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Employment Compliance

Arizona's New Paid Sick Leave Law

What You Need to Know

As of July 1, 2017 all employers in Arizona are now required to provide employees with paid sick leave as directed by a new law, the Fair Wages and Healthy Families Act, which Arizona voters passed in November 2016.


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As of July 1, 2017 all employers in Arizona are now required to provide employees with paid sick leave as directed by a new law, the Fair Wages and Healthy Families Act, which Arizona voters passed in November 2016. The law dictates how employers must implement the new rules — from when the benefits begin to accrue to when they pay out, and what fines will be imposed for non-compliance. Employers may struggle with how to conform to the new law. In this article, we address some of the more likely issues employers may face.

Who Does This Affect?

Companies with even one paid Arizona employee are required to comply. An “employee” includes any person who is or was working for an employer, including people engaged in work as a condition of receiving public assistance. It does not include those who are employed by a parent or a sibling, or who performs babysitting services in the employer’s home on a casual basis. Employees of the state of Arizona and the United States are also exempt. It only applies to those who work IN Arizona, not those who are Arizona residents but who work out of state.

How Much Paid Sick Leave Do I Need to Provide?

The number of employees a business has determines how much paid sick leave employers have to provide. If an employer has 15 or more employees, each individual accrues one hour of sick leave for every 30 hours worked, and cannot accrue more than 40 total hours of sick leave in one year unless a higher limit is set by the employer. If an employer has fewer than 15 employees, each employee accrues one hour of sick leave for every 30 hours worked, with a limit of 24 total hours of sick leave in one year unless a higher limit is set by the employer.

Paid sick leave for employees who are exempt under the Fair Labor Standards Act of 1938 will be calculated on a 40-hour workweek unless the normal workweek is less than 40 hours. Then, it would be based on the actual hours worked.

What if My Staff Size Changes During the Year?

The new law directs employers to count the number of employees working for pay who are full-time, part-time and temporary workers in a given week. If the employer has 15 or more employees for “some portion of a day” for at least 20 weeks in a current or preceding year, it has to follow the guidelines for employers with 15 or more employees, even if those employees are not the same 15.

How Do I Calculate Sick Leave if I Do Not Pay Hourly?

The new law does not address how employers should calculate rates of pay for earned sick leave when employees are paid in ways other than traditional hourly rates, such as by commission or product output, or through tips. The Industrial Commission of Arizona, the agency responsible for enforcement, has offered these recommendations:

Regardless of what you decide, make sure to provide employees with the written policy in advance, and ask them to acknowledge the receipt of the policy in writing. Then, strictly adhere to the policy for all similarly situated employees and retain clear documentation for each employee, identifying what time has been accrued, when it was paid out, how the pay was calculated.

When Does the Paid Sick Leave Start to Accrue?

For current employees, sick leave begins to accrue on July 1, 2017. After that, sick leave starts accruing on the employee’s first day of work, but the employer can impose a 90-day probationary period for using the accrued sick leave for new employees. Even though a new employee can earn three hours of sick leave during the 90-day probationary period, the paid sick time off cannot be taken during the probationary period. If you decide to use this probationary period, make sure it is included in a written policy given to all new employees when they start work, and retain a written acknowledgment from employees that they received the policy and understand it.

What Happens if an Employee Changes Positions Within the Company?

The earned sick leave will follow the employee.

Can Employees Carry Over Accrued Sick Leave From One Year to the Next?

Yes. The provisions for carry-forward balances are mandatory unless an employer pays the employee for all earned and unused sick leave at the end of the year and pays the employee for the full amount of expected sick leave for the following year.

The purpose of this provision seems to be to ensure that accrued sick leave that is earned in one year is immediately available to an employee the following year if it is needed. Again, if you decide to use this provision, put it in writing and get a written acknowledgement that the employee received it and understands it.

What if an Employee Needs More Paid Sick Leave Than He/She Has Accrued?

