2016 Employment Law Update For Arizona Employers
This year has brought many changes to the laws regarding how much employers must pay their employees, particularly in Arizona. Because these changes can lead to confusion, below is a summary of the most important points.
NEW FEDERAL OVERTIME EXEMPTIONS
The Department of Labor recently passed regulations effectively increasing the salary amount required for an employee to be exempt from overtime. This law goes into effect on December 1, 2016.
Overtime Law: Under the Fair Labor Standards Act, (29 U.S.C. 201 et al), every employee is entitled to time and a half for any hours they work over 40 hours in a workweek.
Overtime Exemptions: The FLSA allows for certain employees to be exempt from overtime if the employer can show that the employee meets all three exemption requirements below:
1) Job Duties – an employee must perform specific tasks as part of their employment to be exempt from overtime. (See Department of Labor “Fact Sheet” regarding exempt job duties)
2) Salary Basis – an employee must be paid a specific salary amount regardless of the hours worked or quality of work to be exempt from overtime.
3) Salary Level – an employee must make a base salary amount as set by statute to be exempt from overtime.
New Regulation: The new regulation focuses only on increasing the Salary Level requirement for certain overtime exempt employees as follows:
Bonus towards Salary: Another change made in the new regulation is that employers are allowed to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to ten percent (10%) of the new standard salary level.
Record Keeping: The employer has the duty to track and maintain employees pay records for up to three years. Please follow this Department of Labor “Fact Sheet” for more detailed information about record keeping requirements.
Common Mistakes: The most common employer mistakes that happen when classifying employees as exempt from overtime revolve around the employer’s failure to ensure that the employee performs exempt job duties. This happens in a few ways. One way is that the employer believes that by paying an individual salary then that individual is automatically exempt from overtime. Next, some employers simply misclassifying an employee as overtime exempt based on inaccurate information. Another common error happens when an employee is properly classified as exempt but then legal precedence changes that overtime exemption, making it so the employee is no longer overtime exempt. Finally, sometimes employers properly classify an employee as overtime exempt based on the current job duties of that employee, but as time progresses that employee’s position with the company changes and includes non-exempt job duties. This means an employee may not be exempt from overtime any more.
Liability of Employer: If an employer improperly classifies an employee as exempt, does not pay the employee on a salary basis, or does not pay the employee at the appropriate salary level, then the employer may be liable for that employee’s time and a half overtime pay dating back up to three years. On top of that, the employer may be liable for double damages of the amount owed, and the employee’s attorneys’ fees and costs.
Preventative Measures: Many of the issues surrounding overtime exemptions are completely preventable. Employers need to take a step back and look at how they are classifying their employees for pay purposes, and then see if currently overtime exempt employees truly should be exempt or not. Because these determinations can be difficult to make, it is important to consult with a trained employment law attorney to assist you with these matters. If you have any questions on this issue, please do not hesitate to contact Timothy Coons at Denton Peterson P.C. at 480.325.9900 or at [email protected].
NEW ARIZONA LAW ON MINIMUM WAGE AND PAID SICK LEAVE
Arizona voters passed Proposition 206, “The Fair Wages and Healthy Families Act” on November 8, 2016. The law will impact two areas of Arizona employment law: 1) minimum wage and (2) paid sick leave. The new minimum wage law goes into effect on January 1, 2017. The new paid sick time law goes into effect on July 1, 2017.
On January 1, 2017, the Arizona minimum wage increases as follows:
- January 1, 2017 to $10.00
- January 1, 2018 to $10.50
- January 1, 2019 to $11.00
- January 1, 2020 to $12.00
On January 1, 2021, the minimum wage will no longer automatically increase by a predetermined amount. Instead, the rate will be reviewed annually and increased based on an annual cost of living increase.
Paid Sick Leave
Coverage: All private-sector employers in Arizona are covered by this new law as well as some public-sector employers.
Effective Date: This law goes into effect on July 1, 2017.
