Arizona’s New Minimum Wage and Paid Sick Leave …/media/files/insights/...Arizona’s New Minimum Wage and Paid Sick Leave Law D. Lewis Clark Jr. and Laura Lawless Robertson Partners,

Arizona’s New Minimum Wage and

Paid Sick Leave Law

D. Lewis Clark Jr. and Laura Lawless Robertson

Partners, Labor and Employment, Phoenix

2 squirepattonboggs.com

Arizona’s Current Minimum Wage Law

Prior to 2006, state minimum wage = federal minimum wage

In 2006, Arizona established a higher minimum wage (A.R.S. § 23-363)

Effective January 1, 2007, Arizona minimum wage set at $6.75/hour.

From January 1, 2008 onward, state minimum wage increased annually as cost of

living increased.

• Measured by the percentage increase as of August of the immediately preceding year over

the level as of August of the previous year of the consumer price index (all urban

consumers, U.S. city average for all items) or its successor index, with the minimum wage

increase rounded to the nearest multiple of $.05.

As of January 1, 2016, Arizona minimum wage = $8.05/hour.

Contrast with federal minimum wage of $7.25/hour.

Full-time employee at state minimum wage grosses $16,422/year.


Prop. 206 “The Minimum Wage and Paid Time

Off Initiative”

Also known as the “Fair Wages and Healthy Families Act”

Introduced by “Arizonans for Fair Wages and Healthy Families” as an

initiated state statute, or initiative statute

A law that a state adopts via the ballot initiative process

Groups collect signatures and once enough are collected, election officials place the

measure on the ballot for a vote

Strongly supported by Democratic elected officials

Including Rep. Ann Kirkpatrick, Rep. Raul Grijalva, Rep. Ruben Gallego, Phoenix

Mayor Greg Stanton, and Phoenix Vice Mayor Kate Gallego

Backed by diverse social and civic organizations

Including the Arizona Democratic Party, Chicanos Por La Causa, numerous public

health and education non-profits, faith-based organizations, minority advocacy

organizations, National Employment Law Project, AFL-CIO, American Federation of

State, County and Municipal Employees, Arizona Building Trades & Construction

Council, Pima Area Labor Federation, United Food and Commercial Workers,

UNITE HERE


Prop. 206 Ballot Title

INCREASES THE MINIMUM WAGE FROM $8.05 PER HOUR IN 2016 TO

$12.00 PER HOUR BY 2020 AND ESTABLISHES THE RIGHT TO EARN

PAID SICK TIME AWAY FROM EMPLOYMENT.

A “yes” vote shall have the effect of increasing the minimum wage from $8.05 per hour

in 2016 to $10.00 per hour in 2017, and then incrementally increasing the minimum

wage to $12.00 per hour by the year 2020; entitles employees to earn 1 hour of paid

sick time for every 30 hours worked with limits based upon the size of the employer;

broadly defining the conditions under which paid sick time may be taken, including

mental or physical illness, care of a family member, a public

health emergency, or absence due to domestic violence,

sexual violence, abuse or stalking; prohibiting various forms

of retaliation against employees for exercising any rights

under the law; and requiring employers to provide various

notices to employees about the law.

A “no” vote shall have the effect of retaining the existing

minimum wage (along with the existing method for annually

increasing the minimum wage for inflation) and retaining

employers’ existing ability to determine their own earned

paid sick leave policy.


Prop. 206 Ballot Summary

The ballot summary was as follows:

The Fair Wages and Healthy Families Initiative increases minimum

wage to $10 in 2017 then gradually to $12 by 2020; provides 40 hours

annual “earned paid sick time” for employees of large employers (24

hours for those of small employers); time accrues at one hour earned

for every 30 hours worked; time may be used to address circumstances

caused by illness of employee or employee’s family, public health

emergencies, or domestic violence; prohibits retaliating against

employees using the benefit; allows for more generous paid time-off

policies; and exempts employees who expressly waive the benefit

under collective bargaining agreements.


