A civil action to enforce The Fair Wages and Healthy Families Act (the “Act”) may be filed by a law enforcement officer (which means the attorney general, a city attorney, a county attorney, or a town attorney) or by any private party injured by a violation of the Act. The civil action must be filed no later than two years after a violation last occurs, or three years in the case of a willful violation. The civil action may include all violations that occurred as part of a continuing course of employer conduct regardless of the date of the violation.

No. The Fair Wages and Healthy Families Act (the “Act”) prohibits an employer from discriminating or retaliating against an employee or other person for asserting any right under the Act. Additionally, if an employer takes an adverse action against an employee within 90 days of the employee asserting a right under the Act, the presumption is that the employer retaliated against the employee. This presumption can only be overcome if the employer shows by clear and convincing evidence that the action taken against the employee was for a permissible reason.

An employee may file an administrative complaint with the Labor Department of the Industrial Commission of Arizona or file a civil lawsuit.

An employer who fails to pay minimum wage or earned paid sick time will be required to pay the employee the wages owed with interest and an additional amount equal to twice the underpaid wages.

An employer who retaliates against an employee is required to pay penalties sufficient to compensate the employee and deter future violations, but not less than $150 for each day that the violation continued or until legal judgment is final.

The Commission and courts also have the authority to order other appropriate legal or equitable relief for violations of The Fair Wages and Healthy Families Act.

Payroll information provided to the Labor Department of the Industrial Commission of Arizona will be kept confidential except as necessary to prosecute violations under The Fair Wages and Healthy Families Act.

The Labor Department of the Industrial Commission will keep the name of an employee identified in an administrative complaint confidential for as long as possible. If the Commission determines that an employee’s name must be disclosed in order to conduct a further investigation, it may do so only with the employee’s consent.

An employer who violates The Fair Wages and Healthy Families Act’s recordkeeping, posting, or other requirements is subject to a civil penalty of at least $250 for the first violation and at least $1000 for each subsequent or willful violation. Special monitoring and inspections may also be imposed.

Additionally, if an employer fails to maintain required records, it will be presumed that the employer did not pay the required minimum wage or earned paid sick time. An employer has the right to rebut this presumption with evidence that the employer paid the employee the required minimum wage.