How to Prepare for Prop 206 in Arizona

prop 206

As all business leaders know, election outcomes can drastically change the direction of the wind, recently evidenced by voters’ November 8th approval of Prop 206. If you are one of the many Arizona employers now scrambling to adjust their sails, you’re not alone. Change can certainly be daunting, but well-informed and well-equipped employers can seamlessly transition to meet the demands of new legislation.

What is Prop 206?

To sufficiently prepare for Prop 206, it’s first necessary to understand its provisions. The two-pronged Prop 206 includes the following key components:

(1) a minimum wage increase from the current rate of $8.05 hourly to $12.00 hourly by 2020, with a notable jump of almost $2.00 to $10.00 hourly effective January 1, and subsequently marked by $0.50 annual increases.

2) a requirement for all employers to furnish paid sick time (PST) to employees beginning July 1, 2017, with PST being defined as time for which employees are paid at the same rate as they would earn during regular work hours, including all existing benefits.

Who is Affected?

One common misconception about Prop 206 is that only large and private businesses are covered. On the contrary, Prop 206 covers almost all employers, including small businesses, school districts, and municipalities. When it comes to employee criteria, state and federal employees are classified as exempt, in addition to babysitters and anyone who works for a sibling or parent, as the latter cohort do not meet the definition of ‘employee’ under the newly amended Arizona Minimum Mage Act. Part-time workers, however, do in fact meet the definition and are covered under Prop 206.

Implementing A Sick Leave Policy

Modifying existing policies to meet Prop 206’s new requirements can prove to be a challenging endeavor for many employers. Some already have a policy in place that is in accordance with Prop 206’s PST regulation. Other employers may not. Unfortunately, there is no categorical, one-size-fits-all approach to developing a viable sick leave policy. Instead, employer size, culture, and values play an integral role in shaping a company’s PST policy.

Before a framework can be established, it’s first necessary to discern the new requirements under Prop 206 from previous mandates. In a nutshell, under Prop 206, covered employers are obligated by law to allow employees to accrue one hour of paid sick time for every 30 hours of completed work based on mitigating factors including company size and a reason for PST. For example, companies with more than 15 employees on their roster must honor a maximum accrual of PST of 40 hours per year. For employers with less than 15 members in their workforce, the maximum is 24 hours of accrued PST.

In response to these requirements, many employers pose the common question, “What constitutes sick time?” Employees can apply their PST to a host of situations including:

  • Employee’s mental or physical ailment(s)
  • When an employee needs to provide medical care for a family member
  • During an instance of public health emergency
  •  Domestic violence incident

When formulating a PST policy, it’s crucial for employers of all sizes to review the detailed specifications of the nuanced Prop 206 to ensure that all factors are considered when implementing a PST policy aligned with their company needs and employee population.

Compliance, Record Keeping, and Penalties

Despite the potential cost and time associated with adopting Prop 206, it’s paramount that all covered employers comply with Prop 206 provisions to avoid harsh penalties and legal sanctions. Maintaining copious and accurate records is essential to complying with Prop 206.

While employers were previously required to furnish detailed and itemized employee payroll records for four years, Prop 206 now requires employers to also record all used and accrued PST, and make that information readily accessible to their employees via formal notice. Failure to comply with this stipulation presumes that the employer simply did not pay the PST earned and may be subject to civil penalties and fines in addition to possibly having to pay out PST that is unaccounted for in the official record.

Beyond electronic and paper record-keeping, employers must uphold Prop 206’s provisions regarding PST notice, verification, discrimination, and confidentiality or risk substantial penalties. Fines can range from $250 to over $1000 depending on the nature and frequency of the infraction. Additionally, violations can lead to employers being monitored and investigated to ensure appropriate standards are being upheld.

Be Proactive and Seek Guidance

As an employer, this new legislation can drastically impact you and your workforce, and amend existing company policies to ensure compliance can be a complex and overwhelming task. Don’t tackle the process alone. With a wealth of experience and robust network of clients, I am equipped to provide the guidance and resources that your company needs to effectively transition to Prop 206. My consultative approach to business health can help you comply with new Arizona laws and drive the results you dream of. Contact me today to discuss how I can help.