Arizona’s Minimum Wage Increases in the New Year: What Employers Should Know

December 29, 2020

Phoenix, Arizona

As with every new year in Arizona, new resolutions should include wage adjustments as required by law.  Even with the global pandemic, these statutory increases continue.  Under Arizona’s minimum wage law, the state-mandated minimum wage increases from $12.00 to $12.15 effective January 1, 2021.  Arizona employers may continue to take a tip credit for tipped employees where permitted by federal law, up to a maximum of $3.00 per hour.  Several cities, towns, and other local jurisdictions within Arizona have their own mandatory minimum wage requirements, and employers should be cognizant of these requirements in each jurisdiction where they operate.  For instance, Flagstaff’s minimum wage will increase to $15.00 per hour effective January 1, 2021.

How does this affect overtime pay?

Arizona does not have a state-mandated overtime law of general application, but minimum wage requirements and pay rates within Arizona will necessarily affect the overtime rates that must be paid.  Overtime rates are based on the employee’s regular rate, even if the employee’s regular rate is much higher than the federal (or state) minimum wage.  At a minimum, Arizona employers must pay their non-exempt employees at least $18.00 per hour (subject to the tip credit), and perhaps more depending on local requirements and the employee’s actual regular rate.

What should employers do?

• Employers should annually audit employee classifications for a variety of reasons, including the application of exemptions and compliance with minimum wage requirements.
• Employers should review their handbooks and overtime policies. Overtime pay continues to increase as minimum wage requirements increase, making penalties and damage claims more costly.

For more information on this topic, please contact Chris M. Mason or another member of the Jennings Strouss Labor and Employment practice.