Arizona’s Paid Sick Leave Law: What Employers Need to Know

Proposition 206 goes into effect on July 1, 2017, making Arizona 1 of 8 states that provide mandatory paid sick leave for employees.

In the absence of paid family or paid sick leave provisions in federal law, a growing number of states, including California, New York, Washington, and Arizona have begun to fill the gap. Stay tuned this week as we discuss major developments in the 2017 leave landscape, and how Zenefits can help you comply with the new regulations in your state or city!

State and local sick leave laws, by administrative district

In November 2016, voters enacted Arizona Prop 206, raising the minimum wage from $8.05 to $10.00 per hour, and requiring nearly all Arizona employees earn paid sick time. As the law takes effect on July 1, 2017, Arizona becomes 1 of 8 states, as well as Washington D.C., that provide mandatory paid sick leave. Keeping track of sick leave based on hours worked by each employee is complicated and fraught with risk, given the penalties for failing to properly account for and allow employees use of their earned sick time. Zenefits can help get you in compliance as soon as possible, with our hourly accrual tool, webinars, and team of qualified HR Specialists. Read on for more information on the law and its potential impact on your workplace.

Who qualifies?

Proposition 206, The Fair Wages and Healthy Families Act (the “Act”), applies to all employees performing work for pay, including full-time, part-time, and temporary employees, with the exception of state and federal employees. Significantly, unlike the minimum wage requirement, this section of the Act does not contain an exemption for small businesses, which means that even employers that are exempt from the minimum wage requirement will still be required to provide earned paid sick time.

What is earned paid sick time?

“Earned paid sick time” is defined in the Act as sick time accrued by an employee, during which  they receive the same hourly compensation and benefits as they would during active employment. Employees will begin accruing their earned paid sick time on either July 1, 2017 or their time of employment, whichever comes later.

When does earned paid sick time apply?

Employees may take earned paid sick time for their own conditions or to care for family members in case of the following:

  • A public health emergency (further detail here)
  • Medical care, mental, or physical illness, injury, or health condition
  • An absence caused by domestic violence, sexual violence, abuse, or stalking.

How can I comply?

Here’s a quick overview of some of the major requirements employers must put in place to comply with the Act. You can find more information here.

1. Accrual Requirements: For the purposes of earned paid sick time, the Act does not differentiate between annual and partial-year employees. The amount of sick time an employer must offer, as well as the accrual caps, are based on the size of their Arizona workforce.

  • For Arizona employers with more than 15 employees: Employees accrue a minimum of 1 hour of earned paid sick time for every 30 hours worked. However, employees cannot accrue or use more than 40 hours of earned paid sick time per year. (The employer may allow a higher limit in their own policies).
    • Counting Employees: An employer will be deemed to have 15 or more employees for sick leave purposes if: 1) they had 15 or more individuals on payroll 2) for some portion of a day each week, 3) for each of 20 calendar weeks in the current or preceding year.
    • NOTE: The Act does not include employees who work outside of Arizona in calculating the number of employees for earned paid sick time accrual.
  • For Arizona employers with under 15 employees: Employees accrue a minimum of of 1 hour of earned paid sick time for every 30 hours worked, but can only use 24 hours of earned paid sick time. (The employer may allow a higher limit in their own policies).
  • Exempt Employees: Employees who are classified as “exempt” under the Fair Labor Standards Act, are assumed to have worked 40 hours per week. However, if the exempt employee’s normal workweek is under 40 hours, they will accrue paid sick leave based on that workweek.
  • NOTE: Employers are allowed to “loan” their employees earned paid sick time prior to accrual at their discretion.

2. Hourly Wages:  An employer may not pay employees less than the minimum wage per hour of earned paid sick time.

3. Notice Requirements:

  • For Employers: Employers must provide their employees with written notice of earned paid sick time on their employment date, or by July 1, 2017, whichever comes later. The notice must include information on the employee’s right to sick time, leave accrual amount, complaint procedures, and contact information for the AZ Industrial Commission. Posters can be found here, along with additional information on the notice content requirements.
    • Employee Paychecks: The employer must also provide the following information along with the employee’s paycheck:

      • The amount of earned paid sick time available to the employee;
      • The amount of earned paid sick time the employee has used thus far; and
      • The amount of pay time the employee has received as earned sick time.
  • For Employees: Employers may require their employees to provide advance notice of sick time, if they have a written policy that documents their internal notice procedure. When possible, an employee must provide advance notice of their need for sick leave, as well as the expected duration of the leave. Employees are allowed to provide notice in person, electronically or in writing.
  • Required Documentation from Employees:If the employee is requesting sick time for 3 or more consecutive work days, they may be  required to provide documentation that the absence is for a permitted purpose (see above), but not the specifics of the health condition.

4. Waiting Period: Employees will accrue earned paid sick leave immediately upon hire, and can also use their sick time as soon as it is accrued. However, employers may require employees hired after July 1, 2017  to wait 90 calendar days after their employment date to use their accrued paid sick time.

5. Carryover Requirements:  Under the Act, earned paid sick time will carry over to the following year, subject to the 40 and 24 hour limitations (see above). However, employers also have the option of paying employees for their unused earned sick time at the end of the year, instead of carrying it over.

6. Recordkeeping: Employers must comply with all the recordkeeping requirements in the Act, including:

  1. Posting written notices in the workplace, including notices on their rights and responsibilities under the Act;
  2. Providing employees with the employer’s business name, address and phone number in writing upon hire;
  3. Maintaining payroll records required by the Act, for up to 4 years.

Do I need to amend my paid leave policy?

If your company’s paid leave policy provides sick leave that is the same as or greater than the amount required by the Act, and can also be taken for the same purpose, and under the same conditions, then you may not need to provide additional sick leave time. However, you should consult your attorney before making this determination or any other changes based on the Act.
NOTE: Employers always have the option to offer more generous earned paid sick time policies than those required by the Act.

What penalties will I face for noncompliance?

Employers who fail to provide earned sick time will be required to repay employees the wages owed to them with interest, as well as an additional amount that equals twice the underpaid wages. Employers who fail to maintain payroll records could face penalties of at least $250 for the first violation, and $1000 for each violation thereafter. Employees may also file complaints against their employer with the Labor Department of the Industrial Commission of Arizona. Discover how easy managing time-related details for your business is with Zenefits Time and Attendance here:

Stay in the know about upcoming leave requirements by following blog for a continued discussion of San Francisco and New York paid family leave provisions, and what you can do to prepare your business.

Finally, our Help Center is chock-full of imperative details on coverage, notice, and paid time off requirements. Interested in seeing Zenefits in action? Request a demo with one of our HR specialists today.


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