On November 8, 2016, Arizona voters approved Proposition 206,The Fair Wages and Healthy Families Act, which will increase the minimum wage incrementally to $12 an hour by January 1, 2020 and establish a statewide paid sick leave requirement effective July 1, 2017.

Minimum wage increase begins January 1, 2017

Effective January 1, 2017, the state minimum wage will increase from the current $8.05 to $10 an hour; to $10.50 effective January 1, 2018; to $11 effective January 1, 2019; and to $12 effective January 1, 2020. Effective January 1, 2021 and each January 1st thereafter, the minimum wage will increase based on inflation. The minimum wage had been scheduled to increase to $8.15 effective January 1, 2017.

Employees who customarily and regularly receive tips or gratuities may be paid a wage of up to $3 less than the minimum wage, as long as weekly tips and wages add up to equal at least the minimum wage in effect at that time.

City of Flagstaff employers must pay at a higher minimum wage effective July 1, 2017

Voters in the City of Flagstaff voted to increase the minimum wage for employment within the city to the greater of $10 an hour or $2 above the state minimum wage, effective July 1, 2017. As a result, effective July 1, 2017, the city minimum wage will be $12 per hour; $12.50 effective January 1, 2018; $13 effective January 1, 2019; and $14 effective January 1, 2020. Effective January 1, 2021, the city minimum wage must be $15 or $2 above the state minimum wage, whichever is greater. Effective January 1, 2022 and each January 1st thereafter, the minimum wage will increase based on inflation.

See Proposition 414 for more information.

Statewide paid sick leave

Effective July 1, 2017, all employees of Arizona employers (except the state of Arizona and the federal government) must accrue a minimum of one hour of paid sick leave for every 30 hours worked. Employers of 15 or more employees must accrue and allow for use for each employee at least 40 hours of paid sick leave per year. Employers of less than 15 employees must accrue and allow for use for each employee at least 24 hours of paid sick leave per year. An employer may choose to set a higher limit.

The paid sick time requirements will not apply to employees covered by a current collective bargaining agreement or to a valid collective bargaining agreement if the requirements are expressly waived in the agreement.

Paid sick leave must begin to accrue on the later of commencement of employment or on July 1, 2017. An employer may choose to provide all paid sick leave that an employee is expected to accrue at the beginning of each year. A current employee must be able to use paid sick paid sick leave as it accrues. For employees hired after July 1, 2017, the employer may require that the employee wait until the 90th day of employment before using accrued paid sick leave. For the purposes of paid sick leave accrual, employees exempt from overtime will be assumed to work 40 hours per week unless their normal workweek is less than 40 hours.

Paid sick leave may be used for an employee's own medical needs, to care for a family member's medical needs or for domestic/sexual violence leave.

Unused accrued paid sick leave must be carried over to the next year, subject to the 40 (24 for small employers) hour per year limitation, unless the employer chooses to instead pay employees for unused paid sick leave at the end of the year. An employer may choose to loan paid sick leave to an employee in advance of the employee's accrual. An employer is not required to pay over unused accrued paid sick leave upon an employee's termination, resignation, retirement or other separation of employment.

Effective July 1, 2017, employers must give notice to current employees (and future employees upon hire) of their entitlement to paid sick leave and the amount of paid sick leave to which the employee is potentially eligible. The notice must give the terms for usage of paid sick leave and state (1) that retaliation against employees who request or use paid sick leave is prohibited; (2) that employees have the right to file a complaint if use of accrued paid sick leave is denied by the employer; and (3) contact information for the state Industrial Commission where questions regarding the paid sick leave requirement may be asked. The Commission will develop a model notice for employers' use.

Information regarding the amount of paid sick leave taken and available to the employee must be given to the employee with their regular paycheck. Employers must also post information in the workplace on the minimum wage and paid sick leave laws and maintain payroll records showing the hours worked and the wages and paid sick leave paid to employees for a four year period.

A local government will not be prohibited from enacting a law providing for greater paid sick leave rights than established by Proposition 206. For more information on Proposition 206, go to the Arizona Secretary of State's website.

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