Arizona Employers Have Questions About Complying with Paid-Sick-Leave Law

Arizona workers became eligible for paid-sick-leave benefits on July 1, but many employers still have questions about how to comply with the nuances of the law.

The Fair Wages and Healthy Families Act was passed through a ballot initiative that voters approved in November 2016. In addition to paid sick leave, the measure provides for incremental state minimum-wage increases through 2020.

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In the first few months after the law was approved, the Industrial Commission of Arizona (ICA)—the agency tasked with enforcing the paid-sick-leave law—provided little guidance for employers, said Steve Biddle, an attorney with Littler in Phoenix.

"The initial set of regulations were very short and not very insightful," according to Nonnie Shivers, an attorney with Ogletree Deakins in Phoenix. However, the ICA has since been very responsive to employer questions and has provided useful, more robust guidance over the past few months, she said.

Though supplemental regulations have yet to be finalized, the ICA has issued answers to frequently asked questions to aid employers that have questions about complying with the new paid-sick-leave law.

Biddle noted that the FAQs are detailed and have been updated several times based on input the ICA received from the business community.

"It's a smart idea for employers to get involved in the rulemaking process, because their involvement does seem to make a difference," Shivers said.

Employers should watch for more clarification from the ICA as the commission grapples with compliance questions from the community, attorneys said.

"The only way employers can be compliant with this law is to study it carefully, because there are lots of details," Shivers said, "and the devil is in the details."

Overview

Workers in Arizona are entitled to begin accruing paid sick leave on their first day of employment at a rate of one hour for every 30 hours worked.

The law applies regardless of whether workers are full-time, part-time, temporary or on-call—but there is a small business concession, Biddle explained. While large employers with at least 15 employees can't cap accruals until they reach 40 hours, smaller employers may impose a 24-hour accrual cap.

Employees must be able to carry over 40 or 24 hours of accrued leave, depending on employer size, to the following year.

So who counts as an employee to determine employer size? The ICA initially said businesses had to count all employees—even those working outside of Arizona—but the commission changed its position after employers raised concerns, Biddle noted. Now the ICA says employers must count all full-time, part-time, on-call and temporary employees who work in the state, he said.

Employers that don't want to deal with accruals, caps and carryovers can frontload the leave and offer the full 24 or 40 hours at the start of the year (which may be prorated for 2017). Then employers can have a policy that employees must "use it or lose it" by the end.

Shivers said many employers already offer equivalent paid time off (PTO) benefits that meet or exceed the minimum time required under the new law. But those employers still need to look at the details of the paid-sick-leave law and revise their policies to comply with its nuances, she said, noting that the supplemental draft regulations provide some clarity for employers that offer PTO and how they can fold paid sick leave into a PTO plan.

Employers will still have to comply with reporting requirements specifically related to paid sick leave, Biddle said. Therefore, if employers offer general PTO benefits, they may want to have subcategories of PTO to track use for sick leave versus vacation and other types of leave.

Three data points have to be reported on paychecks or an attachment to paychecks:

• How much paid sick leave has been accrued.
  
• How much has been used.
  
• The pay rate provided when leave was used.
  

The ICA has clarified that as long as employees can access these details on the day they are paid, the information can be made available through a payroll and benefits portal, Biddle noted.

Retaliation Rules

The time off will be available for employees to address their own or a family member's medical care, for a public health emergency, or for domestic violence issues.

Employers can't discipline workers who take accrued leave in accordance with the law or retaliate against employees who report perceived violations of the law.

Shivers said there is an employee-friendly presumption under the law. If an employer takes an adverse action against an employee within 90 days of the employee asserting a right under the law, it is presumed that the employer retaliated against the employee.

"This presumption can only be overcome if the employer shows by clear and convincing evidence that the action taken against the employee was for a permissible reason," according to the ICA.

"That's a little scary for employers in the state," Biddle said. "It's going to be a struggle for HR professionals to properly document employee disciplinary action."

He noted that employers can still enforce their attendance policy but not as it relates to absences covered by the paid-sick-leave law. Employers can discipline workers if their absences exceed their accrued paid leave.

"Any adverse action must be very cautious and thoroughly documented because the presumption is going to be difficult for employers," Shivers said. "Any policies that touch on attendance and leave need to be reviewed and revised."

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