Arguments in Favor of Prop. 206

The proposition would decrease poverty in Arizona.

“No one who works 40 hours a week should have to live in poverty

and decide between buying groceries, medicine or paying the bills.

Raising the minimum wage offers hardworking families the

opportunity to put food on the table, care for their children, and

creates a better future for our state.” (U.S. Rep. Ann Kirkpatrick)

The proposition would increase opportunities to working-class families.

“We feel that this wage increase is that happy medium that protects small business and helps

workers who can’t pay their rent at the end of the month even though they work full time.”

(Tomas Robles, campaign mgr. for Arizonans for Fair Wages and Healthy Families)

The proposition would increase consumer purchasing-power and help

small businesses.

“Consider the increase in purchasing power for our working families after a wage increase.

Businesses, small and large, stand to gain from customers with higher wages as those

customers spend more on goods and services.” (Former State Rep. Phil Lopez)


Opponents of Prop. 206

The Arizona Chamber of Commerce and Industry launched a campaign

against Prop. 206 called “Protect Arizona Jobs,” or “Vote No on Prop 206.”

Arizona Chamber of Commerce pledged to raise over $1 million to oppose the

initiative.

Campaign donations showed the Chamber donated $30,036.78 as of Nov. 17.

Contrast with total raised in support of the Proposition: $4,236,846.23.

Opponents included U.S. Sen. John McCain, the Greater Phoenix Chamber

of Commerce, Arizona Farm Bureau, Western Growers, conservative policy

institutes, restaurant associations, and local chambers of commerce.


Arguments Against Prop. 206

The proposition would decrease employment and increase

prices for consumers. “To maintain profitability, businesses forced to raise their wages beyond market rates

must make adjustments elsewhere. These cuts typically lead to reduced hiring, fewer

work hours for employees, diminished fringe benefits for employees, and higher prices for

consumers.” (Matthew Glans, Sr. Policy Analyst, The Heartland Institute)

The proposition would encourage restaurants to

implement more automation, putting people out of work. “Twice I’ve talked to groups of franchisees here in Arizona, Taco Bell and McDonalds,

those places that give you the first rung on the ladder. They said, ‘Fine. The next time

you drive up to a window, you won’t be talking to a person. The next time you they hand

you a hamburger and French fries, it will come out a slot.' … They have a certain profit

margin. They cannot raise their cost of their product or people will stop purchasing it. So

what are they going to do? They’re going to automate. So somebody is going to have to

convince me that it’s good for employment in America, and I don’t think it is.” (U.S. Sen.

John McCain)

The proposition takes a one-size-fits-all approach when

urban and rural areas have different costs of living. “[T]his measure has the potential to eliminate more jobs than it would create. It does

nothing to address local governments adopting a higher minimum wage above what this

measure calls for, furthering the dangerous potential for a patchwork of wage and benefit

policies across the state.” (Mike Huckins, VP, Greater Phoenix Chamber of Commerce)


Voter Response

Initiative proponents needed 150,642 signatures

by July 7, 2016 to land the measure on the ballot.

On July 7, 2016, Arizona Healthy Working

Families submitted 275,000 signatures to the

Arizona Secretary of State’s office.

Sponsors of the measure hired “Sign Here Petitions” to

collect signatures for the petition to qualify for the ballot. A

total of $900,981.80 (or $5.98 per signature) was spent to

collect the signatures required to be on the ballot.

In months leading up to November 2016 election,

61% of those surveyed supported Prop. 206.

(Arizona Republic, Morrison, and Cronkite News

8/17/2016-8/31/2016)

Highest support among registered Democrats, voters

aged 18-35, and people with a high school diploma

or less.


Voter Response

Arizona Secretary of State

http://results.arizona.vote/2016/General/n1591/Results-State.html


Effect of New Law on Minimum Wage

Employers shall pay employees no less than the minimum wage, which shall

be not less than:

1. $10.00 on and after January 1, 2017




5. Increases on January 1, 2021 and on January 1 of successive years by the

increase in the cost of living.

