Paid Sick Time: Arizona’s Draft Regulations Leave Employers Feeling Queasy

This is a continuation of my series regarding problems and issues relating to Arizona’s new Paid Sick Time requirements. Here is the link to my first article discussing how the law’s anti-retaliation provisions effectively alter at-will employment in Arizona. Here is the link to my second article discussing why employers should be hesitant to try and satisfy their PST obligations through preexisting PTO or vacation policies.

Arizona’s new Paid Sick Time (“PST”) requirements go into effect on July 1, 2017. By now most employers know the basics: (i) they must provide up to 40 hours of PST to employees each year (24 hours for small employers); (ii) employees will accrue 1 hour of PST for every 30 hours worked; and (iii) employees are entitled to use PST for their personal or family member medical conditions, certain public health emergencies, and relating to incidents of domestic or sexual violence, abuse or stalking.

Given ambiguities in the statutory language and other unanswered questions, employers have been eagerly awaiting the Arizona Industrial Commission’s draft regulations for guidance in implementing and complying with the new PST requirements. Although the Industrial Commission did get its draft regulations released (link here), they mostly address issues of minor importance, raise additional questions and ambiguities, and leave other serious issues completely unaddressed. For instance …

Overtime

PST must be compensated “at the same hourly rate and with the same benefits [] as the employee normally earns during hours worked … .” See A.R.S. § 23-371(D). Does this require that PST used be paid as overtime if the employee is already over 40 hours for the work week?

The draft regulations attempt to answer this in the negative, stating that “[t]he same hourly rate does not include … overtime [] pay. See (Proposed) A.A.C. R20-5-1202(19)(e)(i)). If passed, many employers will rely on this regulation and not pay overtime for PST used. But a serious question exists whether this portion of the regulation is invalid. Specifically, it may be viewed as conflicting with an unambiguous requirement that an employee using PST be paid the same as he/she “normally” would be paid. See, e.g., In re Pima Cty. Mental Health No. MH-2010-0047, 228 Ariz. 94, ¶ 15, 263 P.3d 643 (App. 2011) (“[A]n agency or administrative body may not enact rules or regulations that conflict with a statute.”).

Even if this draft regulation is passed, valid and enforceable, it still does not answer the question of whether (due to the requirement that PST must be paid at the same rate/with the same benefits as normally earned) PST used during the first 40 hours in a work week must be counted as hours worked for purposes of determining when the employee has reached 40 hours (and is therefore entitled to overtime pay for all subsequent hours worked in that work week).

PST Yearly Rollover

The statutes allow employers to limit employees to 40 hours of PST accrued or used each year (24 hours for small employers). See A.R.S. § 23-372(A) & (B). Employees can roll over unused PST from one year to the next, but the rollover is still subject to the above use limitations (assuming an employer imposes them). See A.R.S. § 23-372(D)(4).

Thus, employees can roll over unused PST year to year, and this accrued rollover can result in the employee’s PST bank growing large over time. While the ability to rollover would serve to provide an employee with more PST availability in the early part of a following year, it otherwise appears to be of limited effect as the rollover amount is still subject to any employer-imposed use limit (which most employers will apply). Id.

Oddly the draft regulations address PST rollover, capping of the amount of PST hours that can be rolled over year to year at 40 hours (24 hours for small employers). See(Proposed) A.A.C. R20-5-1206(F). But why? Why would the Industrial Commission enact a regulation that caps rollover PST hours when the statutory structure already greatly limits its effect? Why wouldn’t the Industrial Commission spend its time addressing the myriad of more serious issues which are raised by the statutes but completely ignored in the draft regulations? (See Other Unaddressed Issues below).

Beyond these questions, it is unclear if this draft regulation is even valid. The statutory framework is seemingly clear that caps are permitted for yearly use or accrual of PST. At the same time, the statutes appear to have specifically omitted caps for yearly PST rollover while providing that PST rollover can be subject (only) to the yearly use cap. In other words, the statute appears to clearly intend and provide that the yearly rollover be uncapped, and only subject to the yearly cap on use (if imposed by an employer). This raises a serious question whether this portion of the draft regulation might also be invalid as conflicting with an unambiguous statutory requirement and intent. See In re Pima Cty. Mental Health No. MH-2010-0047, supra.

Other Unaddressed Issues

There are a myriad of other serious issues which arise by virtue of the statutory language, but which were left completely unaddressed in the Industrial Commission’s draft regulations. For instance (this is not a comprehensive list):

  • Does the fact that PST is compensated “with the same benefits [] as the employee normally earned during hours worked” require that use of PST be counted towards further accrual of PST?
  • Can an employer provide PST tracking information to its employees via an electronic portal (instead of placing it on a printed pay stub/physical document)?
  • Can a family member, medical provider or friend submit a request for use of PST on behalf of an employee?
  • Can employees be required to use accrued PST concurrently with unpaid FMLA leave (like most employers require for PTO)?
  • Where employers try to satisfy their PST obligations through a preexisting PTO policy, and an employee exhausts her PTO for a different reason (vacation) but then has a PST-qualifying event (serious illness), is she entitled to demand additional paid leave because she did not receive paid leave for the PST-qualifying event (as guaranteed by the statute)?
  • Can an employee returning to work from use of PST for a personal illness or medical condition be required to provide a return to work note/certification from the employee’s healthcare provider?
  • What are the definitional limits of “adverse action” which could lead to a claim of PST retaliation against an employer or individual?
  • If an employer pays out accrued PST upon termination and later re-hires the employee, must the employer still reinstate the PST previously accrued as of the time of termination?

As the draft regulations provide little useful guidance on these or other serious PST issues, we strongly encourage employers to submit their comments and questions to the Industrial Commission. This can be done by either appearing at upcoming the public hearing regarding the draft regulations (June 5, 2017 in Phoenix), or submitting questions and comments in writing to the Industrial Commission in advance of that hearing (which is the deadline for written submissions). The meeting location, contact information and other instructions for written submissions are on the second page of the Industrial Commission’s draft regulations.

Employers will face a myriad of additional issues and problems in trying to comply with the new PST requirements. My upcoming articles will continue to address significant issues relating to PST. If you have any questions or comments, please feel free to email me at edm@rllaz.com, or call me at 520.792.4800.

Important Disclaimer: The foregoing is not legal advice and does not create an attorney-client relationship. Also, given the PST statutes are new and not yet tested, it remains to be seen whether the courts and/or agencies will apply and enforce the PST requirements in the ways discussed above.