Arizona Fair Wages and Healthy Families Act: A PSL-4Step Analysis

Arizona voters last November approved Proposition 206, The Fair Wages and Healthy Families Act. The Act requires most Arizona employers to allow employees to accrue paid sick leave, effective July 1, 2017. It also increases the minimum wage in increments.

Legal challenges to the constitutionality of that law by a cadre of business interests have been unsuccessful, thus far. On March 14, in a one-paragraph opinion, the Arizona Supreme Court rejected the argument that the Proposition was unconstitutional. The Court stated that it would issue a “written opinion further explaining the Court’s decision … in due course” but has not yet done so.

The Arizona Industrial Commission (AIC) issued a Notice of Proposed Rulemaking concerning the Act on May 5, 2017. The comment period ended on June 5, 2017. The AIC also issued Frequently Asked Questions (FAQs) about Minimum Wage and Earned Paid Sick Time, updated most recently on May 19, 2017.saguaro-232762_640

Here, I use the PSL-4Step framework to analyze The Arizona Fair Wages and Healthy Families Act.

Step 1: Does it apply?

“Employer” includes every type of business entity, political subdivision of Arizona, individual or other entity “acting directly or indirectly in the interest of an employer in relation to an employee” excluding the State of Arizona and the United States.

“Employee” means any person who is employed by an employer but does not include anyone employed by a parent or a sibling, or who is employed performing babysitting services in the employer’s home on a casual basis. The term also includes recipients of public benefits working as a condition of receiving public assistance. There are no salary-based exemptions.

The earned paid sick time provisions (referred to in this blog as PSL) are effective July 1, 2017 except if a labor contract is in effect at that time, the law takes effect upon the expiration of that contract.

An employer and union may “expressly waive[]” any or all of the law’s PSL requirements in their labor contract by using “clear and unambiguous terms.”   (Help me understand the logic of that provision.)

Step 2:  The Benefit

Accrual: One hour of leave for every 30 hours worked, beginning the first day of employment (or July 1, 2017 for then-current employees). Those employed on July 1, 2017 may use leave as it accrues. Those hired after July 1, 2017 may use accrued leave beginning on the 90th calendar day of employment. An employer may cap accrual and use at 40 hours per year (any consecutive 12 month period as determined by employer) except that employers with fewer than 15 employees (whether full-time, part-time or temporary) may cap accrual and use at 24 hours per year.

  • The May 19 FAQs state that “in the absence of further statutory or judicial  guidance on the issue the Industrial Commission will not include an employer’s non-Arizona employees in an employer’s total employee count for earned paid sick time purposes.”
  • The May 19 FAQs state that an employer whose selected “year” begins on a date other than July 1 may prorate employees’ annual accrual and use based on the number of days remaining in the employer’s year, as of July 1, 2017.

Exempt Employees: Are assumed to work 40 hours weekly unless their normal work week is less than 40 hours, in which case PSL accrues based upon that normal work week.

Rate of Pay: The “same hourly rate and with the same benefits, including health care benefits, as the employee normally earns during hours worked,” but not less than the federal minimum wage.

  • The AIC Proposed Regulations and May 19 FAQs state that the hourly rate includes shift differentials and premiums, but excludes “overtime, holiday pay, bonuses, other types of incentive pay, tips and gifts.”They also state that an employee with multiple hourly rates shall be paid the rate the employee would have been paid for the period of time in which sick time is used or, if unknown, the weighted average of all hourly rates of pay during the pay period; salaried employees shall be paid an hourly rate equal to the employee’s total wages divided by the number of agreed to hours for such salary or, if a salaried employee’s hours vary, the employee is presumed to work 40 hours weekly; commissioned, piece-rate for fee-for-service employees shall be paid “in the following order of priority”:
    • agreed upon hourly rate, if one had been established previously;
    • the wages the employee would have earned, if known, for the sick time period;
    • a reasonable estimation of the wages the employee would have been paid for the sick time period;
    • the weighted average of all hourly rates of pay during the previous 90 days, if the employee worked regularly during the previous 90 day period.

Unused Hours: Carried over to the following year, subject to use limits set forth in “Accrual” section above. An employer may elect to pay an employee for unused sick time at the end of the year and frontload the employee’s sick time accrual, which would be available for immediate use, at the beginning of the subsequent year.

