The Essentials of Arizona Labor Laws for Salaried Employees

An Introduction to Salaried Employee Rights in Arizona

As with all states in the United States, Arizona provides certain rights and protections for employees working within its borders, regardless of how they are classified. This includes those who may be salaried employees, which may or may not be exempt from overtime pay requirements.
Understanding the rights of salaried employees according to Arizona employment law is crucial for both employers and employees. While some may assume that because they do not receive paychecks directly – rather, receiving a deposit in their bank account twice a month – that they are truly salaried employees. However, it is important for all employees to understand that even if they believe they are salaried, they must still be guaranteed payment for certain minimum wage standards, which cannot be avoided by the company simply because they are not paid hourly, or have some other salary structure in mind. Arizona law is quite strict on this point, and remains quite consumer-friendly.
Arizona law clearly outlines the fact that a salaried employee is entitled to payment for time worked , regardless of whether the employee is exempt or non-exempt from payment of overtime.
For exemptions, the law notes that there are three exemptions which apply to salaried employees, although not every employee will necessarily fall into one of these categories. The first is when the employee earns at least $455 per week, according to the company’s established pay periods. The second is if the employee is involved in administrative, professional, or computer activity (among other duties), which requires an elevated level of meaning. It may seem like a vague requirement, but there are a number of tasks and concepts that come into play here.
That said, the primacy of the classification of whether or not the employee meets some or all of the definitions of salaried employees in Arizona, the primary rights of salaried employees are those that relate directly back to payments for time worked, including:
The basis of almost all rights for salaried employees is the guarantee of payment for work performed. If financial compensation is not provided as required under applicable state and federal law, then employees may have recourse.

What Is the Meaning of Exempt and Non-Exempt for Salaried Workers?

The Fair Labor Standards Act (FLSA) governs minimum wage, overtime, and child labor standards for employees in the private sector and in Federal, State, and local governments. Under the FLSA, companies must pay time-and-a-half for each hour worked over 40 hours. However, this requirement is subject to many exceptions. One of the most common exceptions applies to salaried employees.
Under the FLSA, an employee is not entitled to overtime if he or she is considered an "exempt" employee. As a rule of thumb, anyone who receives a weekly salary of at least $455 per week or $23,660 per year from their employer will be classified as an exempt employee and therefore will not be entitled to overtime. Regardless of their salary status, exempt employees are still require to receive minimum wage even though they are not entitled to overtime pay.
Exempt employees fall into one of three categories: learned professionals, executive employees, and administrative employees. However, the employee’s job title alone is not sufficient enough to determine someone’s classification. In fact, employees should have the duties that correspond with their job title. The general rule is that exempt employees primarily perform executive, administrative, or professional tasks and earn a salary based on the quality of their work rather than their hours.
The learned professional exemption applies to employees whose primary duty is the performance of work requiring advanced knowledge. An advanced degree, such as a lawyer or engineer, is almost always necessary for this exemption. The executive exemption applies to employees whose primary duty is management; earning percentages of the company along with their base salary must be a large enough portion of the employee’s total pay so that the employee is no longer paid by the hour. The administrative exemption applies to employees whose primary duties are related to office and non-manual work; the work must also include discretion and independent judgement with respect to matters of significance. More specifically, the employee must manage either the business or business practice of the company and must generally supervise two or more employees. Any employee who is not classified as exempt is considered a non-exempt employee, and therefore entitled to overtime pay.

Salaried Workers: What is the Minimum Salary Required by Arizona Law?

The minimum salary requirement for overtime exemption was recently updated by the Arizona Department of Economic Security, Industrial Commission, and Office of Economic Opportunity. Based on the state’s current inflation rate, the required minimum salary for an exemption will rise from $455 – a typical federal standard – to about $679 per week. The minimum salary for exempt employees in Arizona is scheduled to change each year as Arizona’s Consumer Price Index rises, and will tie directly into the minimum wage increase, also scheduled every January. Arizona’s minimum salary was updated on July 1, 2016, and can be reviewed through the State’s Minimum Wage Advisory Fact Sheet.

Overtime Pay Laws: What Slips Your Mind When You Are a Salaried Employee?

In general, under both state and federal law, entities must pay overtime to their non-exempt employees who work over 40 hours in a week. Under the Fair Labor Standards Act (FLSA), overtime is generally calculated at one-and-a-half times the employee’s regular hourly rate. However, there are critical exceptions. For instance, an employer does not need to pay overtime to "exempt" employees, whose exemptions depend on specific job duties, wage, and other factors. For example, an executive employee is generally an exempt employee. This means the employee does not need to receive overtime or other premiums even if the employee works over 40 hours in one week. Note that exempt employees do not receive defined overtime pay if they work more than 40 hours, though the overtime exemption also means that they are not automatically entitled to an increased hourly rate for overtime work.
Actions against employers alleging unpaid overtime can be difficult to prove if an entity has or is able to show it is using different pay practices that comply with the law. For example, an employer could avoid claims by showing that the employee was a salaried employee who was exempt. Further, the employer must show that the specific exemption applies. An employer defending itself from such claims is well advised to keep overtime documentation and other employee records.
Further, sometimes overtime pay is required if the employee fits into other classifications or other factors. Therefore, it is not uncommon to see cases where an employee is entitled to some sort of additional compensation, including overtime. In this situation, an employer could avoid liability for overtime by showing that the employee was a proper manager, executive or professional employee, for example. (Arizona law has similar provisions falling under the Arizona Minimum Wage Act.)

