Arizona Minimum Wage for 2017 is $10.00

In November of 2016, the voters of Arizona passed Proposition 206. This new law requires that the minimum wage be increased as follows: $10.00 on January 1, 2017, $10.50 on January 1, 2018, $11.00 on January 1, 2019, $12.00 on January 1, 2019, then indexed for inflation for the years following.

Going less noticed in the new law, but just as impactful, is the requirement to accrue Sick Time on all employees (including temporary and part-time workers). See the section titled "Sick Time" below.

The Federal minimum wage was increased to $7.25 per hour effective July 24, 2009. Since the Arizona law is currently ahead of the federal law, Arizona businesses will need to comply with the Arizona Minimum Wage Act.

Basic Minimum Wage Rate:

2020 - $12.00
2019 - $11.00
2018 - $10.50
2017 - $10.00
2016 - $8.05
2015 - $8.05
2014 - $7.90
2013 - $7.80
2012 - $7.65
2011 - $7.35
2010 - $7.25
2009 - $7.25
2008 - $6.90

Tipped Employee Minimum Wage Rate:

The tipped employee minimum wage rates are three dollars ($3) less than the basic minimum wage rate. A tipped employee means any employee engaged in an occupation in which he or she customarily and regularly receives tips. The tips must belong to the employee and be free of any control from the employer.

If the employer chooses to pay using the Tipped Employee Minimum Wage Rate, the employer must: (1) Provide written notice to the employees, (2) Be able to show that the reduced wage + the tips (employer needs to keep records of tips) yields a rate of pay that's equal to or higher than the Basic Minimum Wage Rate, and (3) allow the employees to keep all their tips (there could be a tip pooling arrangement).

Sick Time - Accrual Rate

When the voters of Arizona passed Proposition 206 in November of 2016, they approved new law requiring businesses to accrue Sick Time on ALL employees (including temporary and part-time workers) starting July 1, 2017.

ACCRUAL OF EARNED PAID SICK TIME: Employees of an employer shall accrue a minimum of 1 hour of earned paid Sick Time for every 30 hours worked. (see ARS 23-372)

Sick Time - Maximum Hours

MAXIMUM HOURS AN EMPLOYEE IS ENTITLED TO EARN: This is determined by how many employees the employer has. If the employer normally has 15 or more employees working for them, then the maximum amount of Sick Time the employee is entitled to is 40 hours / year as opposed to 24 hours if the employer has fewer than 15 employees. (see ARS 23-372)

DETERMINIG THE NUMBER OF EMPLOYEES: If the employees fluctuate around 15 at any one given time, then an employer is deemed to have 15 or more employees if the employer has 15 or more employees (any employee, full time, part-time, or temporary) on the payroll for some portion of a day in each of 20 different calendar weeks, whether or not the weeks were consecutive, in either the current or the preceding year. (see ARS 23-372(C))

So if you are the employer, you would: (1) examine your 52 weeks from the preceding year plus all the weeks in the current year - one week at a time, (2) look at the seven days in that week, (3) if there's a day in that week where you had 15 or more employees working, then that week counts as a week towards the determination, and (4) if you end-up counting 20 or more weeks that had 15 or more employees within the current and preceding year, then you are considered to be an employer with 15 or more employees for the purposes of determining your maximum hours you are required to accrue for each employee.

Sick Time - Carry Over

Unused Sick Time shall be carried over to the following year. Alternatively, in lieu of carryover of unused Sick Time from one year to the next, an employer may pay an employee for unused earned Sick Time. (see ARS 23-372(D)(4))

While the employer is required to carry over unused Sick Time, the employee is still limited to using the maximum allowed for a year (24 hours for employers with fewer than 15 employees, and 40 hours for employers with 15 or more employees) and looses any unused Sick Time upon termination.

Sick Time - Conjunction with Existing Paid Leave Policy

If an employer already has a paid leave policy and that policy already allows the employee to accrue equal or more time than the hours required by the Arizona Sick Time law, AND the employee is already allowed to use the days for the same purposes and under the same conditions described in the Arizona Sick Time law (see ARS 23-373), then the employer is not required to provide additional paid Sick Time.

NOTE: While a paid benefit program may result in a benefit due to an employee upon termination, unused Sick Time is not due to an employee upon termination. You may want to take care when combining Sick Time with other paid leave programs.

Sick Time - Notice to Employees (ARS 23-375)

Employers shall give employees written notice of the following: Employees are entitled to earned paid sick time and the amount of earned paid sick time, the terms of its use guaranteed, 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 the contact information for the commission where questions about rights and responsibilities under this article can be answered.

Employee 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 the employee has received as earned paid sick time shall be recorded in, or on an attachment to, the employee's regular paycheck.

Small Business Exemption

This exemption is frequently misunderstood. There are two ways an employee can be covered by the minimum wage laws: (1) if the business is covered, or (2) if the employee is a covered employee. Just because the business is exempt because their gross receipts are less than $500,000 does not mean that the employee is an exempt employee. It's very unlikely that the employee is an exempt employee. According to the US Code, an employee is not exempt if they have anything to do with interstate commerce (e.g. Mailing letters out-of-state, making phone calls out-of-state, accepting out-of-state checks or credit cards, working with any materials from out-of-state). What employee does not handle materials that originated from another state? I'd be really careful in determining that employees are exempt from minimum wage law.

If you think you have exempt employees, you should consult with your legal counsel to assist you in making this determination.

More detailed explanation of the Small Business Exemption.

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