Proposition 206 and What It Means for the Transit Industry Snell & Wilmer

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1 Proposition 206 and What It Means for the Transit Industry 1

2 Proposition 206, the Fair Wages and Healthy Families Act, and What it Means for Your Company April 10, 2017 Presented by Joseph A. Kroeger Snell & Wilmer L.L.P. 2

3 Proposition 206: Fair Wages and Healthy Families Act Passed by a comfortable margin (60%) Alters the landscape of pay and benefits available to Arizona employees. Hundreds of thousands of Arizona employees received a raise on January 1, 2017, and will receive further raises later. Private sector employees in Arizona, now have a right to paid sick leave beginning July 1,

4 Minimum Wage Under the Act, Arizona s minimum wage of $8.05 per hour will increase annually as follows: $10.00 per hour on January 1, $10.50 per hour on January 1, $11.00 per hour on January 1, $12.00 per hour on January 1, Starting January 1, 2021, the minimum wage will increase annually based on cost of living, as measured by the consumer price index. 4

5 Minimum Wage: Tipped Employees Employees who receive tip income can continue to earn $3.00 per hour less than the minimum wage if their employer can prove the employee is earning at or more than the minimum wage when tips are counted. 5

6 Minimum Wage: Notice and Recordkeeping The Act imposes new notice and recordkeeping requirements: Employers must post a notice of employees rights under the Act and keep payroll records for four years. The Industrial Commission of Arizona has issued a model notice compliant with the Act for employers to use. If you do not yet have it posted, you should download and post it promptly. They just issued the Paid Sick Time poster as well. It is available for download on the Industrial Commission s web-site. 6

7 Local Regulation of Minimum Wage Local ordinances may provide a higher minimum wage, an outcome which has already come to fruition: Flagstaff voters approved Proposition 414, which raised the minimum wage in Flagstaff to $12 per hour starting in July 2017, and would increase to $15.00 by The minimum wage in Flagstaff would increase by the cost of living, and remain at not less than the prescribed levels or $2 above Arizona s minimum wage. Update: On March 21, the Flagstaff City Council approved an ordinance that slowed down the wage increase and removed the requirement that the minimum wage in the city be at least $2 above the state minimum wage. The minimum wage will rise to the same $10.50 an hour in July as the rest of the state, and $1 per year until it reaches $15 an hour. 7

8 Paid Sick Leave - Accrual Beginning July 1, 2017, Arizona employers must provide paid sick leave ( PSL ): Employers with fewer than 15 employees one hour of paid sick leave for every 30 hours worked, up to 24 hours a year. Employers with 15 or more employees one hour of paid sick leave for every 30 hours worked, up to 40 hours a year. Exempt employees are assumed to work 40 hours per week for purposes of paid sick leave accrual (unless their normal work week is less than 40 hours). 8

9 Paid Sick Leave - Accrual Part-time and temporary workers are considered employees under Prop. 206 and are entitled to accrue PSL. 9

10 Paid Sick Leave New Employees An employer may require an employee hired after July 1, 2017 to wait until the 90 th calendar day after commencing employment before using accrued PSL. 10

11 Paid Sick Leave Reasons for Leave Reasons employees may use paid sick leave: 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. 11

12 Paid Sick Leave Notices and Paychecks Employers must post a notice in the workplace that outlines employees right to paid sick leave and their protections under the Act. Employers must itemize on employees paychecks: the amount of paid sick leave available to the employee; the amount of sick leave taken by the employee in the year to date; and the amount of pay the employee has received as paid sick time, if any. 12

13 Paid Sick Leave Carry over Employees may carry over earned sick leave to the following year, subject to employers limitations on usage and accrual. Employers can avoid the rollover, but only if the employer pays out the earned sick leave at the end of the year and grants the full allotment of sick leave for the following year. 13

14 Paid Sick Leave - Documentation If the leave lasts 3 or more consecutive work days, employers may request documentation from employees to demonstrate they are entitled to paid sick leave. Employers cannot require that employees disclose the details about the health condition of the employee or family member, or the details of the domestic violence, sexual violence, abuse or stalking. The potential for abuse is rampant and employers are going to have to accept that fact. 14

15 Paid Sick Leave - Increments Employers must permit employees to use paid sick leave in the smaller of: (1) hourly increments; or (2) the smallest increment that their payroll system uses to account for absences or other time. 15

16 Paid Sick Leave Replacement Employees Employers cannot require employees, as a condition of using paid sick leave, to find a replacement worker. 16

17 Paid Sick Leave Misc. Protections Employers cannot count the use of paid sick leave as an absence that leads to discipline or termination. Employers cannot retaliate against employees for using or seeking to use paid sick leave. 17

18 Paid Sick Leave Pay out upon termination or rehire Employers do not need to pay out the paid sick leave upon termination of employment, but if the same employee is rehired within nine months of termination, the accrued, unused sick leave needs to be reinstated and the employee can use that balance immediately upon rehire. 18

19 Paid Sick Leave - Recordkeeping Employers are required to keep payroll records showing compliance with the Act for four years. 19

20 Paid Sick Leave Collective Bargaining Agreements The Act s requirements do not apply to employees covered by a collective bargaining agreement, to the extent that such requirements are expressly waived in the CBA in clear and unambiguous terms. 20

21 Paid Sick Leave Damages and Penalties The Act provides for specific civil penalties and damages, including attorneys fees, if an employer violates the Act, or otherwise discriminates, retaliates, or interferes with an employee s rights under the Act. 21

22 Paid Sick Leave General Paid Leave Policies Employers existing paid leave policy, such as a general PTO policy, may be acceptable to satisfy the paid sick leave requirements under the Act, if the paid leave policy provides the same or greater amount of leave and accrual as under the Act and is available for the employee to use under the same circumstances as described in the Act. 22

23 Paid Sick Leave General Paid Leave Policies Most existing PTO policies provide for at least 5 days of PTO and provide for an accrual rate that is quicker than 1 hour for every 30 hours worked. However, many PTO policies are limited as to the purposes for which leave may be used and may not allow PTO to be utilized for all of the purposes required under Prop Most employers have chosen to create a separate PSL bank, typically of 5 days, and to administer it separate from the rest of the PTO bank. Other employers have chosen to make all PTO available under the same terms required for PSL. 23

24 Paid Sick Leave General Paid Leave Policies Three significant issue that make it difficult (though not impossible) to use PSL within existing PTO policy: Administration of vacation versus sick leave use of time What if an employee uses all of their PTO on vacation and only then requests sick leave? Paystub requirements Do you want them to apply to your entire PTO bank? Accrual and Usage Cap Issues 24

25 Prop. 205 Not Approved Arizona voters did not pass Proposition 205, which sought to legalize recreational marijuana. Arizona s existing marijuana law remains, which prohibits individuals from using, possessing, growing or purchasing marijuana unless the individual is authorized by and doing so in compliance with the Arizona Medical Marijuana Act. Marijuana use under any circumstances is still prohibited under federal law. 25

26 Questions? 26