Year Hourly Minimum Prior to

New Law (anticipated)

Hourly Minimum After

New Law

2017 $8.15 $10.00

2018 $8.35 $10.50

2019 $8.55 $11.00

2020 $8.80 $12.00

2021 and after Increase based on COLA Increase based on COLA


Effect of New Law on Minimum Wage

Tipped Employees: No change in tip credit!

“For any employee who customarily and regularly receives tips or gratuities from

patrons or others, the employer may pay a wage up to $3.00 per hour less than the

minimum wage if the employer can establish by its records of charged tips or by the

employee’s declaration for federal insurance contributions act (FICA) purposes that for

each week, when adding tips received to wages paid, the employee received not less

than the minimum wage for all hours worked. Compliance with this provision will be

determined by averaging tips received by the employee over the course of the

employer’s payroll period or any other period selected by the employer that complies

with regulations adopted by the [Industrial C]ommission.”


Paid Sick Leave Requirement

Prior to Prop. 206, Arizona had no law requiring that employers provide any

amount of paid sick leave to employees.

Same under federal law.

Effective July 1, 2017, employers must provide employees earned paid sick

time.

Which companies are covered?

“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 not the State of Arizona or the U.S.

Arizona minimum wage law exempts “small businesses,” i.e., those that have less than

$500,000 in gross annual revenue and that are exempt from having to pay a minimum wage

under federal law. Small businesses are not excepted from the paid sick leave

requirement.

Who is a covered employee?

“Any person who is or was employed by an employer, but does not include any person who is

employed by a parent or sibling, or who is employed performing babysitting services in the

employer’s house on a casual basis.”

Applies to exempt and non-exempt employees



Employees of an employer with 15 or more employees shall accrue a minimum of one

hour of earned paid sick time for every 30 hours worked, but shall not be entitled to

accrue or use more than 40 hours of earned paid sick time per year, unless the

employer selects a higher limit.

Employees of an employer with fewer than 15 employees shall accrue a minimum of

one hour of earned paid sick time for every 30 hours worked, but shall not be entitled

to accrue or use more than 24 hours of earned paid sick time per year, unless the

employer selects a higher limit.

Exempt employees are presumed to work 40 hours for accrual purposes, unless the regular

work week is less than 40 hours, in which case time accrues based on the normal work week.

When determining how many employees a business has, all full-time, part-time, and

temporary employees shall be counted.

If numbers of employees fluctuate, an employer will be deemed to have 15 or more employees if

it employed 15 employees or more for some portion of a day in each of 20 different calendar

weeks, whether or not consecutive, in either the current or preceding year.

Time off may be used as it accrues, but employer can restrict use by new hires in first

90 days of employment.



15 or more employees 14 or fewer employees

Accrual One hour of earned paid sick time for

every 30 hours worked, beginning on

July 1, 2017 or first day of work,

whichever is later – OR –

Employer may provide all earned paid

sick time an employee is expected to

accrue in a year at the beginning of

the year.

One hour of earned paid sick time for

every 30 hours worked, beginning on

July 1, 2017 or first day of work,

whichever is later – OR –

Employer may provide all earned paid

sick time an employee is expected to

accrue in a year at the beginning of the

year.

Cap 40 hours total, unless employer

selects higher limit

24 hours total, unless employer selects

higher limit

Use 40 hours total, unless employer

selects higher limit; time off can be

used at it accrues.

Employer may restrict use during first

90 calendar days of employment.

24 hours total, unless employer selects

higher limit; time off can be used as it

accrues.

Employer may restrict use during first

90 calendar days of employment.



Unused, earned paid sick time shall be carried over to the following year, subject to the

24- or 40-hour limitations on usage.

Alternatively, an employer may pay an employee for unused earned paid sick time at

the end of the calendar year and provide the employee with an amount of earned paid

sick time that meets or exceeds the requirements of the law that is available for the

employee’s immediate use at the beginning of the subsequent year.

