Minimum Wage

Arizona and Flagstaff Minimum Wages: Addressing the Requirements and Changes Brought on by 

This past November, Arizona voters passed Proposition 206, which will raise the Arizona minimum wage from its current $8.05 to $10.00 (all wages mentioned herein are per hour) effective January 1, 2017, after which it will incrementally increase until it gets to $12 effective January 1, 2020. For tipped employees, the minimum wage will remain set at $3.00 less than these new minimum wages, but, as always, employers must ensure that a tipped employee’s wages plus tips for a pay period are at least equal to what the employee would have been paid under the standard minimum wage. Prop 206 applies to all employees working in Arizona except the employees of the State of Arizona or United States governments.

While general discourse surrounding Prop 206 has primarily centered upon the minimum wage increase requirements, Prop 206 also creates new employee rights related to earned paid sick time. Under Prop 206, all Arizona employers must now provide earned paid sick time to all employees. An employee must accrue at least one hour of earned paid sick time for every 30 hours worked. However, there are limits to the total amount of earned paid sick time that an employee may use or accrue in a single year. For employers with 15 or more employees, an employee can only accrue or use 40 hours of earned paid sick time per year. For employers of fewer than 15 employees, an employee can only accrue or use 24 hours of earned paid sick time per year. Of course, these are only minimums and employers are free to select higher limits for the accrual and use of earned paid sick time per year. Employers must begin tracking earned paid sick time by July 1, 2017 and every employee’s accrued and used earned paid sick time must be shown on the employees pay stubs from that date forward.

To further complicate matters for Flagstaff employers, Flagstaff voters also passed Proposition 414, which functions to raise the minimum wage that employers that operate within the Flagstaff city limits must pay to their employees.  Like Prop 206, Prop 414 contains steps by which the minimum wage is increased yearly until it reaches a set amount, in this case $15.00 on January 1, 2021. However, Prop 414 is unique in that it contains language which requires Flagstaff’s minimum wage be set at either the amount defined in Prop 414 or $2.00 above the state minimum wage, whichever is greater. Prop 414 becomes effective on July 1, 2017.

Once the Arizona and Flagstaff minimum wages reach their respective goals under Prop 206 and 414, the minimum wage will be increased every year thereafter to account for increases in the cost of living, as measured by the yearly percentage increase of the consumer price index.

Like Prop 206, Prop 414 allows Flagstaff employers to pay tipped employees $3.00 less than their non-tipped counterparts. However, that difference will gradually be stepped down in yearly $0.50 increments beginning on January 1, 2022 ($2.50 less) until there is no difference between the minimum wage paid to tipped and non-tipped employees, effective January 1, 2026.

The effective minimum wage schedules for the State of Arizona and the City of Flagstaff are as follows:

Date Arizona Flagstaff
January 1, 2017 $10.00 $10.00
July 1, 2017 $10.00 $12.00
January 1, 2018 $10.50 $12.50
January 1, 2019 $11.00 $13.00
January 1, 2020 $12.00 $14.00
January 1, 2021 $12.00 + cost of living increase $15.00
Every January 1 thereafter Previous + cost of living increase Previous + cost of living increase

While most affected employers are at least familiar with the minimum wage increase requirements, it is likely that many are unaware of some of the supplemental provisions that accompany both Prop 206 and 414. For example, employers must provide all new and current employees a written notice on or before July 1, 2017 summarizing the employee’s rights under the new minimum wage and earned paid sick time laws. Both Prop 206 and 414 also carry steep penalties for employers that fail to comply. Failure to pay the set minimum wage will result in a penalty payable to the aggrieved employee in an amount three times the amount by which the employee was underpaid. Additionally, taking retaliatory action against an employee who asserts his or her rights under these laws can result in steep legal judgments and civil penalties (taking any adverse action against an employee within 90 days of the employee asserting a legal right is presumed to be a retaliatory action). Furthermore, a simple (and easily overlooked) failure to comply with the various recordkeeping, notice and posting requirements will also result in civil penalties to the City and/or State.

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