An Overview of Arizona and Federal Wage Laws
State and federal wage laws
IntroductionAlthough Arizona generally follows federal wage law, state minimum wage laws are more favorable, providing a higher minimum wage, an extended statute of limitations for minimum wage violations, and the potential for employees to recover triple damages on claims for unpaid (or underpaid) back wages. Federal law allows for double damages for unpaid overtime and unpaid minimum wage.
Arizona Minimum WageEnacted in 2007, the Arizona Minimum Wage Act, A.R.S. § 23-364, requires employees be paid at least minimum wage for ALL hours worked. Neither state nor federal wage laws can be waived. An employee cannot “opt out” of these requirements. Interestingly, this statue allows an employee to seek unpaid, or underpaid, minimum wages as far back as 2007 if the violations are “part of a continuous course of action by the employer”. The penalty for failure to pay at least minimum wage for all hours worked is the unpaid sum, plus the same amount doubled, resulting in treble damages for unpaid minimum wages. In addition, an employee is entitled to recover costs and attorney’s fees. In November 2016, voters passed Proposition 206 annually increasing the Arizona minimum wage statewide. Effective January 1, 2021, minimum wage in Arizona will be $12.15, while federal minimum wage remains $7.25 an hour.
Under the state statue, when an employer claims a tip credit, it may reduce the minimum wage by up to $3.00 per hour less to employees who customarily and regularly receive tips. The tipping credit under the FLSA may allow a higher offset, but again, an employee is entitled to the benefit of the most favorable law, in this case, Arizona state wage law.
The state minimum law applies to the vast majority of employers, although some individuals are exempt from Arizona’s minimum wage, including:
• Employees who work for a parent or sibling;
• Employees who provide babysitting services in the employer’s home on a casual basis; and
• Employees employed by the government of the United States or by the State of Arizona.
City of Flagstaff Minimum WageThe City of Flagstaff's Minimum Wage Law, passed in 2017, set a schedule of annual increases. Effective January 1, 2021, the minimum wage jumps to $15.00 an hour for all covered employees, those who worked or are expected to work 25 hours or more in any given calendar year within the city limits of Flagstaff, Arizona. The law also provides annual incremental increases for tipped employees, those individuals in positions that regularly or customarily receive $30 or more in tips per month. Tipped employees are often subject to a “tip credit” reducing their hourly minimum wage by $3. As such, as of the New Year, tipped employees working in Flagstaff must be paid no less than $12.00 an hour. In 2022, the Flagstaff minimum wage again rises to $15.50 an hour (or $2 above the State of Arizona minimum wage, whichever is higher), and the tipped employee credit is incrementally reduced by .50 a year until it is eliminated entirely.
OvertimeArizona follows federal overtime law. Employers must pay all non-exempt employees overtime pay for all hours worked in excess of 40 in a workweek at 1.5 times the employee’s regular wage. For hourly employees, this is fairly straightforward, 1.5 times their hourly rate for all hours worked in excess of 40 in a 7-day workweek. If an employee is paid a different hourly rate for various tasks throughout the workweek, the weighted average applies. Salaried nonexempt employees are a bit trickier: divide the annual salary (which as of January 2020, must be at least $35,568), by 2080 hours (40 hours a week for 52 weeks) for the effective hourly rate which is then multiplied by 1.5 for all hours worked in excess of 40 in a workweek. Time worked does not include sick time, vacation time or holidays. It is only time actually worked.
Exemptions from OvertimeIf an employee’s job duties fall within an exemption from the FLSA’s overtime requirement, the employer does not have to pay overtime, or in most cases, the federal minimum wage. An employer must still nonetheless comply with the state (or local) minimum wage law. The most common (and most misunderstood and misapplied) exemptions to the federal overtime pay requirement are:
• Administrative employees;
• Executive employees; and
• Professional employees.
Numerous additional exemptions exist, but these are the most common, and the most often misunderstood and misapplied. Although salaried Administrative, Executive, and Professional employees may be exempt under federal law, they are not exempt from the Arizona (or local) minimum wage regulations. This means these employees must be paid a salary that equates to at least minimum wage for all hours worked. This could result in a higher salary requirement than federal law. For example, as of 2020, the Arizona minimum wage was $12/hour. If an Administrative, Executive, or Professional employee was required to work at least 60 hours per week, their salary would have to be at least $720/week which would be higher than the 2020 federal salary requirement of $684/week.
RetaliationUnder both state and federal law, it is unlawful for an employer to retaliate against an employee exercising their rights under any of these wage statues. Arizona law provides, in addition to all other remedies, a court can award assess a penalty of not less than $150 per day from the date of the initial act of retaliation through the date of judgment or any settlement. A.R.S. § 23-364(G).
Time to Bring Claims-Statute of LimitationsOvertime claims must be brought within 2 years, or 3 years when the violation is “willful.” Under Arizona’s wage law, timeframes to bring wage claims are:
• 1 year to seek treble damages (3x backpay) for wrongfully withheld earned wages;
• 1 year for failure to pay wages in breach of an employment agreement; and
• 2 years to seek unpaid or underpaid minimum wages, 3 years in the case of a willful violation, and the claim may encompass all violations that occurred as part of a continuing course of employer conduct regardless of their date, as far back as 2007
ConclusionArizona wage law can be more favorable to workers than federal law (as detailed above), in some cases allowing treble damages and allowing minimum wage violations to go back more than 2-3 years where there is a “continuing course of conduct”.
Federal law provides liquidated damages equal to the amount of unpaid overtime, allowing double the amount of unpaid overtime. An employee can also be awarded attorney’s fees and expenses for any of these wage claims.
If you have not been paid all that you are due, don’t delay. Contact an experienced employment lawyer today. The lawyers at Faulkner Law Offices, PLLC have decades of wage and hour experience