Accrual: An employee accrues 1 hour of PSL for every 30 hours worked. The amount of PSL available in a year depends on the size of the employer. For employers with 1-14 employees, then the employee can accrue 24 hours in a year. For employer with 15+ employees then the employee can accrue 40 hours in a year. The employee can accrue PSL based on how many hours he/she works, or the employer can give the employee a block of PSL to use each year. As a side note, an employer may require the employee to wait for up to 90 days after hiring to use any accrued PSL.
Year End Roll-Over: While accrued PSL can be carried over from year to year, the employee cannot reach more than the accrual cap set by the employer. Instead of rolling over the unused accrued PSL into the following year, an employer may elect to pay it out at the end of the year.
Termination: Accrued PSL is not required to be paid out upon termination of employment so long as that is stated that way in the employers written policies. However, pursuant to this law if an employee is re-hired within nine months after termination then the employee’s lost PSL must be reinstated.
Usage: The new law allows for broad usage of PSL. PSL can be used if a public health emergency causes the employee’s child’s school or daycare to close. An employee can use PSL for his/her own mental or physical illness, injury, or health condition or to care for a family member with those conditions. Employees can also use PSL to deal with situations involving attendance at legal proceedings, domestic or sexual violence, counseling, or relocation.
Employee Obligations: Employees have some obligations under the law as to when they can use PSL. For situations where an employee knows they need to use PSL such as a scheduled surgery, etc. an employee is expected to make a good faith effort to provide notice of the need to use PSL. The employee may provide notice orally, in writing, electronically, or by other means acceptable to the employer. When an employee’s use of PSL is unforeseeable, the employee is expected to provide notice to the employer in a way that complies with the employer’s policies.
Verification: If the PSL is three days or longer, the employer can ask for a doctor’s note (but cannot inquire further about the condition). When an employee’s PSL is to deal with domestic violence, the employee can show a court record, police report, signed statement from the employee’s attorney, clergy, doctor or the employee’s own statement to verify the need for PSL.
Record Keeping: Employers are tasked with keeping accurate records for their employees. Existing Arizona law requires employers to keep payroll records for four years. The new law also requires an employer to keep records relating to PSL for four years. Employers must provide a report of an employee’s PSL with every paycheck.
Employer Liability: If an employer fails to comply with the new law, then an employee can file a lawsuit or alternatively, notify the Industrial Commission of Arizona. As with most laws, retaliation is strictly prohibited and employer must not take an adverse employment action against employees who complain about their PSL rights. This law goes one step further by stating that if adverse action is taken against an employee within ninety days of the employee’s exercise of his/her rights under the law, then the action is presumed retaliatory. The employer can rebut the presumption only by providing clear and convincing evidence of some other reason for the adverse action.
Damages: Employers who violate the law are subject to civil fines and civil damages. The fines for violation are at least $250 for the first violation and at least $1,000 for the second violation. The damages can include the amount of PSL owed to the employee, plus double that amount, and reasonable attorney’s fees and costs. The law allows for a two years statute of limitations for unwilling violation and three year statute of limitations for willful violations.
Existing Employer Policy: Employers with current paid leave policies that allows for paid leave as required under the law do not need to revise their existing policy. However, even if current policies are in place, you must be sure that your record keeping satisfies this new law.
Preventative Measures: Employers should review their existing policies to determine if they are in compliance with the law. This includes a review of your payroll records to ensure that they itemize employee paid sick time off benefits, how much PSL is accrued, how much PSL has been used, etc. Also be sure to post the new notice posters that will be provided by the Industrial Commission of Arizona.
If you would like to be proactive about these expected changes, please contact an experienced Mesa Arizona employment attorney to discuss how you can comply with the new laws. If you have any questions on this issue, please do not hesitate to contact Timothy Coons at Denton Peterson P.C. at 480.325.9900 or at [email protected].
Timothy Coons – Denton Peterson, PC
1930 N. Arboleda, Suite 200
Mesa, AZ 85213
Email: [email protected]