Happy Birthday Arizona’s Paid Sick Time!

Arizona’s paid sick time requirement became effective on July 1, 2017. Now, one year later, we look at how the new law—and Arizona employers—are faring.

Arizona Fair Wages and Healthy Families Act

First, a quick primer on the paid sick time requirement. In November 2016, Arizona voters approved Proposition 206, The Arizona Fair Wages and Healthy Families Act, which increases Arizona’s minimum wage incrementally over the next several years, and requires employers to provide sick leave for employees.

The paid sick time requirement became effective on July 1, 2017, which was also the first day that sick leave began to accrue for all employees (in other words, accrual was not retroactive).

Employees can take protected sick leave for a variety of reasons

The law defines sick leave as leave taken for any of the following:

  • the employees’ mental or physical illness, injury or health condition;
  • the employees’ need for medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition;
  • an employee’s need for preventative medical care;
  • care of a family member with a mental or physical illness, injury, or health condition;
  • care of a family member who needs medical diagnosis, care, or treatment of a mental or physical illness, injury, or health condition;
  • care of a family member who needs preventative care;
  • close of the employer’s place of business due to a public health emergency;
  • an employee’s need to care for a child whose school or place of care has been closed due to a public health emergency;
  • care of oneself or one’s family member who is exposed to a communicable disease and that person’s presence in the community may create a health risk to others;
  • absence necessary due to domestic violence, sexual violence, abuse or stalking, provided the leave is to allow the employee or the employee’s family member to obtain medical care, victim services, counseling, relocation, or legal services.

Accrual of protected sick leave

Accrual of sick leave depends on the number of employees. Employees of employers with 15 or more employees accrue a minimum of one (1) hour of earned paid sick time for every 30 hours worked, and employees of employers with fewer than 15 employees accrue a minimum of one (1) hour of earned paid sick time for every 30 hours worked. For the former, the employee is not entitled to accrue or use more than 40 hours of paid sick time in a given year; for the latter, the employee is not entitled to accrue or to use more than 24 hours of paid sick time in a given year. An employer may of course set higher limits; however, these are maximums to which employees are entitled by law. Note that exempt employees are generally assumed to work 40 hours each workweek—unless the employee’s normal schedule is less than 40 hours per workweek—therefore, an exempt employee will accrue leave at a rate of about 1.34 hours per week regardless of how many hours they actually work.

Employees begin to accrue sick leave on their first day of work, though employers may impose a 90-day wait before permitting employees to use accrued sick leave. Other than a new-hire wait period, an employee is entitled to use the accrued sick time as she or he earns it (in the smallest increment that the employer’s payroll uses, or one hour). Employers may also provide all earned paid sick time that an employee is expected to accrue within the year at the beginning of that year rather than waiting for the employee to “earn” it.

The law imposes strict recordkeeping and posting requirements

Under the law, employers are required to provide employees with the following information in or on an attachment to the employee’s regular paycheck:

  • The amount of earned paid sick time available to the employee in the current year;
  • The amount of earned paid sick time taken by the employee to date in the current year; and
  • The amount of pay that the employee has received as earned paid sick time to date in the current year.

Notably there are no exceptions in the law for employers that elect to roll their paid sick time into more generous PTO policies, therefore even if an employer allows employees to take more than the statutory minimum paid leave (for any purpose), employers are still obliged to provide an accounting of paid sick time.

The law also requires employers to provide written notice to employee regarding the law, including the following information:

  • Employees are entitled to earned paid sick time;
  • The amount of earned paid sick time that employees are entitled to accrue;
  • The terms of use guaranteed by Arizona’s earned paid sick time laws;
  • 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; and
  • Contact information for the Industrial Commission.

Limited sick leave is carried over, but not necessarily discharged upon separation

Earned paid sick time carries over to the following year—but the employee still cannot use or accrue more than 40 or 24 hours. In other words, if the employee has 40 hours at the end of the year and carries it over, she may still earn 40 hours the following year and if she does not take any sick leave, she will have 80 total hours (40 accrued in Year 1, 40 accrued in Year 2). This carry over is limited to 40 hours, however, so the employee would only carry over 40 hours into Year 3 (not 80). Alternatively, an employer may payout carryover hours at the end of the year, as long as the employer front-loads the employee’s paid sick time the following year.

Employers are not obligated to pay out unused sick leave upon termination—unless, of course, the employer has a policy of doing so.

Employers may not discriminate, retaliate, or discipline employees for taking leave

Finally, employers may not discriminate or retaliate against employees who take paid sick time, nor can they discipline employees who take protected sick leave. Even if the employee has taken multiple “unprotected” days leading up to protected leave, an employer may not terminate or discipline an employee for using protected leave.

