On November 18th, 2016, Arizona’s Fair Wages and Healthy Families Act (Prop 206), passed with high voter approval increasing both minimum wage and mandated paid sick leave for Arizona employers. While the minimum wage increase has been in effect since January 1st, the paid sick time portion of the mandate takes effect July 1st. Generally, a state without severe weather, this new paid sick time standard is likely to rock Arizona employers like a hurricane largely due to the lack of attention received as most headlines focused on the minimum wage impact to employers. Unfortunately, silence appears to have left many employers being unaware of the paid sick time portion or feeling they are unaffected. Here are the top 5 myths we have found, leaving employers ill-prepared for the July 1st change.
Myth #1 – The Fair Wages and Healthy Families Act doesn’t apply to companies with fewer than 15 employees.
Perhaps the most common myth we’ve uncovered, unlike other similar labor laws and protections, the Fair Wages and Healthy Families Act does not have a small business exemption. Under the Act, “employer” is defined as any corporation, proprietorship, partnership, joint venture, limited liability company, trust, association, political subdivision of the state, individual or other entity acting directly or indirectly in the interest of an employer in relation to an employee, but does not include the state of Arizona, the United States. Therefore, the new law applies whether the company has one employee or 1,000 employees. The only aspect that differs based on number of employees is the minimum cap of either 40 hours of paid sick time for employers with 15+ employees and 24 hours of paid sick time to employers with less than 15 employees.
Myth #2 – Only full-time employees are entitled to paid sick time under the Fair Wages and Healthy Families Act.
Employees, full-time and part-time alike, are to accrue one hour of sick time for every 30 hours worked. While many larger employers likely have some sort of time off or better yet, sick time benefit and policy, it’s possible that it speaks to only full-time employees. This change then forcing even larger, more prominent Arizona employers to revise their policies and practices around paid sick time.
Myth #3 – Seasonal and/or temporary employees are not eligible to accrue paid sick time.
Employees are to accrue paid sick time upon hire or July 1st, 2017, whichever is later – period. Employers can however, implement a 90-day waiting period before allowing employees to use their accrued sick time. So, it is possible to hire a seasonal or temporary employee for a 90-day period in which he/she will accrue paid sick time but will not meet the eligibility requirement to use it, so long as the duration of employment does not exceed 90 days, required by your sick time policy. If an employee leaves the company and is rehired within nine months from separation, the employee is entitled to any previously accrued, unused paid sick time immediately upon rehire. In summary, if employment exceeds 90 days or the employee should be rehired within nine months of separating, the employee, regardless of whether or not he/she is working in a temporary or seasonal capacity, becomes eligible to use accrued paid sick time.
Myth #4 – Straight commission employees are not entitled to paid sick time.
Here’s where things get tricky as Prop 206 does not clearly address the issue of calculating paid sick time rates for those with variable pay (due to commissions or “piecework” type pay systems). Instead, employers should look to the enforcing agency, the Industrial Commission of Arizona which encourages employers, in the absence of guidance, to calculate an average hourly rate using time worked and compensation earned in the previous 90 days. Needless to say, payroll processors can anticipate a frustrating first few payroll runs following July 1st in calculating sick time payouts for unique pay structures.
Myth #5 – Companies with PTO accruals that exceed 40 hours/year do not need to be reviewed.
Aside from the financial and administrative burdens associated with the changes brought by the Fair Wages and Healthy Families Act, there are also legal challenges, particularly for small employers. Employers with less than 15 employees are likely unfamiliar with handling retaliation, and discrimination claims or reasonable accommodation discussions. This law allows for employees to use paid sick time for a variety of reasons, beyond what many may associate with the notion of sick time, forcing some potentially risky conversations to take place between employees and untrained managers. Acceptable reasons for an employee to use accrued sick time as outlined in the Act include:
- An employee’s mental or physical illness, injury or health condition; an employee’s need for medical diagnosis, care, or treatment of a mental or physical illness, injury or health condition; an employee’s need for preventive 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 preventive medical care;
- Closure of the employee’s place of business by order of a public official due to a public health emergency or an employee’s need to care for a child whose school or place of care has been closed by order of a public official due to a public health emergency, or care for oneself or a family member when it has been determined by the health authorities having jurisdiction or by a health care provider that the employee’s or family member’s presence in the community may jeopardize the health of others because of his or her exposure to a communicable disease, whether or not the employee or family member has actually contracted the communicable disease; or
- To relocate or seek legal or medical services for the employee or family member who was subject to domestic violence, sexual violence, abuse or stalking.
So, when your employee calls out, do you ask for a reason? If your policy is to avoid questioning absences because you have a PTO policy (and do not designate sick from vacation time), have you inadvertently given way for the employee to use the entire PTO balance to cover incremental unplanned absences? Can coming in late, leaving early, and any schedule deviations then become unmanageable. This is especially important as this Act also protects activities related to paid sick time in a way similar to the Family Medical Leave Act.
The Act does allow an employer to require reasonable documentation for absences of three or more consecutive days; however, “reasonable” as outlined in the Act is broad. Attempts by the employer to challenge documentation should be done so with extreme caution given protections in using sick time. Furthermore, employees are to be made aware of this change – informed of how much time they have accrued and used with each pay period.
With far reaching impact, particularly for small-to-medium sized Arizona companies, it’s important businesses start taking note now as July 1st is quickly approaching. Like most things, waiting until the deadline will only allow for more expensive and less effective solutions. Take the time to review the changes or engage a local expert to help guide your company with the Fair Wages and Healthy Families Act. Labeled by supporters as a substantial step in ensuring Arizonans can “take care of their families without risking their jobs”, we now need to ensure companies are taking care of their employees without risking their ability to succeed.