Category Archives: Laws & Compliance

If we’ve learned one thing in our decades of HR experience, it’s that ignorance is not bliss. While Arizona Proposition 206 did not come as a surprise to the HR world, it has certainly taken its toll on many Arizona businesses.

Prop 206 is legislation that went into effect in July 2017 requiring AZ employers to offer their employees paid sick time. This legislation did, and continues to, cause confusion among employers surrounding its requirements and application.

However, we know that most normal people don’t spend their rare free time thinking about HR laws and how to deal with them. That’s where we come in.

For those of you only looking for the 1,000-foot overview, here’s five things you should know about AZ Prop 206.

Five Things You Should Know About Prop 206

1. Beginning from date of hire, ALL employees (including part-time) are eligible to accrue paid sick time.
2. Employees accrue a minimum of 1 hour of paid sick time for every 30 hours worked.
3. They’ll generally be able to use this sick time as it’s accrued, but you have the option to place a 90-day waiting period on its use for new hires if you’d like.
4. Companies with fewer than 15 employees need only offer 24 hours of sick time per year. Companies with 15 or more employees need only offer 40 hours per year.
5. At the end of the year, unused sick time must either be paid out to employees or rolled over to the next year.

“But AmeriSource, this sounds a lot like the PTO policy my company already has!”

If your company PTO policy already meets or exceeds the above five criteria, you don’t need to take any further action. No work necessary. We salute you.

We’ve found, however, that many companies do have a PTO policy for full-time employees that meets the above criteria, but most don’t apply that policy to part-timers.

If your policy doesn’t meet the above requirements, then you’ve got two options:

1. You can amend your existing PTO policy to be Prop 206-compliant.
2. Or, you can create a separate bank for paid sick time and keep your current PTO policy.

We can help you implement and maintain compliance within either option.

That being said, let’s cover some of the questions we get most frequently from employers surrounding Prop 206 and sick time.

AZ Prop 206 and Sick Time Employer FAQ’s

What can this sick time be used for?

Sick time can (more obviously) be used by an employee when they are ill. However, some additional reasons for usage covered by the law are:

• An employee’s mental or physical illness, injury, or health condition
• Caring for a family member with a mental or physical illness, injury, or health condition
• Absences necessary due to or resulting from domestic violence, sexual violence, abuse, or stalking

Can I set a cap on how many hours of sick time employees can use in a year?

You can! The law states that employers with fewer than 15 employees can cap sick time usage at 24 hours per year, and employers with 15 or more employees can cap usage at 40 hours. This cap can apply regardless of the employee’s accrual balance, meaning they could have 100 unused hours built up from rollover, but they can still only use 24/40 hours in any given year.

Do I have to pay out unused sick time when an employee is terminated or leaves the company?

No, although you may choose to do so.

Do I have to allow rollover? Aren’t there any exceptions?

In general the answer is yes, you do need to allow the rollover of unused sick hours. There are only two ways around this. The first is to pay out any unused sick hours at the end of the year, as stated above. The second is to front load your sick time hours at the beginning of the year, rather than have a per pay period accrual. If you “dump” hours, you may implement a use it or lose it rule.

What if I don’t want to offer my part-time employees as much sick time as my full-time employees?

You may establish tiers as part of your time off offerings. It is at your discretion to offer more time off hours to full-time employees as long as what you offer your part-timers still meets the minimum requirements set out by the law. Your tiers must also be clear-cut and non-discriminatory.

Can I have the waiting period for sick time match the waiting period for my existing PTO policy?

You can, assuming your PTO waiting period is 90 days or less! Employees must begin accruing sick time from their date of hire, and their waiting period to begin using the accrued time off cannot be any longer than 90 days from hire.

If my company is not based in Arizona, do I still need to give paid sick time to my employees that live in Arizona?

Yes! The same would apply for employees you have in any other states or municipalities that mandate paid sick time.

Do I have to give paid sick time to temporary workers or interns?

The law defines an employee as any individual performing work for compensation, so yes, temporary employees and paid interns would be eligible for paid sick time.