Meal and Rest Breaks for Arizona Based Salaried Employees

Manufacturers and industrial companies should pay particular attention, as salaried employees who work in these facilities tend to work longer hours and face greater hazards.
In contrast to many other states, Arizona law does not require that employees receive any additional rest or meal breaks. However, unlike many other states (that have similar "exempt" class employee categorization rules), Arizona does not exempt businesses from the state’s meal and rest break laws. Therefore, regardless of whether an employee is exempt or non-exempt, if he/she performs any manufacturing or similar functions during the work shift, then the employer is required to provide them the requisite one meal break and at least one paid 15 minute break every four hours. Arizona law does not generally require that these rest breaks be paid, however, if an employer does not provide the 15 minute paid rest break, it will be required to compensate the employee for the length of the missed break potentially at the overtime rate.
The major industries that are likely to be affected by the labor laws related to meal and rest breaks are transportation, telecommunications, manufacturers, food service , commercial support and entertainment. Nevertheless, this section relates primarily to those employers who earn a majority of their income from transportation, food service and operations of manufacturer activities. These three categories of employers are obligated to provide employees with lunch breaks and rest periods.
While Arizona law provides no specific detail to the mandatory planning or scheduling of meal and rest breaks, Arizona courts have provided employers a two-fold test to determine when employees are entitled to take meal and rest breaks. A court would first look to whether there has been any express agreement between the parties to shorten the required break, which is common in busier environments:
a) a lunch break not less than one-half hour, free from all duties, to be taken approximately mid-shift, and
b) two rest periods of not less than 10 minutes each for each eight hours of work or major fraction thereof, at times to be determined by such employer.
The second step is whether it is the general practice that such breaks are provided to employees. If this is the case, employers will need to be careful in ensuring employees are compensated for the time taken for employee breaks.

Leave Law Rights – What Does the Arizona Legislature Say About Leave?

As an employer in Arizona, you may be required to provide your employees with certain types of leave concerning their employment. For salaried employees, leave packages can be particularly confusing. For example, most employers know that vacation time accrues on an hourly basis per day worked. Therefore, salary pays earned for the week a salaried employee only the portion of the week worked, and unpaid for the portion of the week not worked. But what type of leave do you offer and how does it accumulate? Arizona law does provide for family leave. Nevertheless, employers need not provide sick leave, vacation time or other paid leave, unless such leave is part of an Express written policy offering such leaves, and details how they will be provided. The most commonly provided leave message in Arizona is vacation time. However, this leave is not mandatory, but simply a form of remuneration for services performed. Therefore, leave is provided under a written policy of leave, detailing if, when and why vacation will be paid to an employee for missed time from work. In Arizona, the Department of Labor does not provide any minimum hours of leave which must be provided, or a maximum amount of hours an employee is permitted to accrue. Therefore, this type of time off is up to the individual employer, and simply a form of compensation.
Therefore, if you have a written vacation policy, it is important to detail specifically how such leave will be carried out should the employee take such leave. For example, you may want to provide how much leave is made available for employees to accrue. You can also detail if you will pay out leave, whether it must be used within a certain calendar period, and what happens to unused leave (e.g., rollover, expiring, etc.) after each period. Family or sick leave may also be provided, and while there is no state law in Arizona governing these types of leave, employers may choose to prescribe a policy. For example, employers in Arizona may elect to provide up to 12 weeks of federal Family and Medical Leave under FMLA. However, you may also elect to offer days or hours of leave (individual or lump sum) for exempt employees, to be utilized at their discretion when the employee needs time off to tend to a family or personal issue.

What You Need to Know About Arizona Law on Termination and Severance Pay

Employers in Arizona may terminate a salaried employee "at will," meaning that the employer may terminate an employee at any time and for any lawful reason. However, employers and employees may agree that an employee may only be terminated "for cause," in which case the employer must have a valid business reason for terminating the employment.
If an employee is terminated, the employer must pay all wages owed to the employee within three working days after termination. Any unpaid wages beyond that period are subject to a penalty of up to twice the employee’s regular daily wage. The penalty may also include back pay, interest, lost job benefits and other damages.
Arizona law does not require employers to provide severance packages. However, if there is a written contract between the employee and employer that requires the employer to pay a severance package, then the employer must honor its obligations under the contract.

What Arizona Law Says About Resolving Disputes Over Salaried Employment

Should you find yourself in a dispute with your employer over an employment issue, there are numerous potential methods to resolve these disputes.
One option is to file a claim with the Arizona Department of Economic Security Office of Equal Opportunity ("OEOP"). The OEOP is a government agency that will investigate your claim and, if it finds cause of discrimination, will issue a Findings and Determination. You may then sue your employer and demand a jury trial on the matter. It is important to note that OEOP has limited jurisdiction.
Another option for resolving a dispute with your employer is to submit to arbitration. Arbitration is a process where an impartial third party, the arbitrator, hears testimony between both parties and makes a decision on the dispute. Many employers include mandatory arbitration agreements as part of their terms and conditions of employment. These agreements can be beneficial to companies willing to settle disputes. Conversely, these agreements often cut off an employee’s right to sue in court and go before a jury . Further, arbitration decisions can be arbitrary and difficult to overturn, depending on how and when the agreement was signed. It is always in your best interest to consult an attorney regarding the pros and cons of each arbitration agreement.
Yet another way to potentially resolve an employment related dispute is to submit to mediation. Mediation is different than arbitration in that the arbitrator will decide the dispute. Mediation, on the other hand, is a facilitated discussion where the mediator hears both sides of the dispute and helps create potential solutions. Mediation is a voluntary process that is much less formal than a court or arbitration proceeding.
Finally, a convenient way to resolve a dispute with an employer may be to seek assistance from a third party. There are numerous private companies that charge a fee to review your dispute and provide a professional opinion on the matter. This type of advice could be provided in the form of a letter to your employer.