Complying with Proposition 206: Fair Wages and Healthy Families Act

On November 8, 2016, Arizona voters enacted Proposition 206: The Fair Wages and Healthy Families Act (“Act”), which requires virtually all employers to provide paid sick leave to its part-time and full-time employees. The Act contains some ambiguities which will, we hope, be clarified by regulations from the Industrial Commission of Arizona in the near future. In the interim, however, below are some frequently asked questions and answers that have arisen following the passage of the Act.    

Q: When do employers need to start providing paid sick leave?
A: Employees begin accruing paid sick leave on July 1, 2017. For employees who start working after July 1, 2017, employers may wait until after the ninetieth day of employment to start providing paid sick time.   

Q: What is the rate of accrual for paid sick leave?
A: It depends on the size of the employer. For employers with fifteen or more employees, employees will accrue one hour of paid sick time for every thirty hours worked, with a cap of accruing forty hours per year. For employers with fewer than fifteen employees, employees will accrue sick leave at the same rate (of one hour of paid sick leave for every thirty hours worked) but may only accrue twenty-four hours per year.

Q: Do part-time employees accrue paid sick leave?
A: Yes. It will take part-time employees longer to accrue paid sick leave because it will take them longer to work thirty hours.    

Q: Is an employee entitled to use this leave only when the employee is out sick?
A: No. Although this leave is typically referred to as “paid sick leave,” it is actually much broader than that. Specifically, an employee may use leave under this Act for any of the following reasons:

• The employee’s own physical or mental illness
• Care for the employee’s family member who has a physical or mental illness
• Public health emergency
• To ameliorate the effects of domestic violence, sexual violence, or stalking of the employee or employee’s family member
   

Q:  May I “cash out” an employee for accrued but unused sick time at the end of the year?
A: Yes. BUT you then need to provide the employee with available sick leave at the start of the following year so that the employee is not in a situation in which they were paid out at the end of the year and does not have paid sick leave available at the start of the following year.  

Q: At the end of the year, may I roll over an employee’s unused sick time to the following year?
A: Yes. Employers may roll over accrued but unused sick time to the following year. In that situation an employee may end up with more than forty hours of accrued sick leave (if, for example, twenty hours rolls over and the employee then accrues an additional forty hours), but the employer is only required to allow the employee to use forty hours in a particular year. An employer may choose to allow an employee to use more than forty hours in a particular year, but that is not required by the Act.

Q: Does an employer need to pay an employee for any accrued but unused sick time at the end of the employment relationship?
A: No.

Q: May an employer use a Paid Time Off policy (commonly referred to as a PTO policy) instead of providing paid sick leave?
A: Yes. But the employee needs to accrue paid time off at a rate that is at least commensurate with the rate of paid sick time accrued under this Act.

Q: May an employer ask for documentation to establish an employee’s right to use paid sick leave?
A: No. Only when an employee has used accrued sick pay for three or more consecutive work days may an employer require “reasonable” documentation establishing that the paid sick time has been used for a purpose covered by this Act. This could be a note from a medical provider.   

Q: How should an employer track an employee’s accrued sick leave?
A: This depends on how much detail the employer wants/needs. If an employer has an attendance policy in which employees are disciplined for unexcused absences, an employer will need to carefully monitor whether the employee is using paid sick leave under the Act. In that case, the employer may want to have the employee certify that he/she used a particular day off for one of the purposes provided for in the Act. Then, when the employee has used all of their accrued paid sick time, the employer may discipline the employee under its Attendance Policy (so long as the absences are not protected for some other reason, such as the Americans with Disabilities Act).

Q: May an employer continue to use a “no fault” attendance policy?
A: Yes. However, an employer may not penalize an employee in any way for taking paid sick leave. Whenever an employee uses any of their 40 hours of paid sick time, that is protected leave and an employer may not make any employment decision that takes into account that leave.

Q: May an employer require that an employee use paid sick leave in at least half-day increments? 
A: No. Employers must permit employees to use paid sick leave in the smaller of either one-hour increments or the smallest increment that their payroll system uses to account for absences or other leave. This means that employees will be entitled to use paid sick leave in increments of one hour or less.

Q: Do employers need to post a notice of the requirements of this Act?
A: Yes. Employers need to post a notice of the requirements of this Act in English, Spanish, and any other language deemed appropriate by the Commission. Currently, a poster is available only for the minimum wage portion of the Act. Posters are available at: https://www.azica.gov/labor-minimum-wage-main-page.

Q: Does the Act require employers to provide certain information on an employee’s paystub?
A: Yes. An employee’s paystub needs to include the following information: (1) the amount of paid sick leave available to the employee, (2) the amount of sick leave taken by the employee in the year to date, and (3) the amount of pay the employee has received as sick pay, if any. For employers using a PTO policy, the paystub would include the number of PTO days available to the employee, the amount of PTO used by the employee to date, and the amount of pay the employee has received for PTO, if any.  

Q: Going forward, what do employers need to do?
A: Employers need to ensure that they are prepared to meet the paid sick leave requirements under the Act by July 1, 2017. This will likely include revising employee handbooks, revising attendance policies, modifying any other employer policies that discuss the employer’s leave policies, and ensuring that human resources personnel and supervisors understand the Act and its requirements. In addition, employers need to post notices of the Act in common work areas. 

This list of questions is not intended to be exhaustive. The Act has other requirements that are not addressed in these questions and answers.