Prop 206 will go into effect July 1st, 2017. This new law impact Arizona employers in two signifanct ways:
- The minimum wage will be increased to $10 per hour
- Employees must be provided paid sick time
Are you Ready for the New Regulations?
This new law is a significant change as it will increase the employer's responsibility to track and allocate paid sick time based on the formula mandated by the state. Because of these added requirements, existing polices and record keeping procedures must be significantly updated.
Update Your Policies Before the Deadline
Arizona employers must be Prop 206 compliant before the first of July. Non-compliance can increase your exposure to law suits from your employees. Since damages in these suits include attorney's fees, the amount you'll end up paying will far exceed the time off owed.
Additionally, the Department of Labor can step in when they suspect a violation. This can lead to a full audit of your company and possibly fines.
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Prop 206 FAQ
Q: How Does AZ Prop 206 Impact My Business?
A: The new law applies to virtually every employer in Arizona. The only exception to these new rules is for businesses that transacts less than $500K in gross anual revenue and does not engage in "commerce". Since the definition of commerce is so broad, we recommend every employer comply with 206.
Q: We Already Give 40 Hours of PTO. Is That Good Enough?
A: In our opinion, offering 40 hours of PTO which an employee can use for any reason is not good enough. We recommend that every Arizona employer adopt a PST policy.
Q: How Do We Calculate PST Under the New Law?
A: Employee accrues 1 hour of PST for every 30 hours worked, which is capped depending on the size of the employer. Exempt employees are assumed to work 40 hours each week. If that exempt employee works less than 40 hours, PST calculations revert back to their actual hours worked.
Q: Are There Posting Requirements?
A: Yes, every employer is required to post a notice about the employee's expanded PST rights.
Q: What is the Maximum Number of PST Hours and Employee Can Accrue?
A: 40 PST hours in any calendar year. Employers are allowed to provide more time if they wish.
Q: Can PST Be Used For More Than Healthcare Reasons?
A: Yes, employees may use PST for themselves or for family members under the following conditions:
- Medical care or mental or physical illness, injury, or health condition
- A public health emergency
- Absence due to domestic violence, sexual violence, abuse, or stalking
Q: What if the Employer Fails to Comply with Prop 206?
A: The employer may have to pay their employees twice the PST owed. An employee that secures an attorney can be awarded attorney fees which can far exceed the amount of PST in dispute. The Department of Labor can also audit an employer and assess their own fines for violations discovered.
Q: Is there a “one size fits all” PST policy?
A: No. Every company has unique circumstances. An example would be commissioned or "piece rate" employees. This requires a formula to calculate their normal hourly rate into an associated amount of PST. Additionally, Prop 206 applies differently depending on the number of employees.
Employers should engage legal counsel to draft a PST policy that complies with the nuances of the law. Counsel can also provide best practices with the employer. The new law can be tricky to navigate, and even good-faith mistakes can be very costly.
Q: Does the new PST law apply to salaried employees who are exempt under the FLSA?
A: Yes, the new law applies to all employees, including salaried employees who are exempt under the Fair Labor Standards Act (“FLSA”). For purposes of calculating the number of hours worked, the new law allows employers to presume that a salaried employee works 40 hours per week, unless their normal work week is less than 40 hours, in which case PST accrues based upon the actual hours worked.
Q: Can an employer require an employee to use their accrued PST when taking FMLA leave?
A: Yes, employers may require employees to use any accrued PST when taking approved leave under the Family Medical Leave Act (“FMLA”). The employer should, however, consider that although there is some overlap between the FMLA and the new PST law, they are not the same. Before requiring an employee to use their accrued PST as part of their FMLA leave, employers should ensure that the employee has a qualifying reason to use their PST. For example, the FMLA allows an employee to take leave for any qualifying emergency arising out of the fact that a spouse, son, daughter, or parent is a military member on covered active duty or call to covered active duty status. The new PST law does not allow an employee to take PST for this reason. Thus, the employer could not require the employee to use their accrued PST in this scenario. When an employer decides that an employee’s request for FMLA also qualifies for PST, employers should notify the employee that they will be deducting their accrued PST before they take leave.
Q: Employees may only accrue, or use, 24 or 40 hours of PST per year depending on the number of employees. Can employers just give employees half that amount for the period from July 1, 2017 December 31, 2017?
A: No. Many employers plan to give their employees the full 24 or 40 hours of PST at the outset of the fiscal year because they don’t want to keep track of how many hours have been accrued during the year. That is fine, although employers still need to keep track of the number of hours worked each week. Some employers, however, mistakenly believe that since July 1, 2017 is the midpoint in the calendar year, they can just give their employees half of the 24 or 40 PST hours for the period from July 1, 2017 through December 31, 2017.
Actually, an employee who worked 40 hours per week every week from July 1 through December 31 would earn 32 PST hours. The math is as follows:
- 160 hours per month x 6 months = 960 hours.
- 960 divided by 30 hours = 32 PST hours earned.
Thus, an employer in this scenario would have to give each full-time employee 32 PST hours. If these employees worked overtime, employers would need to give them more than 32 PST hours.
The safest course of action is to either keep track of hours accrued or give each employee 40 PST hours for the calendar year July 1 to December 31.
Q: Does an employee need to state a reason why they are requesting PST?
A: Employees are not required to give any specific details about why they need to take PST, but employers can require employees to state the general basis for the request (i.e., that they or a family member have a qualifying health care reason).
We recommend that employers have a PST request form to document (i) that the employee indeed had a qualifying healthcare or legal reason to use PST, and (ii) how many PST hours were used and when. Employers should require that the employee sign the PST request form to verify this information.
Q: When must an employee give notice of their PST request?
A: The new law doesn’t specifically address whether an employee can call into work 5 minutes before their shift and claim to be sick. It is, however, clear that employers can require advance notice of foreseeable leave and that an employer can deny an untimely request for PST. We believe it appropriate to require that an employee request PST as soon as they become aware of the need for leave. However, this issue is not clearly addressed in the law, so employers need to be careful. The safest course is not to deny a PST request based on the failure to provide timely notice.
Q: Are there special recordkeeping requirements?
A: Employers must keep records showing the amount of PST accrued and used each pay period and the employee’s current PST balance. Employers must also keep track of other records to satisfy the requirements of the Arizona Minimum Wage Act and the FLSA. The FLSA’s record keeping requirements largely mirror the Arizona Minimum Wage Act’s record keeping requires and can be found here.
Although the statute of limitations on a claim under the new PST law is no longer than three years, the Arizona Minimum Wage Act states that an employee can seek recovery of minimum wage back to January 1, 2007 if they establish that the violations were a “continuing course of employer conduct.” A.R.S. § 23-364(H). We recommend that employers keep track of all records indefinitely.
Employers should keep confidential any information an employee provides about their health care or legal reason for requesting PST.
Q: What information must be on the employee’s paycheck?
A: The new law states, “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 has received as earned paid sick time shall be recorded in, or on an attachment to, the employee's regular paycheck.” A.R.S. § 23-375(C).
In other words, this information must be on the employee’s paycheck or “an attachment” to their paycheck. We believe employers could also satisfy this requirement by providing this information in an online portal, so long as the employee can access this information whenever they want.