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How AZ Prop 206 Will Affect Your Business

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The results are in and it’s now been confirmed that AZ Prop 206 will be passed, increasing minimum wage and affecting businesses statewide. What you need to know about Proposition 206 is that it will increase the state minimum wage to $10 an hour by January 1, 2017.  This minimum wage is projected to continue increasing in steps to $12 an hour by 2020. If you’re an Arizona employer with fewer than 15 employees, you will now be required to provide your employees paid sick leave for a minimum of 3 days per year. However, if you own a company with more than 15 employees, you will be required to provide 5 days of paid sick leave.  Here are more details on the changes that AZ Prop 206 will create in 2017 and further on.

AZ Prop 206 = Minimum Wage Increase

The progression of minimum wage growth will proceed as such:

  • $10.00 per hour on January 1, 2017
  • $10.50 per hour on January 1, 2018
  • $11.00 per hour on January 1, 2019
  • $12.00 per hour on January 1, 2020

After 2020, Arizona’s minimum wage would increase according to increases in the cost of living, as is currently the law. It should be noted that AZ Prop 206 preserves an employer’s right to pay $3.00 per hour less than the minimum wage to an employee who customarily and regularly receives tips or gratuities. Any potential issues with this format should be considered by your company’s HR support when hiring new employees.

Paid Sick Time Requirements 2017

az prop 206The less-publicized, but certainly more groundbreaking portion of AZ Prop 206, is its paid sick time (PST) component. As of 2016, Arizona law does not require any private or municipal employers to provide PST for their employees.

All private and municipal employers must account for each employee a minimum of one hour of paid sick leave per 30 hours worked according to the following terms and limits:

  • Employers with 15 or more employees must permit employees to collect up to 40 hours of PST per year and to allow use of up to 40 hours of accrued PST per year.
  • Employers with fewer than 15 employees must permit employees to accumulate up to 24 hours of PST per year and to allow use of up to 24 hours of collected PST per year.
  • Even part-time and temporary workers are considered “employees” under Prop. 206 and are entitled to PST.
  • Like the federal Family and Medical Leave Act of 1993, employees are protected from retaliation and may not have PST absences count against them.
  • “Foreseeable” leaves require an employee to “make a good faith effort to provide notice to the employer” in advance of the leave and make a “reasonable effort” to schedule the time off “in a manner that does not unduly disrupt the operations of the employer.”
  • Leaves that are “not foreseeable” require no prior notice to the employer, unless the employer has a written policy containing procedures for providing notice.
  • Employers may not require employees to find their replacements as a condition for receiving PST leave.
  • Unused sick leave carries over from one year to the next, but collected paid sick leave does not need to be paid to employees whose employment is terminated for any reason.
  • PST begins to accumulate at the commencement of employment, or on July 1, 2017, whichever is later.
  • An employer may require an employee hired after July 1, 2017, to wait until the 90th calendar day after commencing employment before using built up PST.

What Does This Mean For Your Business?

There’s no doubt that this proposition will have a significant effect on current and future employers. AZ Prop 206 will allow employees to require paid sick time for mental or physical illness or taking care of family members with mental/physical illnesses. They may also request paid time off for public health emergencies, and addressing issues related to domestic violence. These may benefit employees for the better, but business owners will be set back with payroll problems, accounting, and HR issues. Make sure you’re managing your company correctly in accordance to the new proposition, including new business tax changes that may follow this proposition. Companies like PayTech are here to help you keep your company assets organized and lawful. Consider using PayTech to help manage your accounting, payroll, and HR so that you can focus on growing your business despite any new propositions.


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