Example: Employer with more than 15 employees provides statutory minimum of earned paid

sick time, i.e., employees can accrue up to 40 hours per calendar year. Employee uses 20

hours in 2017.

2017 2018

Rollover option Employee has accrued 40 hours, uses 20

hours in 2017, has a balance of 20 hours at

year-end, which is rolled over to 2018.

Employee begins the year with 20 rolled-

over hours, begins to accrue additional

time off on Jan. 1 at a rate of 1 hour per

30 hours worked until 40-hour cap

reached.

Cash-out option Employee has accrued 40 hours, uses 20

hours in 2017, has a balance of 20 hours. At

year-end, employer pays employee for

unused paid time off at regular hourly rate of

pay x 20.

Employee begins the year with 40 hours

of paid sick leave on Jan. 1.

Accrual?



If employee is transferred to a separate division, entity, or location but

remains employed by the same employer, employee retains all accrued

earned paid sick time and is entitled to use it without interruption.

If there is a separation from employment and the employee is rehired within 9

months, previously accrued but unused paid sick time shall be reinstated,

with accrual of additional paid sick leave beginning immediately at the

recommencement of employment.

If a different employer succeeds an existing employer, all employees of the

original employer who remain employed are entitled to all earned paid sick

time accrued under the original employer, and are entitled to use earned paid

sick time previously accrued.

Employers may, in their direction, lend earned paid sick time in advance of

accrual, but they are not required to do so.

No obligation to pay employees for unused, accrued, earned paid sick time

upon termination, resignation, retirement, or separation from employment.


Use of Paid Sick Leave – Four Circumstances

An employee’s mental or physical illness, injury or health condition; an

employee’s need for medical diagnosis, care, or treatment of a mental or

physical illness, injury or health condition; an employee’s need for

preventive medical care.

Examples

Doctor’s visits (routine or illness)

Colds/flus/viruses/headaches

Broken bones/sprains

Vaccinations

Physical therapy

Counseling

No limitation to serious health conditions, as defined under FMLA, or to

disabilities, as defined under ADA



Care of a family member with a mental or physical illness, injury or health

condition; care of a family member who needs medical diagnosis, care, or

treatment of a mental or physical illness, injury or health condition; care of a

family member who needs preventive medical care.

“Family member” defined

Regardless of age, a biological, adopted or foster child, stepchild, or legal ward

Regardless of age, a child of a domestic partner

Regardless of age, a child to whom the employee stands in loco parentis, or as to whom the employee stood

in loco parentis when the individual was a minor

A biological, foster, stepparent or adoptive parent or legal guardian of an employee or an employee’s spouse

or domestic partner

A person who stood in loco parentis when the employee or employee’s spouse or domestic partner was a

minor child

A person to whom the employee is legally married under the laws of any state, or a domestic partner of an

employee registered under the laws of any state or political subdivision

A grandparent, grandchild or sibling (whether of a biological, foster, adoptive, or step relation) of the

employee or the employee’s spouse or domestic partner;

Any other individual related by blood or affinity whose close association with the employee is the equivalent

of a family relationship.



Closure of the employee’s place of business by order of a public official

due to a public health emergency or an employee’s need to care for a

child whose school or place of care has been closed by order of a public

official due to a public health emergency, or care for oneself or a family

member when it has been determined by the health authorities having

jurisdiction or by a health care provider that the employee’s or family

member’s presence in the community may jeopardize the health of others

because of his or her exposure to a communicable disease, whether or

not the employee or family member has actually contracted the

communicable disease.

Same broad definition of “family member” applies to this circumstance as in preceding

slide.



Absence necessary due to domestic violence, sexual violence, abuse, or

stalking, provided the leave is to allow the employee to obtain for the

employee or the employee’s family member:

(a) medical attention needed to recover from physical or psychological injury or

disability caused by domestic violence, sexual violence, abuse or stalking;

(b) services from a domestic violence or sexual violence program or victim

services organization;

(c) psychological or other counseling;

(d) relocation or taking steps to secure an existing home due to the domestic

violence, sexual violence, abuse or stalking; or

(e) legal services, including, without limitation preparing for or participating in

any civil or criminal legal proceeding related to or resulting from the domestic

violence, sexual violence, abuse or stalking.

