The Industrial Commission of Arizona issued new guidance clarifying how it intends to enforce many requirements of the Fair Wages and Healthy Families Act in regards to Paid Sick Leave. The Industrial Commission’s guidance, along with its earlier proposed regulations, answers many of the questions raised by the new paid sick time law. See questions below along with the guidance issued.

 

 

If an employer’s selected “year” ends less than 365 days after the Act’s earned paid sick time effective date (July 1, 2017), can that employer prorate its employees’ annual earned paid sick time accrual and usage caps based on the number of days remaining in the employer’s “year”?

Prorated accrual and usage caps should be rounded up to the nearest hourly increment or the smallest increment that the employer’s payroll system uses to account for absences or use of other time, whichever is smaller. An employee’s accrual rate, however, may not be prorated.

 

 

Is an employer with employees outside of Arizona required to include those employees when calculating its total employees for earned paid sick time purposes?

The Act’s minimum wage and earned paid sick time provisions apply only to Arizona employees. The Industrial Commission will not include an employer’s non-Arizona employees in an employer’s total employee count for earned paid sick time purposes.

 

 

Are earned paid sick time accrual and usage caps prorated for partial-year employees? In other words, is an employee who works part of a year entitled to accrue and use the same amount of leave available to a year-round employee?

The Act does not draw a distinction between year-round and partial-year employees. An employee’s accrual and usage caps are based solely on the size of the employer (24 hours for less than 14 employees and 40 for 15 or more employees) and are not based upon whether an employee works a full or partial year.

 

 

How does an employer determine hourly wage rate for earned paid sick time purposes?

 

The Industrial Commission issued the following methods for payment of paid sick time;

 

• For employees with a single hourly rate. For employees paid on the basis of a single hourly rate, an employer is required to pay the employee the same hourly rate that the employee would have earned for the period of time in which sick time is used. For example, 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.

 

• For employees with multiple hourly rates. If known, an employer is required to pay a multi-rate employee the actual hourly wages that the employee would have been paid for the period of time in which sick time is used. If unknown, an employer must pay an hourly rate equivalent to the weighted average of all hourly rates of pay during the previous pay period

 

• For salaried employees. Employers must pay a salaried employee an hourly rate equal to the employee’s total wages earned during the pay period covered by the salary divided by the number of hours agreed to be worked in the pay period for which the salary is intended to compensate. If a salaried employee’s hours of work vary from work week to work week, for the purpose of calculating the same hourly rate to be used for the payment of earned paid sick time, the employee is presumed to work 40 hours per workweek.

 

• For commissioned, piece-rate, or fee-for-service employees. Such employees’ hourly rates are determined in the following order of priority:

 

◦ The hourly rate of pay agreed upon by the employer and the employee, if an hourly rate of pay was previously established.

 

◦ The wages that the employee would have been paid, if known, for the period of time in which earned paid sick time is used.

 

◦ A reasonable estimation of the wages that the employee would have been paid for the period of time in which the earned paid sick time is used.

 

◦ The weighted average of all hourly rates of pay during the previous 90 days, if the employee worked regularly during the previous 90-day period.

 

 

Must an employer carry forward balances of earned paid sick time at the end of a year to the next year?

The Act provides that earned paid sick time shall be carried over to the following year, subject to usage limitations based on employer size. Per the policy, an employee can carry over all unused, accrued paid sick leave. Alternatively, an employer may pay an employee for unused earned paid sick time.

 

 

When an employer’s paid leave policy either meets or exceeds the Act’s requirements, and an employee uses accrued leave for reasons unrelated to earned paid sick time (such as vacation), is the employer required to provide the employee additional leave for earned paid sick time purposes?

No. Provided that an employer’s equivalent paid leave policy provides paid leave that may be used for the same purposes and under the same conditions stated in the Act, it does not need offer additional leave when an employee utilizes the available time for purposes other than those stated in the Act.

 

 

To review the Act’s FAQs, please click here.

 

 

Thank you for choosing Paylocity as your Payroll Tax partner. Should you have any questions please contact your Paylocity Account Manager.

 

 

This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.