What Prop 206 means for Arizona Businesses
Effective July 1, 2017, the Fair Wages and Healthy Families Act, also known as Proposition 206, requires employers to provide paid sick time (PST) to employees.
- Employers with fewer than 15 employees must permit accrual and use of up to 24 hours of PST per year.
- Employers with 15 or more employees must permit accrual and use of up to 40 hours of PST per year.
A “year” is any regular and consecutive 12-month period, as determined by the employer.
Accrual of leave. Employees are entitled to a minimum of 1 hour of PST per 30 hours worked.
PST must begin to accrue on July 1, 2017, or the beginning of employment, whichever is later. New hires may be required to wait until 90 days after hire before using accrued PST.
Employees who are exempt under the federal Fair Labor Standards Act are presumed, for PST accrual purposes, to work 40 hours per week (except for weeks in which they work fewer than 40 hours, for which PST will accrue on the basis of actual hours worked).
Employers may also provide a lump sum of all PST expected to be earned at the beginning of the year.
Use of leave. PST may be used for an employee’s (or an employee’s need to care for a family member’s) mental or physical illness, injury, or health condition or need for preventive medical care.
Leave may also be used to address various issues (for the employee or the employee’s family member) relating to domestic or sexual violence, abuse, or stalking. This may include the need for medical attention, victim services, counseling, relocation, or attendance at legal hearings.
Please take note that the law defines “family member” very broadly, including any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship.
Notice of leave. When leave is foreseeable, employees must make a good-faith effort to give employers advance notice of the need for leave and to schedule absences in a way that lessens the impact on the employer’s business. For unforeseeable leave, employers may apply a written policy explaining the procedures employees must follow to provide notice of the need for leave and the expected duration of the absence.
Employers may not require an employee to find a replacement worker for his or her time off during PST.
Carryover of leave. Unused, accrued PST carries over to the following year.
Payout on termination. Employers are not required to pay unused, accrued PST to employees upon termination. If, however, an employee is reinstated within 9 months (for example, after a temporary layoff), all accrued PST must be reinstated.
Existing leave policies. The law provides for minimum requirements and will not supersede any other law or policy that provides for more generous leave rights. Thus, employers may adopt their own leave policies that provide for more generous leave accrual, use, and carryover.
Employers that have existing paid leave policies that fulfill the minimum requirements of the PST law need not offer additional paid sick leave.
What we anticipate becoming an employer’s headache is when the existing PTO policy is retained and employee’s use of PTO for vacation results in a zero balance, only to be followed by an incident of illness. In this scenario, the employer is still required to provide that employee with paid sick leave in certain instances. It is for this reason, that we are recommending employers adopt a separate paid sick leave policy.
Notice and recordkeeping requirements. Employers must post a notice to employees informing them of these rights. Sample notices in English, Spanish, and any other required languages will be created and provided by the Industrial Commission at www.azica.gov.
Employers must also include information on the amount of PST employees have available, the amount used, and the amount of pay received as earned PST with employees’ standard payroll statements.
Records of accrued and used PST must be maintained as with other payroll records and must be kept for at least 4 years. Failure to maintain records creates a rebuttable presumption that the employer did not pay earned PST.
Retaliation prohibited. Employers are prohibited from interfering with, restraining, or denying exercise of any right under the PST law. Employers also may not count PST absences against an employee.
Next steps. The Industrial Commission of Arizona has committed to publish a sample policy that is fully compliant. Once that document has been released, we will adopt it as our standard recommendation. We are all anxiously awaiting!
As well, clearing the recordkeeping requirements tie to payroll system requirements. We are working with our provider to ensure we are able to manage that aspect on your behalf.
Please continue to stay tuned and we will communicate with you as information becomes available.