Arizona's New Minimum Wage and Paid Sick Time Law


On November 8, 2016, the voters in Arizona passed the Minimum Wage and Paid Sick Time Off Initiative, also known as Proposition 206. The paid sick time component of the law will go into effect July 1, 2017, while the minimum wage increase to $10/ hour begins January 1, 2017.

The new Arizona law inserts Article 8.1 entitled "Earned Paid Sick Leave Time" into Section 5, Title 23 of Arizona Revised Statutes. The new law applies to employers regardless of their size or the number of employees. A covered employer with at least one Arizona employee is obligated to comply with the law. The time off may be used by the employee for his/her own mental or physical health, injury or health condition, or to care for a family member's health. The definitions are extremely broad. Here are some major parts of the new law:

  • All employees will accrue paid sick leave time at a minimum rate of one hour for every 30 hours worked. If you have 15 or more employees, you can cap the maximum annual accrual at 40 hours, while smaller employees may cap the annual accrual at 24 hours.
  • Employees who are exempt under the FLSA will be assumed to work 40 hours in each week for the purpose of calculating sick time accrual, unless their normal work week is less than 40 hours.
  • Unused earned paid sick leave must be carried forward to the following year consistent with the accrual limits of the statute. Employers may forgo this requirement by following a procedure specified in the statute.
  • A 90-day probationary period for new employees may apply to the use, but not the accrual.
  • The new law includes specific employee protections making it unlawful for an employer to retaliate or discriminate against an employee.

The complications of this new law do not stop with the above. There is a statutory provision allowing employees to do away with the accrual method in favor of simply providing an employee at the beginning of the year all earned paid sick leave that an employee is expected to accrue during the year. Some suggest that this provision brings Arizona's new law on par with California's paid sick time law.

The new Arizona law also contains other provisions such as an employer's ability to pay its employee for earned and unused paid sick leave rather than carrying it forward to the next year, notice required by the employee for the use of sick leave, and the employer's ability to request documentation to verify proper use of paid sick leave.

The statute defines a year as a regular and consecutive 12-month period as determined by the employer. If the employer does not designate a year, the statute is silent on what the default year will be.

There are numerous other provisions of the law that must be considered before the effective date. Employers must post notices informing employees of their entitlement to paid sick leave. Those notices must be provided in English and Spanish.

What is not immediately clear is how the new law will affect employers who have an earned time off policy that encompasses vacation and sick leave in one. For example, some employers allow employees to accrue paid time off (PTO) at a specified rate. The employee can use this for any purpose whatsoever. If, for example, an employer allows a new employee to accrue 40 hours of PTO in one year, will that satisfy the statute? Will that satisfy the statute if part of that time is intended as vacation as well as sick leave? These are questions that may be answered by the regulations that should be issued before the July 1, 2017, effective date.

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