Stressed BusinessmanIf you are a business owner in the state of Arizona, there are two new labor laws that could significantly impact you.
The first rule was promulgated by the Department of Labor (“DOL”) and was scheduled to take effect on December 1, 2016. The rule purports to extend overtime pay protections to over 4 million workers. The rule increased the requisite annual salary for Executives, Administrators, and Professional workers from $23,000 to $47,476 to be exempt from overtime pay. In other words, now employees earning less than $47,476 per year must be paid according to the Fair Labor Standards Act’s (the “FLSA”) overtime wage provisions. The practical outcome of this rule is that business owners will be forced to cut overtime by creating more exempt, salaried positions.
In November, however, a federal judge in Texas issued a preliminary injunction enjoining the DOL from enforcing the new overtime pay rule. While this is good news for employers, it is important to keep in mind that this injunction is only temporary. Furthermore, the DOL has already appealed the order and could take the case all the way to the Supreme Court if it loses its initial appeal. Given these recent developments, employers must be careful if they have already communicated or made changes to their employee’s pay structure. While employers are currently not obligated to follow the new rule, they should pay attention to how this case unfolds. It is still unclear what the new Trump administration will do regarding this rule; employers should stay alert and prepared to comply with the rule in the event that it does go through.
Because the FLSA is a federal law, all states must comply with its requirements that employees be paid time-and-a-half upon exceeding a 40-hour work week, as well as its minimum wage requirement of $7.25 per hour. States are free, however, to promulgate their own overtime laws so long as they provide more protections to workers than the FLSA’s overtime pay and minimum wage provisions.
This segues into the second law that significantly impacts Arizona business owners. In the November election, Arizona voters passed Prop 206, or the Fair Wages and Healthy Families Act. Prop 206 increases the state’s minimum wage from $8.05 per hour to $10.00 per hour, effective January 1, 2017. The measure also increases the minimum wage until it reaches $12.00 per hour in 2020. Moreover, Prop 206 requires employers to recognize mandatory paid sick time starting July 1, 2017, which Arizona employers have never been required to do. Pursuant to the sick leave provision, an employee who works 30 hours will accrue one hour of paid sick time, or time for which the employer is required to compensate the employee at the same hourly rate and with the same benefits as he or she normally earns.
For employers with 15 or more employees, the accrual of paid sick time is capped at 40 hours per year for each employee, and employers with 14 or fewer employees are capped at 24 hours per year. Accrued, unused paid sick time carries over to the following year; however, employees may not use that carried-over time to exceed their 40 or 24-hour annual caps. The Act also allows employers to pay out unused, accrued paid sick time at the end of the year, instead of allowing that time to carry-over into the following year.
The new Arizona measures apply to all business owners except those that generate less than $500,000 in gross annual revenues and are not engaged in interstate commerce or in the production of goods for interstate commerce. Federal and state government employees are also exempt from the new requirements.
Similar to the DOL rule, however, challengers to Prop 206 are litigating its constitutionality under state law. In particular, business groups petitioned the Maricopa County Superior Court for review of the law. The Superior Court upheld the law and now those business groups are appealing the matter to the Arizona Supreme Court for further review; a hearing will be held on the issue on March 9. Because the state Supreme Court did not issue an injunction pending review of Prop 206, the new minimum wage is still in effect as of January 1, 2017.
The law firm of Davis Miles McGuire Gardner will be holding an informational breakfast on Prop 206 on Tuesday, March 14 at 7:30 a.m. If you are interested in attending this breakfast, please register here. Space is limited.