The law imposes harsh penalties for violations of the law

Penalties for violations of the law include (but are not limited to):

  • Civil penalties of at least $250 for the first violation and at least $1000 for each subsequent or willful violation for violations of the recordkeeping and posting requirements;
  • Any employer who fails to pay earned paid sick time is required to pay the balance of the PSL owed, including interest, and an additional amount equal to twice the unpaid PSL;
  • A presumption that the employer did not pay the required earned paid sick time if an employer fails to maintain required records;
  • An employer who retaliates against an employee will be required to pay the employee not less than $150 for each day that the violation continued or until legal judgment is final; and/or
  • An award of attorneys’ fees and costs of suit to a prevailing party.

Efforts to Curtail the Law

The Arizona Chamber of Commerce, among other plaintiffs, filed a complaint challenging the law and seeking an injunction to prevent its implementation. The challengers argued that Proposition 206 violated multiple provisions of the Arizona Constitution, in particular, that the proposition violated the Revenue Source Rule (Ariz. Const. art. 9, § 23)(arguing that the proposition proposes a mandatory expenditure of state revenues without establishing or allocating funds), the Separate Amendment Rule (Ariz. Const. art. 21 § 1) (arguing that the proposition addresses two separate topics, minimum wage and paid sick time), and the Single Subject Rule (Ariz. Const. art. 4, pt. 2, § 13)(arguing again that the bar on proposing legislation on multiple subjects prohibits a proposition from addressing two subjects – minimum wage and paid sick time). The Superior Court denied the challenge, and the plaintiffs sought a special action from the Arizona Supreme Court. The Court denied the challenge and found that Proposition 206 did not violate the Arizona Constitution. In particular, the Court found that Proposition 206 does establish a mandatory expenditure of state funds without correlating allocation of funds because it provides for a collection of fines (a revenue source), and because the rule does not apply to increased wages of employees of employers with state contracts. It also fund that the Single Amendment and Single Subject rules apple to Constitutional amendments and legislation, respectively, and not to propositions proposing statutory changes.

Rule-Making

On October 3, 2017, the Industrial Commission’s rules regarding paid sick time came into effect, after several months of proposals and revisions. The rules are primarily intended to address enforcement of the to address enforcement of the paid sick time provisions, as well as providing additional definitions and clarifications of various provisions of the law. Notably, the rule focuses on calculating an employee’s rate of pay for paid sick time.

Claims and Litigation

Industrial Commission

Employees who believe that their employers have violated the paid sick time law may file a grievance with the Industrial Commission. According to the Industrial Commission’s office of public information, 384 claims have been filed claiming violations of the paid sick time law. The Commission does not track the time to resolution or outcomes of these claims—however, that equates to just over one claim per day since the law came into effect.

Litigation

As with other wage disputes under Arizona law, employees are not obligated to file a claim with the Industrial Commission prior to filing a lawsuit, they may file a lawsuit directly. Because plaintiffs are not required to state on their civil filing coversheets whether the claim arises under the paid sick time law, it is difficult to survey how many cases have been filed in which a plaintiff claims a violation of the paid sick leave requirement. However, a survey of all federal and state court dockets referring to the statute or paid sick leave, we identified one case in which the plaintiff based claims on violations of the paid sick leave law — Donald Gilbert et al. v. Kelly Services, Inc., Case 2:17-cv-03684-DMF. Plaintiff filed a class action lawsuit against Kelly Services on August 31, 2017 alleging: (1) failure to provide accounting regarding PSL on their paystubs; (2) failure to provide proper accounting regarding PSL on their paystubs; and (3) failure to pay PSL.  The case was removed to federal court, and voluntarily dismissed on February 27, 2018 without any decision on the merits.

Conclusion

Arizona employers have various options to implement the Arizona paid sick leave law, ranging from rolling the sick leave into existing (or expanded) generous PTO policies to providing separate paid sick leave and PTO, or providing only the statutory minimum paid sick leave.

Like any one-year-old, this law is still finding its feet, and poses a complicated balancing act for Arizona employers. Ensuring compliance with recordkeeping and posting requirements as well as the anti-discrimination and harassment requirements can create tension among managers, accounting, human resources, and employees.

 

Important Disclaimer: The foregoing is not legal advice and does not create an attorney-client relationship. If you have any questions or require any assistance, please contact Ms. Frenzinger at kfrenzinger@rllac.com or Ms. Fernandez Watts at swatts@rllaz.com.