Benefits and Compensation

Court Ruling May Necessitate Overhaul of Paid Sick Time Policies and Practices

The Arizona Fair Wages and Healthy Families Act requires all employers to provide a certain amount of paid sick time (PST) depending on the number of employees. Employers with at least 15 employees must provide at least 40 hours of PST to employees each year. The act also requires employers to follow certain notice requirements, including posting the Earned Paid Sick Time Poster and providing employees with pay stubs that include the amount of PST available, the amount already taken, and the amount of pay received as sick time. Even if employees exhaust PST, employers must be cautious when taking any adverse employment action within 90 days of their last use of PST. An Arizona Court of Appeals case highlights the importance of implementing and following a comprehensive PST policy.

Facts of the Case

Joshua Papias worked for a manufacturing company, which had implemented policies on PST, paid time off (PTO), and attendance. Its employment practices deviated from these policies in several respects. For example, the policy stated that Papias could use PST for limited reasons, but he was permitted to use PST for reasons beyond permissible uses. He was also paid more than his allotted PST. In his second year, he continued to request time off without explicitly indicating it was for sick time, yet his employer classified the hours as PST.

Eventually, he sought to use PST for illness. After missing a week of work, he returned with a doctor’s note, but his supervisor expressed skepticism that Papias had been ill and told him his services were no longer needed. Papias then sued the company for retaliation.

Because Papias had received more PST than required by law or company policy and he didn’t have PST available at the time of his absences, the company believed its actions couldn’t be retaliatory. The court disagreed, citing the fact that the company had paid him for PST in the past 90 days (even though that payment was in excess of what was required by law or policy) and that this payment created a presumption that any adverse employment action was retaliatory.  

While there’s so much more to this ruling, this should be enough to encourage employers to review their policies and their implementation. Here are answers to some questions you may be asking.

Am I Required to Have a PST Policy?

The Act doesn’t require employers to implement a specific policy for compliance, but employers that do should ensure the policy complies with the Act and that it’s implemented as written.

Outside of the FAQs on its website, the Industrial Commission of Arizona (ICA) has provided little guidance since 2017 on how it will interpret the Act with respect to policy language. But one thing is clear: If the ICA determines the policy violates the Act in any way, it will assess a penalty against the employer for the technical violation.

What Should My PST Policy Include?

The PST policy should provide comprehensive guidance on accrual, usage, and payment. At the very least, the PST policy should:

  • Explain the amount of earned PST employees will receive and whether PST will be granted at once or accrued over time.
  • State whether the company uses a calendar year or an anniversary year when calculating PST accrual and use.
  • Provide employees with the permissible uses of PST.
  • Explain how to request PST.
  • Note whether unused PST is paid out upon separation.
  • Contain the ICA’s enforcement and contact information.

Once the PST policy is implemented, PST should be earned and paid out consistently according to the policy. Deviations from the policy, even if they result in the employee’s receiving more PST than the Act requires, could result in potential liability.

Can I Combine Vacation and Sick Pay Into One Policy?

Based on the recent case, employers that implement a combined PTO policy may be doing so at their own peril. The Act creates a rebuttable presumption of retaliation for any adverse employment action taken against any employee who has used PST in the past 90 days. By combining PST and vacation into one PTO bank, employers may have a difficult time demonstrating that the PTO wasn’t protected PST and will likely have to be prepared to rebut this presumption under the heightened standard of clear and convincing evidence.

Separating PTO into distinct vacation and PST banks reduces the chances that PST will have been used in the previous 90 days.

In Closing

There’s no one-size-fits-all policy for PST, as different employers and different industries may find certain benefits and processes work better than others. In addition to reviewing policies and practices, you should confirm with your payroll providers that the pay stubs properly reflect the information required by the Act.

Pay stubs also must properly reflect the amount of PST earned/accrued and used and the dollar value paid out based on the year (calendar/anniversary) selected by the company. We encourage you to contact employment council if you have questions about this decision or other related employment issues.

Jodi R. Bohr is a shareholder with Tiffany & Bosco, P.A., and a contributor to the Arizona Employment Law Letter. She practices employment and labor law, with an emphasis on counseling employers on HR matters, litigation, and workplace investigations. She may be reached at jrb@tblaw.com.

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