Revealing the Fundamentals of the Arizona Prop. 206 Act

13
JULY, 2017

COMPLIANCE
PAYROLL
HR

What is Prop. 206?

Arizona voters approved the Fair Wages and Healthy Families Act, or Proposition 206, in November of 2016 to increase the state’s minimum wage to $10.00 per hour and to require employers to provide paid sick leave for all employees. The new minimum wage was effective January 1, 2017, and increases every year by $0.50 until January 1, 2020 at a wage rate of $12.00 per hour. The paid sick leave requirements went into effect July 1, 2017.

Minimum Wage Requirements

All Arizona employers were required to increase their minimum wage to $10.00 per hour and will have to increase the rate $0.50 a year until 2020. Starting on January 1, 2021, the minimum wage then increases each year based on the cost of living. All wages must be paid for all hours worked by an employee and is required for part-time, temporary, or full-time employees.

For tipped employees, employers are permitted to pay a maximum of $3.00 per hour less than non-tip employees. The tipped employee must earn at least minimum wage for all the hours he/she works each week when tips are included, or the employer must make up the difference. To calculate if a tipped employee has earned minimum wage, an employer must count the tips earned in a workweek. If employers use a tip credit, they must maintain records of any tips they want to be considered to pay minimum wage.

Employer-Provided Sick Leave Requirements

Accruals for employee sick leave were effective as of July 1, 2017, or the employee’s first day of employment depending on which date occurs first. Any employees hired after July 1, 2017 must wait 90 days before using their accrued paid sick leave.

Employers with 15 or more employees accrue a minimum of one hour of paid sick leave for every 30 hours worked. However, the employee is not entitled to accrue or use more than 40 hours of paid sick leave in a given year unless stated otherwise by their employer.

Employers with fewer than 15 employees also accrue a minimum of one hour of paid sick leave for every 30 hours worked. However, employees cannot accrue or use more than 24 hours of paid sick leave in a given year unless stated otherwise by their employer.

Earned paid sick time shall carry over to the next year following the 40-hour or 24-hour limitations. Employers may also reserve the right to pay out unused accrued sick leave at the end of the year. The payout must be an amount that’s equal to or more than the legal minimum amounts for the employee to use immediately at the beginning of the next year.

Employees have the right to use accrued sick time as they earn it for the circumstances stated below:

  • Public health emergencies
  • Absence due to domestic violence, sexual violence, abuse, or stalking
  • Medical care or mental/physical illness, injury, or health condition

The Flagstaff Exception

Prop. 206 allows Arizona counties, cities, and towns the freedom to regulate minimum wages and benefits within their respective borders, as long as they are not lower than mandated. The city of Flagstaff, AZ passed Proposition 414 in 2016 which requires employers within their borders to pay employees a minimum wage higher than Arizona’s minimum wage. The wage will be $12.00 per hour, with annual increases up to 2021 of $15.00 hourly to all classified employees with the city. Flagstaff defines an employee as any person who works or is expected to work 25 hours or more in any given calendar year and anyone who is or was employed by an employer.

Penalties for Non-Compliance

Any employer who violates the Fair Wages and Healthy Families Act is subject to a civil penalty of $250 for the first violation and $1000 for any other violations. If an employer fails to keep the required records maintained, the state will assume that the employer failed to pay the mandated minimum wage or earned sick time. For more information regarding Proposition 206, visit the Industrial Commission of Arizona’s website here.

How APS Can Help

The APS Core HR solution provides centralized event tracking so you can easily track and manage all important employee events and run reports to get a global view of all employees’ activities. Track everything from FMLA to performance reviews in a unified platform. To learn more about how APS can help you save time and money, schedule a demo today.

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