  • The AIC Proposed Regulations and May 15 FAQs state that an employee’s carrying over unused hours does not affect the employee’s ability to accrue or use sick time, subject to yearly usage limits.

Alternatives to Accrual: An employer may frontload sick time.

Uses of PSL:

  • Employee’s or family member’s illness, injury or health condition (including diagnosis, care or treatment) or preventative medical care;
  • When employee’s workplace, or employee’s child’s school or place of care is closed by a public official due to a public health emergency.
    • The AIC’s proposed regulations define a “public health emergency” as “a state of emergency declared by the governor in which there is an occurrence or imminent threat of an illness or health condition caused by bioterrorism, an epidemic or pandemic disease or a highly fatal infectious agency or biological toxin and that poses a substantial risk of a significant number of human fatalities or incidents of permanent or long-term disability.”
  • Care for employee or family member when presence in the community may jeopardize the health of others because of his or her exposure to a communicable disease, regardless of whether the individual actually has the communicable disease;
  • Reasons due to domestic violence, sexual violence, abuse or stalking, provided the absence is to obtain related services, i.e. medical attention, services from a domestic violence or sexual violence program or victim services organization; psychological or other counseling; relocation or taking steps to secure an existing home; legal services.

Designation of Paid Sick Time: The May 15 FAQs state that in the absence of legislative and/or judicial guidance, an employer may designate “an employee’s time off from work as earned paid sick time, provided the employer has a good faith belief that the absence meets the requirements of earned paid sick time usage.”

Minimum Increments of Use: PSL may be used in “the smaller of hourly increments of the smallest increment that the employer’s payroll system uses to account of absences or use of other time.”

  • The May 15 FAQs state that if, for example, an employer’s payroll systems accounts for absences or use of other time in six-minute increments, “an employee may use earned paid sick time in this same increment.”

Step 3: Common Clauses

Family Member: Spouse, registered domestic partner, child, parent, grandparent, grandchild or sibling. Other “blood or affinity” relationships.

  • “Child” includes, regardless of age, biological, adopted, foster, step; legal ward; child of domestic partner; child to whom employee stands in loco parentis or an individual to whom the employee stood in loco parentis when individual was a minor.
  • “Parent” includes biological, adopted, foster or stepparent; legal guardian of an employee or employee’s spouse or domestic partner or a person who stood in loco parentis when the employee or employee’s spouse or domestic partner was a minor child;
  • A person wo whom the employee is legally married under the laws of any state or a domestic partner of an employee as registered under the laws of any state or political subdivision;
  • Grandparent, grandchild or sibling, whether biological, adoptive, foster or step relationship, of employee or employee’s spouse or domestic partner;
  • Any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.

Notice Requirements:

  • Employee notice:
    • An employee may request paid sick time orally, in writing, by electronic means or by any other means acceptable to the employer.
    • For foreseeable need, employee shall make a “good faith effort” to provide notice of such need in advance and shall make a “reasonable effort” to schedule the use of earned paid sick time in a manner that does not unduly disrupt the operations of the employer.
    • For unforeseeable need, if the employer requires notice of the need to use PSL, the employer shall provide employees “a written policy that contains procedures for the employee to provide notice.”
  • Employer notice:
    • An employer must give employees written notice of the items listed below by the later of the beginning of employment or July 1, 2017. The notice must be in English, Spanish and any language “deemed appropriate by the [Industrial] Commission.” The AIC has create model notices. Links to these notices are in the May 15 FAQs.
      • Employees are entitled to earn paid sick time and the amount of earned paid sick time employees are entitled to accrue;
      • The terms of its use is guaranteed under this law;
      • That retaliation against employees who request or use earned paid sick time is prohibited;
      • That each employee has the right to file a complaint if earned paid sick time is denied by the employer or the employee is subjected to retaliation for requesting or taking earned paid sick time;
      • The contact information for the Industrial Commission of Arizona, where questions about rights and responsibilities under the is article can be answered
    • An employer must inform an employee on, or on any attachment to the employee’s regular paycheck: the amount of earned paid sick time available; the amount of earned paid sick time taken to date in the year; and the amount of pay the employee has received as earned paid sick time.
    • The AIC’s Proposed Regulations states that employers with less than $500,000 in gross annual revenue—“small employers”—need not post such a notice.

