New AZ minimum wage business impact

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On November 8 Arizona voters passed the “The Fair Wages and Healthy Families Act” to increase the AZ minimum wage. Here are our initial observations regarding this new law. We expect that there will be clarification and guidance in complying with the new act forthcoming from the state.

Arizona, minimum wage, employees, workers, income, pay

For 2016 the minimum wage is $8.05 an hour. The increases will take effect on January 1st starting in 2017 and increase incrementally to $12.00 an hour by 2020. Beginning in 2021 and each successive January 1, the minimum wage will rise by the increase in the cost of living. Here are the new rates:

January 1, 2017 $10.00
January 1, 2018 $10.50
January 1, 2019 $11.00
January 1, 2020 $12.00

Besides the increase in the minimum wage (and perhaps an even bigger requirement and recordkeeping burden) is that beginning on July 1, 2017 Employers are required to start accruing paid sick leave for their Employees. Employers with 15 or more Employees will have to accrue up to 40 hours of sick time while Employers with fewer than 15 Employees will have to accrue up to 24 hours. Employees will accrue one hour of paid sick time for every 30 hours worked. An Employer may require an Employee hired after July 1, 2017 to wait until the 90th calendar day after the start of employment before using any accrued sick time.

Earned paid sick time shall be carried over to the following year unless the Employer decides to pay out at the end of the year. In the case of the payout, the Employer must provide the Employee with the required amount of paid sick time per the Act at the beginning of the subsequent year.

The amount of earned sick time is to be included on or in an attachment to the Employee’s regular paycheck.

Employers are required to post notices in the workplace to inform Employees of their rights under this new Act. Records of hours worked each day and the earned paid sick time shall be maintained by the Employer for a period of four (4) years. Employers who violate the requirements will be subject to a civil penalty of at least $250 for a first violation increasing to $1,000 for subsequent violations.

An employer that already has a paid leave policy in place that meets the accrual requirements is not required to provide additional paid sick time. Exempt employees under the Fair Labor Standards Act of 1938 are assumed to work 40 hours a week and sick time accrues on that normal work week.

This is our initial summary of the key points of the new act. We expect that there will be clarification and guidance on how these provisions will affect specific industries and employee groups.

Lisa H. Smith, EA