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

In November 2016, voters enacted Arizona Prop 206, which, at that time, raised the minimum wage to $10.00 per hour. However, the current minimum wage in the state is $13.85 per hour. The passage of the proposition also required that most Arizona employees earn paid sick time.

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 to use their earned sick time.

Zenefits can help you comply as soon as possible with our hourly accrual tool, webinars, and a 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 employees
• Part-time employees
• Temporary employees
• The exception is for state and federal employees

Significantly, unlike the minimum wage requirement, this section of the Act does not contain an exemption for small businesses. This means that employers will still be required to provide earned paid sick time — even employers exempt from the minimum wage requirement.

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.”

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 cases of the following:

• A public health emergency (further detail here).
• Medical care, mental health needs, or a 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 critical requirements employers must enact to comply with the Act. You can find more information here.

Employees classified as “exempt” under the Fair Labor Standards Act are assumed to have worked 40 hours per week. However, if the exempt employee’s standard workweek is under 40 hours, they will accrue paid sick leave based on that scheduled workweek.

1. Accrual Requirements

• The Act does not differentiate between annual and partial-year employees for earned paid sick time. The amount of sick time an employer must offer and 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, the Act does not require employers to allow employees to 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: they had 15 or more individuals on the payroll for some portion of a day each week or for each of 20 calendar weeks in the current or preceding year.
  • NOTE: The Act does not include employees outside of Arizona in calculating the number of employees for earned paid sick time accrual.
• For Arizona employers with fewer than 15 employees: Employees accrue a minimum of 1 hour of 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 classified as “exempt” under the Fair Labor Standards Act are assumed to have worked 40 hours per week. However, if the exempt employee’s standard workweek is under 40 hours, they will accrue paid sick leave based on that scheduled workweek.
• NOTE: Employers can “loan” or “frontload” their employees’ earned paid sick time before 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. 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. Compliance posters and information on the notice content requirements can be found here.

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.
• Earned paid sick time the employee has used thus far.
• 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. It may read something like, “When possible, an employee must provide advance notice of their need for sick leave, as well as their expected duration. Employees can provide notice in person, electronically, or in writing.”

Required Documentation from Employees: If the employee requests 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). However, due to HIPAA protections, they do not have to disclose the specifics of the health condition.

4. Waiting Period

Newly hired employees accrue earned paid sick leave immediately. Employees can use the leave as soon as it’s accrued. However, employers may require employees to wait 90 calendar days after their employment date to use their accrued paid sick time.

5. Carryover Requirements

Employers can also pay employees for their unused earned sick time at the end of the year instead of allowing it to carry over.

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 can also pay employees for their unused earned sick time at the end of the year instead of allowing it to carry over.

6. Recordkeeping

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

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

What Penalties Will I Face for Noncompliance?

Employers who fail to provide earned sick time will be required to repay employees the wages they’re owed with interest and 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 $1,000 for each offense after that.

Employees may also file complaints against their employer with the Labor Department of the Industrial Commission of Arizona.

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