Documentation: For absences “of three or more consecutive work days,” an employer may require reasonable documentation that the PSL has been used for an authorized purpose. A document signed by a health care professional indicating that the employee’s taking PSL was necessary is considered reasonable documentation.  If the reason for taking PSL relates to domestic violence, sexual violence or stalking, the law lists the “types of documents” that shall be considered reasonable documentation.

An employer may not require that the documentation explain the nature of the health condition or the details of the domestic violence, sexual violence, abuse or stalking.

Replacement Requirement: Prohibited. An employer may not require an employee to search for or find a replacement to cover the employee’s PSL hours.

Termination of Employment: No requirement to pay employee for unused PSL if employment terminates for any reason.

Effect of Employee’s Transfer or Rehire: 

  • If employee is transferred to a separate division entity or location, but remains employed by the same employer, the employee is entitled to, and may use, all PSL accrued at the prior division, entity or location.
  • If employee is rehired by the same employer within nine months of separation, previously accrued but unused PSL shall be reinstated and may be used upon reemployment (no need to wait another 90 days).

 Effect of Sale of Business: When a different employer succeeds or takes the place of an existing employer, employees of the original employer who remain employed by the successor are entitled to all PSL they accrued when employed by the original employer and may use that time.

  • The May 15 FAQs state that the “Industrial Commissioner will follow existing Arizona case law concerning liability assumption in asset-only transactions.”

Relations to Other Employer Sick Time Policies:  If an employer already has a paid leave policy that provides “an amount of paid leave sufficient to meet the accrual requirements” of this law, may be used for the same purposed and under the same conditions” as PSL under this law, the employer need not provide additional PSL.

  • The May 15 FAQs state that if an employer has an equivalent paid leave policy and an employee exhausts the available time for purposes other than those enumerated in the Act, an employer need not offer additional leave.

Relationship to Other Laws/Agreements: PSL is in addition to any other legal or contractual requirements. The law shall not be construed as diminishing the rights of public employees regarding paid sick time or use of paid sick time.

Employer Prohibitions: Employer may not interfere with, restrain or deny the exercise of, of the attempt to exercise, any right protected by the law. An employer shall not discriminate or retaliate against an employee or former employee because that individual has exercised of rights protected under the PSL law, including the right to request or use paid sick time, the right to file a complaint or inform any person about any employer’s alleged violation of the law; the right to participate in an investigation, hearing or proceeding or cooperate with or assist in an investigation; and the right to inform any person of his or her potential rights under this law.

“Retaliate” means denial of any right guaranteed under this law and any threat, discharge, suspension, demotion, reduction of hours, or any other adverse action against an employee for the exercise of any right guaranteed including any sanctions against an employee who is the recipient of public benefits for rights guaranteed herein. It shall also include interference with or punishment for in any manner participating in or assisting an investigation, proceeding or hearing under this law.

The protections of the law apply to any person who mistakenly but it in good faith alleges a violation of the law.

An employer ‘s absence control policy may not count PSL taken under this law as an absence that may lead to or result in discipline, discharge, demotion, suspension, or any other adverse action.

Payroll Records: Employers must maintain records showing information relating to accrual and use of earned sick time for four years.

Enforcement: By both private right of action or by complaint to the Industrial Commission of Arizona. The Commission shall coordinate implementation and enforcement of this law and adopt and implement “appropriate guidelines or regulations” to do so.

 Step 4: Unique Provisions

A rule of construction: These provisions “shall be liberally construed in favor of its purposes.”

A presumption the employer unlawfully retaliated: “Taking adverse action against a person within ninety days of a person’s engaging” in the exercise of any right guaranteed by the law “shall raise a presumption that such action was retaliation, which may be rebutted by clear and convincing evidence that such action was taken for other permissible reasons.”

An anti-preemption provision: This law “shall not limit the authority of the legislature or any other body to adopt any law or policy that requires payment of higher or supplemental wages or benefits, or that extends such protections to employers or employees not covered by this law.