An employer may, at its discretion, loan earned sick pay to an employee before it is accrued. If you do this, clearly document the arrangement and include the start time and date, the length of sick leave, the rate of pay, the terms of the “loan,” the signature of authorized company representative and the signature of employee. Only offer this option if you are prepared to offer it to all subsequent, similarly situated employees to avoid any concern of favoritism, bias, discrimination or retaliation.

What if I Already Have a Paid Sick Leave Program?

If an employer already provides benefits that are equal to or greater than those mandated by the new law, the employer is not obligated to provide additional paid sick leave. The new law is not to be construed as diminishing an employer’s obligations under any contract, collective bargaining agreement, employment benefit package or other agreement so long as those provide paid sick leave equal to or more generous than the law.

If an Employee Quits, Do I Have to Pay for Unused Sick Leave?

No. But be sure this is reflected in your company policy that is given to all employees and signed off as acknowledged and understood.

What Can Earned Paid Sick Leave Be Used For?

Reasons could include an employee’s or an employee’s family member’s:

Do I Have to Allow Sick Leave Whenever an Employee Asks for It?

Yes. Earned sick leave must be given when an employee requests it. The request can be made in person, in writing, electronically or by other means acceptable to the employer. If possible, employees should provide the planned duration of absence.

If the sick leave is foreseeable, the employee must make a “good-faith effort” to give advanced notice of the absence, and schedule the need for sick leave to avoid unduly disrupting the employer’s operations. But the absence of advanced notice of the need for sick leave cannot deprive the employee of taking it. In addition, the employer cannot require the employee to find a replacement before taking sick leave.

If the employer intends to require notice of the need for sick leave when it is unforeseeable, that must be in a written policy setting forth the reporting procedures. The absence of a policy that has been given to the employee in advance of the need for sick leave cannot deprive the employee of unforeseeable sick leave. The law expressly prohibits employers from discriminating against or subjecting any employee to retaliation for requesting or using earned paid sick time, assisting anyone else do so, or informing anyone of their rights under the law.

What Do I Need to Do Right Away?

Prepare your written policy and plan how you will notify employees. An employer should have given written notice of all earned sick leave protections, policies and procedures before July 1, 2017. If you have not already done so, move quickly to avoid a violation. Notice must be in English, Spanish and other languages as appropriate for the employee population, or as directed by the Industrial Commission. Employers are encouraged to use notices pre-approved by the Commission, and supplement them as necessary for their business needs and company policies. In addition, all year-to-date sick leave accrued and used must be reflected with each paycheck either on it or attached to it.

Set up a reporting and recording process in-house to keep careful and accurate records of compliance with this new law. Understand that these records are subject to audit by the Commission.

What Happens if I Do Not Comply with the Record-Keeping, Posting or Notice Requirements?

An employer that violates the notice requirements is subject to civil penalties: $250 for the first violation and $1,000 each subsequence violation or willful violation. An employer may be subject to special monitoring and inspections as determined by the Commission or the Court.

What Happens if I Fail to Comply with the Paid Sick Leave Law?

Employers that fail to abide by the new law are subject to civil action in a court of competent jurisdiction by a law enforcement officer or private party. Failure to pay wages can result in a penalty of interest earned as well as twice the unpaid wages. For acts of retaliation, the employer is subject to penalties set by a court or commissioner to deter future violations of not less than $150/day for every day of violation or until a judgment is final. The employer could also be subject to equitable relief in the form of temporary restraining orders or such other remedy as the court deems appropriate. A successful plaintiff can recover reasonable attorneys’ fees and costs of the suit. The statute of limitations is two years from the violation or three years in the case of a willful violation. These rights may not be waived by contract.

***** Tamara Cook is a shareholder at Renaud Cook Drury Mesaros, located in Phoenix, AZ.

The views expressed in the article are those of the authors and not necessarily the views of their clients or other attorneys in their firm.

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