With the passage of Proposition 206, many Arizona employees will be getting a raise and paid sick leave.  The new law, known as the “Fair Wages and Healthy Families Act” (the Act), increases Arizona’s minimum wage from its current $8.05/hour to $10.00/hour, effective January 1, 2017.  For the following 3 years, the minimum wage will increase by specified amounts, capping out at $12.00/hour on January 1, 2020.  Beginning January 1, 2021, the minimum wage will increase annually based on cost living as measured by the consumer price index.

As of July 1, 2017, Arizona employers must provide all employees with paid sick leave.  Employers with fewer than 15 employees must provide employees with 1 hour of paid sick leave for every 30 hours worked, up to 24 hours per year.  Employers with 15 or more employees must provide 1 hour of paid sick leave for every 30 hours worked, up to 40 hours a year.  The Act broadly defines the reasons employees may use sick leave and contains multiple rules regarding the accrual, taking and administration of paid sick leave.  Employers are required to post a notice in the workplace that outlines employees’ rights under the Act.  The Arizona Industrial Commission will soon publish a model notice.

What to do?  Audit your workforce to determine who will be entitled to a wage increase on January 1, 2017.  Review your current sick leave or PTO policy to ensure the policy meets the requirements of the Act. If not, the policy should be amended before July 1, 2017.   We are available to answer any questions you may have and/or assist with revising your policies and procedures to address the Act’s requirements.

On August 6, 2016, a new Arizona law (A.R.S. §23-1601) will go into effect that provides a mechanism for a business and an independent contractor who furnishes services to that business to establish a “rebuttable presumption of an independent contractor relationship.”  This rebuttable presumption exists if the independent contractor signs a “Declaration” of independent business status that “substantially complies” with the list of 14 representations set forth in the statute.  For example, the Declaration must specify that the relationship is non-exclusive and the contractor is not entitled to any employee benefits from the contracting business.

This statute underscores the importance of ensuring that an independent contractor relationship is properly documented so that a business and its independent contractors can benefit from the “rebuttable presumption” created by this new law.  However, obtaining a signed Declaration that complies with A.R.S. 23-1601 does not mean the business is immune from an independent contractor misclassification challenge.  The court or government authority investigating such a challenge will necessarily look past the Declaration and examine the economic reality of the relationship.

The DOL has issued its long-awaited Final Rule that will make it harder for many workers to qualify for the overtime exemption.  The Final Rule goes into effect Dec. 1, 2016.  The key provisions include:

• Raises the salary threshold for overtime exempt status from $455 a week to $913 a week ($47,476 per year)
• Increases the threshold to qualify for the “highly compensated employee” exemption from $100,000 to $134,004 per year
• The salary threshold will be adjusted every 3 years, beginning January 1, 2020, based on census data
• For the first time, employers can use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary test. To qualify for this credit, the nondiscretionary payments must be paid on a quarterly or more frequent basis and employers can make a “catch-up” payment if an employee doesn’t earn enough nondiscretionary payments in a given quarter to meet the standard salary level test.

Notably, the final rule does not change any of the existing job duties requirements to qualify for an exemption.

What to do?  Identify current exempt employees who will lose exempt status based on the increased salary threshold and either reclassify these employees as non-exempt or raise their salary/nondiscretionary compensation to meet the new salary test.  We are available to assist you navigate this new rule and ensure your organization is in compliance.

The Department of Labor’s long-awaited proposed rule that would significantly expand the number of workers eligible for overtime compensation is anticipated to go into effect in the next 30-90 days.  If implemented, the new rule will more than double the minimum salary required to be eligible for exempt status from $455 per week ($23,660 per year) to $970 per week ($50,440 per year).  If a worker does not earn this minimum salary threshold, he/she will not be eligible for exempt status, even if the job otherwise meets the exempt duties test.  There are indications that the new rule may include some changes to the exempt duties test that would make it harder to qualify as exempt.

What does this mean for your organization?  You should identify those workers who are currently classified as exempt and earn less than $50,440 per year.  Under the proposed rule, they will automatically lose their exempt status because they don’t meet the minimum exempt salary threshold.  If the rule introduces changes to the duties test, additional exempt positions may need to be examined to ensure they continue to qualify for exempt status.

We are available to assist your organization understand and properly respond to these the changes contained in the proposed rule.

If you employ at least one individual who works at least 30 days in California, then your business is required to comply with California’s new paid sick leave law (the Healthy Workplaces, Healthy Families Act of 2014), beginning July 1, 2015. This is true even if your business is based outside of California. If this applies to you, please make sure your business is compliant with the new rules by July 1.