United States: Arizona's Paid Sick Leave Law, Part I: Accrual and Usage Issues

Since passage last November of Proposition 206, Arizona's new paid sick leave law, officially titled The Fair Wages and Healthy Families Act, employers have been scrambling to prepare for its implementation on July 1, 2017. We previously explained key components of the law to help employers gain an understanding of its requirements and implications. As employers that have attempted to navigate the gaps and intricacies of the law have already experienced, the Act left many important questions unanswered and consigned the Industrial Commission of Arizona (ICA) with the important task of crafting interpretive regulations and/or guidance.

The ICA crafted a limited set of proposed regulations, which remain subject to review and approval by the state attorney general or the Governor's Regulatory Review Council. In addition, the ICA has stated it anticipates revising those proposed regulations and issuing a new Notice of Proposed Rulemaking prior to finalization of the regulations. The ICA has risen to the challenge of crafting guidance for employers principally through the creation of a myriad of interpretive frequently asked questions (FAQs), which can be accessed on the ICA's website.

This blog series examines the ICA's recently expanded FAQs and current proposed regulations, some of which finally address employers' most compelling concerns about implementation and compliance. We also share certain insights obtained through informal communications with the ICA. Lastly, we highlight certain key employer questions that likely will remain unresolved when the Act goes "live" on July 1. The first article in the series will cover issues involving paid sick time accrual and usage.

Paid Sick Time Accrual and Usage Issues

Use of Paid Sick Time for Vacation and Other Non-qualifying Purposes

The ICA takes the view that employers with so-called "equivalent or better" paid time off (PTO) policies are not required to provide additional paid sick leave to employees who choose to use all of their PTO for non-qualifying reasons, such as vacation (except in 2017 as noted below). However, the ICA cautions that an equivalent or better PTO program must at least meet all accrual and usage requirements of the Act in order to qualify for this equivalency interpretation. As an example, if a company's PTO plan imposes more demanding notice requirements on employees than permitted under the Act, then the PTO policy likely would not be deemed equivalent.

Employers May Designate Employee Time Off as Paid Sick Time Absent Employee's Request

The Act does not address this issue. However, the ICA has expressed that it does not intend to pursue enforcement against an employer that designates an employee's time off as paid sick time (PST) (and pays for that time off in accordance with the Act) so long as the employer has a "good faith belief" that the absence meets the requirements of Act. If the employer later discovers that an employee's absence does not meet the requirements of this Act, it must take prompt action to correct its error.

Maximum Carryover of Accrued Paid Sick Time

One of the Act's more significant anomalies is its apparent requirement that all unused accrued paid sick time be carried forward to the following benefit year (unless the employer "buys back" unused PST at the end of the benefit year). This apparent unlimited carryover requirement is at odds with the Act's clear limitation on maximum usage hours, which are capped at 40 per year (24 for small employers), unless the employer opts to allow more usage. Fortunately, the ICA has addressed this issue and prepared both a FAQ and a proposed regulation (R20-5-1206(F)) that caps annual mandatory carryover at 40 hours from one benefit year to the next.

An employee of an employer with 15 or more employees may carry over to the following year a maximum of 40 hours of unused earned paid sick time. An employee of an employer with fewer than 15 employees may carry over to the following year a maximum of 24 hours of unused earned paid sick time. Alternatively, in lieu of carry over, an employer may pay an employee for unused earned paid sick time pursuant to A.R.S. § 23-372(D)(4). Carry over shall not affect accrual or use rights under the Act.

Under this proposed regulation, the maximum PST an employer must allow an employee to accrue would be no more than 80 hours, i.e., 40 hours of unused paid sick time that the employee may have accrued and then carried over from the prior benefit year, plus an additional 40 hours he or she accrues in the current benefit year. Even though employees may accrue up to 80 hours of PST, employers are not required to allow employees to use more than 40 hours of accrued PST in any single benefit year. Keeping accrual, rollover, and usage limits in mind as separate and distinct will aid employers in understanding their obligations and how to create (or revise) a compliant PTO program.

Employers that choose to exercise the Act's so-called "buy back" feature (i.e., paying employees the dollar value of unused accrued PST at the end of the benefit year) would be able to avoid any carry over by buying back 40 hours of PST at the end of the benefit year, and not carrying forward additional unused accrued PST (should there be any). Under A.R.S. § 23-372(D)(4), employers that exercise this option must "front load" employees' allotments of PST in an amount that is no less than would have been available to the employee had the unused PST not been bought back. Under this scenario, if an employer always buys back all unused PST at year-end and frontloads 40 hours of PST at the beginning of the next year, it can be assured that no employee will ever have more than 40 hours of unused PST.

Benefit Years and Prorating of Accrual and Usage

The ICA correctly takes the view that the Act allows an employer to designate its PST benefit "year" as it sees fit (e.g., calendar year, fiscal year, year from an employee hire date, etc.). This expansive interpretation also led ICA to promulgate a FAQ that explains how employers may prorate their benefit year to address the scenario in which the Act's effective date (July 1, 2017) does not align with the employer's benefit year, or, as the ICA put it, the employer's selected "year" ends less than 365 days after the effective date of the Act. One of the examples in the FAQ notes that if an employer's benefit year is a calendar year, then only 184 days remain in the current benefit year as of July 1. Therefore, an employer may limit accrual and usage during the remaining benefit year to a rate of .504 (the result of dividing 184 by 365). Assuming the smallest increment that an employer's payroll system uses is one-tenth of an hour, then employees would be entitled to accrue and use at least 20.2 hours of earned paid sick time (which is obtained by multiplying .504 with 40 (hours) and rounding up to nearest tenth of an hour) in the 184 days following July 1, 2017 (this example assumes a "large" employer for accrual and usage purposes).

Employers should not use this pro rata formula beyond the initial PST implementation period. In another recently released FAQ, the ICA notes that 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 and are not based upon whether an employee works a full or partial year." For example, if an employer that uses a calendar year for PST hires an employee on March 15, 2018, that employer may not prorate the employee's accrual and usage amounts, even though that employee will work less than the full benefit year. Per the Act, PST accrual must be no less than one hour of PST for every 30 hours worked. Similarly, employers may not limit usage of accrued PST up to 40 hours during a benefit year. Despite this new guidance, employers may still require new employees hired on July 1, 2017 or after, to wait 90 days to begin using their accrued PST.

What about employers with existing PTO programs that have already accrued and paid out PTO benefits during the 2017 benefit year? Can any of those pre-July 1 PTO benefits be used to offset PST requirements after July 1? To our knowledge, the ICA has not addressed this question. However, unless an employer can demonstrate that it already had a program in place that met or exceeded the PST requirements before implementation of the statute on July 1, any program that accrues less PST than the pro rata amounts described in the above-cited FAQ for the remainder of 2017 likely would not be in full compliance with the Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions