United States: Arizona's Paid Sick Leave Law, Part III: Record-Keeping, Shifting Employment Relationships, And Tips For Drafting Policies

Arizona's new paid sick leave law—Proposition 206 or The Fair Wages and Healthy Families Act—will go into effect on July 1, 2017. Since the law passed, the Industrial Commission of Arizona (ICA) has crafted proposed regulations and a number of frequently asked questions (FAQs). This three-part blog series examines the intricacies of the ICA's current proposed regulations and FAQs. The first article in the series, " Arizona's Paid Sick Leave Law, Part I: Accrual and Usage Issues," covered issues involving paid sick time accrual and usage. Part two, " Arizona's Paid Sick Leave Law, Part II: The "Same Hourly Rate," Attendance, and Coverage Questions" examined the law's "same hourly rate" requirement, attendance policies and rewards programs under the Act, and the Act's coverage.

Part three covers the Act's notice requirements, record-keeping issues the Act presents, and obligations under the Act for shifting relationships such as successors and the transition from temporary to permanent employee. In addition, the final installment in this series provides tips for employers in drafting their compliant sick leave policies.

Notice and Record-Keeping Issues

ICA's Form Notices to Be Posted in English and Spanish

While employers may use their own notices that contain mandatory provisions called for in the Act, the ICA has created its own compliant notices in both English and , which employers may post "as is" and fulfill their notice-posting requirements.

Can Employers Dictate How Employees Provide Notice of Taking Paid Sick Time?

The Act requires employees to make a "good faith effort" to provide their employers notice of "foreseeable" leave, and even allows employers to create and publish (in advance) policies for giving notice of leave (both foreseeable and not foreseeable). Employers should be cautious not to impose unreasonable temporal requirements on notice required for PST, especially on unforeseen PST usage. 

However, the ICA has announced that employers generally cannot restrict how an employee provides notice of an upcoming leave covered under the Act. In a recently published FAQ, the ICA reiterates the language of the Act in which it "permits an employee to use any available option (orally, in writing, by electronic means, or by any other means acceptable to the employer) when requesting earned paid sick time. An employer is not permitted to interfere with an employee's right to use any of the available options." (Emphasis added). 

Exactly what constitutes "interference" likely will be the subject of further administrative interpretation or litigation. For example, employers should be well within their rights to implement rules that require employees to give reasonable notice in advance of a foreseeable PST leave. However, with unforeseeable leaves the ICA would not look favorably on any requirement that the employee must provide advance notice before taking such leave, or suffer possible adverse consequences. According to informal communications with the ICA, at most, an employer may publish reasonable requirements for how to give notice but should not punish employees if they fail to give advance notice of an unforeseeable leave. 

Furthermore, as reflected in the above-described FAQ, entirely prohibiting certain types of notice, such as "oral" notice, would be deemed improper. On the other hand, requiring an employee to notify his or her supervisor (as opposed to some other member of management or a co-worker) likely would be reasonable and not improper interference. Moreover, the Act and FAQs state: "When possible, the request to use earned paid sick time must include the expected duration of the absence." For now, employers should endeavor to have a written notice policy in place as of July 1, 2017. The policy should identify the title(s) or name(s) of whom the employee must notify of the need for PST, as well as providing a phone number and email address of the person(s) to whom notice must be given. 

The issue of appropriate notice likely will remain a bastion of uncertainty for employers and potential abuse by employees. Unfortunately, that uncertainty coupled with the legal risk of taking adverse action against employees for failure to follow notice procedures is a formula for legal risk. The Act's presumptive retaliation provision, with its potential monetary damages, penalties and attorneys' fees foreshadows a litigation roadmap of such claims.

Tracking Leave and Record-Keeping

While the ICA has yet to define the contours of a legally compliant "combined" PST/PTO policy (and may never do so), it has informally indicated that it favors such polices, provided they extend the same or better benefits and requirements as the Act. However, one key remaining unanswered question is whether an employer may use a combined PST/PTO policy without separately tracking PST hours and pay on the employee's pay stub. We have proposed the following FAQ to the ICA, which would eliminate the need for employers with fully compliant PTO policies but that do not wish to take on the additional burden of separately tracking PTO time when taken for sick leave purposes:

May an employer with a paid leave policy that meets or exceeds the Fair Wages and Healthy Families Act's requirements fulfill its record-keeping and paycheck recording duties by providing the employer's corresponding paid leave information in lieu of paid sick time data?

Yes. The Act requires employers to record on the employee's regular paycheck (i) the amount of earned paid sick time available to the employee, (ii) the amount of earned paid sick time taken by the employee to date in the year, and (iii) the amount of pay the employee has received as earned paid sick time. However, employers with paid leave policies that meet or exceed the Fair Wages and Healthy Families Act's requirements may fulfill their record-keeping obligations by recording equivalent or more favorable earned and used paid time off (PTO) benefits on their employees' paystubs and payroll records. For example, an employer with a PTO policy that is more generous than the benefits required under the Act, may fulfill its paycheck recording obligations by including the following information on each affected employee's paper or electronic paycheck paystub: (i) the amount of earned PTO available to the employee, (ii) the amount of earned PTO taken by the employee to date in the year, and (iii) the amount of pay the employee has received as earned PTO. Similarly, such employers can fulfill their payroll record-keeping obligations under R20-5-1210.B.13 and 14, by maintaining and preserving records of each affected employee's earned PTO accrued and used each pay period and current earned PTO balance.

Shifting Employment Relationships

Successor Employers

When a different employer succeeds or takes the place of an existing employer, under A.R.S. § 23-372 (D)(6), employees of the original employer who remain employed by the successor are entitled to all earned paid sick time they accrued when employed by the original employer, and are entitled to use the earned paid sick time they previously accrued. According to the FAQs, the ICA will follow existing Arizona case law concerning liability assumption in asset-only transactions. 

Exactly what constitutes a "successor" employer under Arizona common law extends beyond the scope of this article. However, for businesses contemplating purchasing the assets of another business and hiring at least some of the predecessor's employees, those buyers should keep in mind that an asset purchase alone will not necessarily insulate the purchaser from the Act's successor liability. Under common law principles, although asset sales usually do not result in the purchaser acquiring the debts and liabilities of the seller, successor liability might be found if one or more of the following factors are present: 

  1. there is an express or implied agreement of assumption (of debts or liabilities);
  2. the transaction amounts to a consolidation or merger of the two corporations;
  3. the purchasing corporation is a mere continuation [or reincarnation] of the seller; or
  4. the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts.

A crucial factor in determining if a successor corporation is a mere continuation or reincarnation of a predecessor corporation is whether there is a substantial similarity in the ownership and control of the two corporations (e.g., identical directors, officers, stockholders, goods and services, and location). Also, the sufficiency of the consideration paid for the assets purchased is viewed as a significant factor in determining "mere continuation" or "reincarnation." 

Prudent business purchasers should take into account the potential value of accrued PST as part of their due diligence, and any agreement for the purchase of an Arizona business with employees should include an acknowledgement of who is responsible for accrued PST in the event of any legal claims for recovery of such benefits.

Temporary Agency to Permanent Employees

What happens when an employer has a contingent workforce through a PEO and eventually directly hires members of that contingent workforce? The ICA has not formally weighed in on this question, but informally has indicated that it would look closely at the contents of the contract between the PEO and employer to determine what the parties intended to occur in the event such a transition occurs. Therefore, employers should review their PEO contracts to ensure that PST benefit issues are addressed in those agreements. In the absence of such clarity in a PEO contract, a best practice is to confer with the PEO company before permanently hiring a temp to determine if there is any accrued, unused PST. If there is, the employer should consider either "transferring" that accrual or frontloading the employee's PST bank.

Tips for Drafting and Revising Your Compliant Policy 

All employers should review their applicable leave policies (e.g., paid sick leave, PTO, or otherwise) to ensure compliance with the law. Employers electing to keep or implement a separate paid sick time policy may wish to include clear definitions of permissible usages and other related definitions from the statute itself to give clarity and avoid claims. Employers should adhere to the options for notice guaranteed in the statute, but supplement them with additional options and information. Such notices must be furnished in writing in order to hold any employee accountable for compliance. Employers also should craft their strategies not only for the remainder of 2017 but also for 2018 and beyond, as separate issues involving proration and defining benefit years face them now.

Policies should warn employees no retaliation will be tolerated and provide internal resources to address any concerns, especially while the nuances of the law are fleshed out in the coming months and years. For multi-state employers seeking a multi-state PST policy, keep a careful eye out for the Arizona nuances, some of which are even more detailed and nuanced than California's various laws!

Finally, for employers with more generous PTO plans, you have work to do before July 1 and after as well. Be sure to get your notices up and tracking and reporting systems up to speed, including possibly identifying and tracking "sub buckets" of PST within the PTO allotment.  This could help avoid the inference of retaliatory action and make payment at the same hourly rate less risky if you have concerns. Employers should ensure their attendance control policies and other procedures do not deter use of protected PST now wrapped into PTO, whether through language requiring notice for all leave or requiring no excessive absences. More developments on combination PTO/PST plans will undoubtedly evolve given the number of employers sticking with their PTO programs (sometimes at employees' requests!), so employers have to keep a keen eye out for those developments and changes.

Part one and part two of this three-part series can be found on Ogletree Deakins' Leaves of Absence and State Developments blogs.

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.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.