Arizonas Paid Sick Leave Law, Part II: The Same Hourly Rate, Attendance, And Coverage Questions

Arizona's new paid sick leave law—Proposition 206 or The Fair Wages and Healthy Families Act—will go into effect on July 1, 2017. While we previously explained key components of the law, the Act left many important questions unanswered. Since the law passed, the Industrial Commission of Arizona (ICA) has crafted a limited set of proposed regulations, which remain subject to review and approval by the state attorney general or the Governor's Regulatory Review Council. In addition, the ICA has created a myriad of interpretive frequently asked questions (FAQs), which can be accessed on its website.

This three-part blog series examines the ICA's current proposed regulations and FAQs while sharing insights and highlighting key employer questions about the law. The first article in the series, " Arizona's Paid Sick Leave Law, Part I: Accrual and Usage Issues," covered issues involving paid sick time accrual and usage. Part two will cover the law's "same hourly rate" requirement, discuss attendance policies and rewards programs under the Act, and explain which employees the Act covers.

The "Same Hourly Rate" Requirement

The Act (at A.R.S §23-371(D)) defines earned paid sick time as time that is compensated at the "same hourly rate and with the same benefits, including health care benefits, as the employee normally earns during hours worked" Under the proposed section proposed R20-5-1202, this "means the same hourly rate that an employee earns for the workweek in which the employee uses earned paid sick time and which is no less than minimum wage."

The ICA recognized that incentive compensation schemes, shift differentials, and premiums meant to compensate employees for work performed under differing conditions (e.g., the night shift), as well as exempt salaried employees, pose difficulties for employers seeking to provide paid sick time off at the "same hourly rate." Therefore, the ICA has proposed regulations that apply the following methods for determining same hourly rates for PST:

Employees with a Single Hourly Rate: For employees paid on the basis of a single hourly rate, the paid sick time rate must be equivalent to the same hourly rate the employee would have earned for the period in which the sick time is used. For instance, if an employee's hourly rate is $15 per hour, the employer is required to pay the employee $15 for each hour of earned paid sick time. Multiple Hourly Rates: If discernable, the employer is required to pay a multi-rate...