Statute incorporates by reference the definitions of abuse, domestic violence, sexual

violence, and stalking in the Arizona criminal code.

Same broad definition of “family member” applies


Use of Paid Sick Leave

Employees may request use of earned paid sick time orally, in

writing, by electronic means, or any other acceptable means.

When possible, the request should include the expected duration

of the absence.

If the use of earned paid sick time is foreseeable, employees

should make a “good faith effort” to provide notice of the need

for such time to the employer in advance of the use of the

earned paid sick time and shall make a reasonable effort to

schedule the use of earned paid sick time in a manner that does

not unduly disrupt the operations of the employer.

An employer that requires notice of the need to use earned paid

sick time where the need is not foreseeable shall provide a written

policy that contains procedures for the employee to provide notice.

If an employer has not provided the employee a copy of its written policy

for providing notice, it cannot deny the use of earned paid sick time

based on non-compliance with the policy.


Use of Paid Sick Leave

An employer may not condition use of

earned paid sick time on the employee

finding a replacement worker to cover the

hours when the employee will be

absence.

Earned paid sick time may be used in the

smaller of hourly increments or the

smallest increment that the employer’s

payroll system uses to account for

absences or use of other time.

For earned paid sick time of three or more

consecutive days, an employer may

require reasonable documentation that

the earned paid sick time was used for a

covered purpose.

Documentation of victim status must be

kept confidential.

Employer may not require an explanation

of the details of the covered crime.

Examples:

Doctor’s note that paid sick time was

necessary;

Police report regarding covered crimes;

Protective order;

Injunction against harassment;

Court order to appear in connection with

civil/criminal proceedings;

Signed statement from a victim services

organization, provider, or witness advocate

affirming employee is receiving services;

Signed statement from an attorney, clergy

member, medical or other professional that

employee is a covered crime victim;

Employee’s own written statement that

he/she or a family member is a covered

crime victim.


Retaliation Prohibited

It shall be unlawful for an employer or any other person to interfere with,

restrains, or deny the exercise of, or the attempt to exercise, any right

protected by the law.

An employer shall not engage in retaliation or discriminate against an

employee or former employee because he/she exercised rights protected

under the law.

It is unlawful for an employer’s absence control policy to count earned paid

sick time used as allowed by the law as an absence

that may lead to or result in discipline, discharge,

demotion, suspension, or any other adverse action.

Taking adverse action against a person within 90 days

of engaging in a protected right under the law raises a

presumption that the action was retaliation, which may

be rebutted by clear and convincing evidence that the

action was taken for permissible reasons.


Notice Requirements

Employers shall 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 and the amount of earned paid sick time, the

terms of its use guaranteed under the law, 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 as required by the law 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

Industrial Commission where questions about rights and responsibilities under the law can be

answered.

The notice must be in English, Spanish, and any other language deemed appropriate for the

employer by the Industrial Commission.

Employees must inform employees of 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 received as

earned paid sick time, either in or on an attachment to the employee’s regular

paycheck.

These records must be maintained for four years. Failure to do so will raise a rebuttable

presumption that the employer did not pay the minimum wage or earned paid sick time.


Violations/Legal Remedies

The Industrial Commission is authorized to enforce the law.

Violations of the notice, posting, or recordkeeping requirements of the law

may result in a civil penalty of at least $250 (first violation) and at least

$1,000 for each subsequent or willful violation, with or without special

monitoring and inspections.

Any person may file an administrative complaint with the Commission

charging that an employer has violated the law with respect to any employee

or other person. The Commission will only disclose an impacted

employee’s name with the employee’s consent.


Violations/Legal Remedies

A civil action to enforce the law may be brought in court by a law

enforcement officer or any injured private party within two years of the last

violation, or within three years in the case of a willful violation, which time is

tolled during an investigation by the Industrial Commission.