What do I do if I think an employee is using sick time for reasons not covered?

You may require employees using sick time to submit a doctor’s note stating the reason for the absence. If an employee then either refuses or fails to provide one, you may take appropriate action at that time.

We hope this brief overview has given you a better idea of what Prop 206 entails. While this article honed in on Arizona sick leave, Arizona is only one of 11 states (plus Washington DC and over 30 other localities) that enforces mandated paid sick time. The trend is only spreading, and additional states/localities are already slated to implement their own paid sick leave laws in 2020. Multi-state employers, keep on the lookout!

Please reach out to the AmeriSource HR team if you believe your company needs help either implementing changes relating to paid tick time or maintaining your compliance. We’re the nerds that do think about new HR laws in our free time, so we know what we’re doing.

If you want to know even more about Prop 206 because you’re an overachiever like us, here’s a link to Arizona’s official law for Proposition 206 (scroll down to Chapter 2, Article 8.1).

OverTime is Money!

The DOL has issued its long-awaited Final Rule that will make it harder for many workers to be qualify for the overtime exemption.  This rule goes into effect Dec. 1, 2016.

The key provisions include:

• Raises the salary threshold for overtime exempt status from $455 a week to $913 a week ($47,476 per year)
• Increases the threshold to qualify for the “highly compensated employee” exemption from $100,000 to $134,004 per year
• The salary threshold will be adjusted every 3 years, beginning January 1, 2020, based on census data
• For the first time, employers can use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary test.  To qualify for this credit, the non-discretionary payments must be paid on a quarterly or more frequent basis and employers can make a “catch-up” payment if an employee doesn’t earn enough non-discretionary payments in a given quarter to meet the standard salary level test.

Notably, the final rule does not change any of the existing job requirements to qualify for an exemption.

What to do…

Identify current exempt employees who will lose exempt status based on the increased salary threshold (anyone earning under $47,476) and either reclassify these employees as non-exempt or raise their salary/non-discretionary compensation to meet the new salary test.

With changes coming to the Wage and Hour landscape, now is the time for employers to analyze the classification of each exempt employee and independent contractors. This will go a long way in avoiding huge headaches and penalties. Employers need to start preparing now by reviewing employee classifications and job descriptions, and consider how their pay systems could be affected if many of their exempt employees become hourly or if independent contractors are deemed employees.

We are available to assist you navigate this new rule and ensure your organization is in compliance.

Summer is quickly approaching, for some people that means summer intern season! If your company is planning on engaging an intern, or would like to but are concerned about the regulations, read further for some tips and guidelines to help keep you in compliance.

So, how can you determine whether your intern is really an intern or an actual employee? Well, the FLSA (Fair Labor Standards Act, which regulate wage and hour issues) has no practical definition of “employee”, what it does define is the word “employ”; including the words “suffer or permit to work”. Suffer or permit to work means that if an employer requires or allows employees to work they are employed and the time spent is probably hours worked. This standard has recently been very narrowly interpreted by the DOL (Department of Labor), and in a number of high profile cases, some large companies have ended up owing wages to interns.

What do you do if you want to engage interns and still stay in compliance? Here are some tips:

• The internship, even though it includes actual operation of the facilities of the employer, is similar in training which would be given in an educational environment.
• The intern does not displace regular employees, but works under close supervision of existing staff.
• The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operation may actually be impeded.
• The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
• The trainee works for his or her own benefits to learn a profession or vocation with adequate supervision and instruction from the company.
• The company should not derive the primary benefit of the work performed by the intern.
• The trainee should not displace any paid employees.

The most important of these tips is the last three. If any of those factors are missing, the DOL will most likely classify the person as an employee.

The issue of how to classify employees – as interns and as independent contractors – has garnered a lot of attention in the last few years. These issues are going to continue to be a big source of concern for the DOL and for employers. If you really aren’t sure about whether that college student is an intern or not – your best bet is to pay them minimum wage. It is less expensive than a full-time employee and far less expensive than a lawsuit. If you have any questions, or need help assessing your employee classifcations, give us a call or send an email. We are here to help!