Summer is upon us and so are Arizona’s new sick time pay rules. On July 1, 2017, virtually all Arizona employers must begin providing either 25 or 40 hours per year of paid sick leave to their employees. The new sick leave requirement, which was part of a 2016 voter initiative that also increased Arizona’s minimum wage, requires Arizona employers to track both the accrual and usage of this sick leave. That means there are only a few weeks left for employers to prepare payroll systems, notices, explanations, policies and training for managers and employees.
Arizona’s new law requires that employers permit employees to accrue at least one hour of paid sick leave for every 30 hours worked, up to 24 hours of leave per year for employers with less than 15 employees and up to 40 hours per year for all other employers. Employers can limit the amount of paid sick leave an employee can use each year to the maximum allowable annual accrual (24 or 40 hours, depending on employer size). All unused accrued sick time must be carried over unless its value is paid out to the employee at the end of the year. However, employers are not required to cash-out an employee’s unused accrued sick leave hours.
Arizona employers will have difficulty monitoring employee use of sick leave. While the statute adopts standards for usage that are similar to those for federal family medical leave, Arizona employers can only request limited documentation and only if the absence endures for three or more consecutive work days.
The new law also increases employers’ recordkeeping burdens. Employers must notify employees of their rights to accrue paid sick leave, in both English and Spanish, and must keep track of each employee’s sick leave accrual and usage. Employers must report this information to employees each payroll period. So, by July 1, employers must have prepared the notices and reviewed payroll systems to ensure their ability to track and report the details of each employee’s sick leave benefits.
Many employers offer “paid time off” that encompasses all types of leave. In light of the new law, Arizona employers may be better off managing vacation and sick time separately. While many employers provide more time off than the law requires, having only one paid time off policy may subject an employer to unplanned liability to pay out unused sick leave. For example, if an employer pays its employees the value of their unused accrued paid time off at the termination of their employment, the payout will include the value of any unused sick leave unless it is expressly excluded. Unused sick leave, which is carried over from year to year, never expires and could therefore inflate the employer’s payment obligation. This problem is easily solved if the employer maintains separate policies for sick leave and other available leave.
Arizona employers should immediately prepare for the July 1st effective date by:
reviewing and developing appropriate sick leave policies; adopting appropriate new written policies or revising existing policies;
preparing communications in English and Spanish; and
verifying that payroll systems allow them to keep proper records and provide timely information to employees.
These are just some of the areas employers need to immediately address. Arizona businesses should consult legal counsel to ensure they understand all the new requirements and have a solid compliance strategy.
Otto S. Shill III is an attorney with Jennings, Strouss & Salmon, P.L.C.