Employers who fail to adhere to the law shall be required to pay the

employee the balance of wages or earned paid sick time owed, including

interest, and an additional amount equal to twice the underpaid wages or

earned paid sick time.

Any employer who retaliates against an employee or other person in violation

of the law shall be required to pay an amount sufficient to compensate the

employee and deter future violations, but not less than $150 for each day the

violation continued or until legal judgment is final.

A prevailing plaintiff shall be entitled to reasonable attorneys’ fees and costs

of suit.


Legal Challenge to Prop. 206

December 15, 2016: Arizona Chamber of Commerce and Industry, Greater

Phoenix Chamber of Commerce, Tucson Hispanic Chamber of Commerce,

Greater Flagstaff Chamber of Commerce, the Arizona Licensed Beverage

Association, and owners and employees of restaurant Valle Luna file a lawsuit

to overturn Prop. 206.

Not a single-subject initiative

Fails to account for state costs from the general fund



Judge Daniel Kiley (Maricopa County Superior Court) denied Plaintiffs’ request for a

temporary restraining order enjoining the law from going into effect on Jan. 1, 2017.

Judge Kiley held a hearing on December 20, 2016 to hear arguments on whether a

preliminary injunction should issue, enjoining the law from going into effect.

On December 21, 2016, Judge Kiley denied the motion for preliminary injunction,

finding that the groups raise legitimate legal questions, but that those questions do not

outweigh the burden employees would face if minimum wage increase is delayed:

The court must consider the hardship that will be visited upon employees at

the bottom of the income scale by a delay in the implementation of the Act …

many of whom struggle on a daily basis to make ends meet.



Plaintiffs appealed the denial of the motion for preliminary injunction.

On December 28, 2016, the Arizona Supreme Court (now expanded

to 7 members, including two recent Gov. Ducey appointees) agreed

to take up the case.

• Gov. Ducey publicly opposed the measure.



On December 29, 2016, the Arizona Supreme Court issued a one-sentence order

denying a request to stay implementation of Prop. 206.

Justice Clint Bolick wrote the statement; the two recent Ducey appointees did not

participate in the decision.

Although the request to stay the law was denied, the Court will decide whether to take

up the underlying issue of the measure’s constitutionality “in due course.”

Arizona Chamber of Commerce & Industry called the ruling “a setback.”

Final ruling not anticipated for several months.


Recommendations for Employers

Make adjustments to minimum wage for Arizona employees!

$10.00 minimum wage, retroactively effective to January 1, 2017.

Ensure payment is accurate in next payroll run.

Consider whether to repeal wage increases if Arizona Court of Appeals or

Arizona Supreme Court ultimately find the law unconstitutional.

Difficult to take back pay adjustments

Morale

Review 2017 budgets to ensure availability of funds to pay employees at

least $10/hour, and account for adjustments at higher end of pay scale for

employees earning above the minimum wage.

Ensure that tip credit rules are being adhered to and difference is paid

accordingly, if applicable.


Recommendations for Employers

Delay implementation of sick leave changes in light of July 1 effective date

Consider and prepare for any modifications to existing sick leave policies that

may be necessary, including whether to implement rollover or cash-out

options, weighing costs/benefits while there is time.

Ensure that payroll department or third-party payroll provider is equipped to

provide the required notices on paystubs, if law is implemented.

Plan for manager/HR training regarding the reasons for which employees

can take paid sick leave, how to request use of paid sick leave, and

confidentiality obligations regarding information obtained in the process of

vetting requests for leave.

Develop (but do not yet roll out) a written policy regarding the use of paid sick

leave, incorporating non-retaliation provisions, and consider the most

effective method for disseminating the policy.


Questions?

Lew Clark

602.528.4065

[email protected]

Laura Lawless Robertson

602.528.4137

[email protected]

Documents

Arizona’s New Minimum Wage and Paid Sick Leave …/media/files/insights/...Arizona’s New Minimum Wage and Paid Sick Leave Law D. Lewis Clark Jr. and Laura Lawless Robertson Partners,