Polsinelli LLP

1

GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

Employment claims, depending upon their nature, may be asserted before the Arizona Industrial Commission, the Arizona Civil Rights Division, local agencies, and the courts. Most claims may be asserted in courts of general jurisdiction, although certain claims must first be presented to the appropriate administrative agency.


The Main Sources Of Employment Law

Common law, state statutes, and state regulations are the main sources of employment law in Arizona. Major state employment statutes include the Arizona Civil Rights Act (A.R.S. § 41-1401 et seq.), the Employment Protection Act (A.R.S. § 25-1501 et seq.), the Arizona Minimum Wage Act (A.R.S. § 23-350 et seq.), the Fair Wages and Healthy Families Act (A.R.S. § 23-371 et seq.), and the Arizona Workers’ Compensation Law (A.R.S. § 23-901 et seq.) Individual contracts and collective bargaining agreements may also govern the employment relationship.


National Law And Employees Working For Foreign Companies

State law applies to all individuals physically working in the state. Federal law, and in some instances a national treaty with a foreign government, may also apply. The parties may contractually agree to apply a certain state’s law in some circumstances.


National Law And Employees Of National Companies Working In Another Jurisdiction

State law applies only when the employee is physically working in the state or when both parties have agreed in writing to the application of Arizona law.


Data privacy

State and federal statutes and regulations related to data privacy are applicable to Arizona employers and employees. Arizona data privacy statutes address such issues as data security breaches (A.R.S. §§ 18-551 and 18-552), restricted use of personal identifying information (A.R.S. §§ 44-1373–1373.03), discarding and disposing of personal identifying information (A.R.S. § 44-7601), electronic records retention (A.R.S. § 44-7012), and retention of customer information (A.R.S. § 44-701). There are also Arizona data privacy statutes specifically applicable to health information organizations (A.R.S. §§ 36-3801–3809).

2

HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

There are no legal requirements regarding the form of an employment agreement. Employment agreements are not required to be in writing, but if the parties reduce their agreement to writing, it will only be enforceable if both the employer and employee sign this written contract, or the written contract is set forth in the employment handbook or manual or any other document distributed to the employee, if that document expresses the intent that it is a contract of employment, or the written contract must be set forth in a writing signed by the party to be charged (A.R.S. §23-1501(2)).


Mandatory Requirements
  • Trial Period

    • There is no legal requirement to provide trial periods under Arizona law (also referred to as “probationary periods” or “introductory periods”).

  • Hours Of Work

    • Arizona law provides few wage and hour standards, but provides for a minimum wage which changes every year based on a cost of living formula. The minimum wage in Arizona for 2021 is $12.15 per hour. There is no restriction on the number of hours employees may be required to work, except for children under the age of 16 (A.R.S. § 23-233). Except for laws mandating minimum wages and paid sick leave, provisions covering the payment of wages, and special overtime provisions for certain public employees,workers in Arizona are governed by the federal Fair Labor Standards Act.

  • Special Rules For Part-time Work

    • There are no special rules for part-time work in Arizona.

  • Earnings

    • Because the Arizona state minimum wage is greater than the federal minimum wage, all non-exempt employees in Arizona must be paid the state minimum wage for all hours worked (A.R.S. § 23-363). Arizona does not have a statute relating to the payment of overtime, and thus relies on the federal Fair Labor Standards Act overtime provisions.

  • Holidays/Rest Periods

    • There are no legal requirements in Arizona to provide holidays or rest periods.

  • Minimum/Maximum Age

    • Federal and state statutes apply to and restrict the employment of children under the age of 16 (see, e.g., A.R.S. § 23-232). Arizona statutes further restrict the employment of youth between 16 and 18 years of age to certain categories of work (A.R.S. § 23-231). There are no maximum age limits. The Arizona Civil Rights Act prohibits discrimination on the basis of age for individuals age 40 or older (A.R.S. §41-1465).

  • Illness/Disability

    • Arizona has no statutory provisions regarding location of work or mobility. It is not common in Arizona for employers to include mobility clauses in employment agreements. Generally, an employer can require an employee to work wherever the employee is needed.

  • Location Of Work/Mobility

    • Arizona has no statutory provisions regarding location of work or mobility. It is not common in Arizona for employers to include mobility clauses in employment agreements. Generally, an employer can require an employee to work wherever the employee is needed.

  • Pension Plans

    • Arizona has no statutory provisions regarding pension plans. Federal law may apply.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

    • In February 2021, Arizona enacted a law expressly prohibiting discrimination against employees on the basis of pregnancy or childbirth (A.R.S. §§ 41-1461, 1463). The law permits the Arizona Civil Rights Division, the state civil rights agency, to investigate charges of pregnancy discrimination, which the agency previously lacked jurisdiction to do. Arizona has no other statutory provisions regarding maternity, paternity, or adoption, although standard state non-discrimination and leave requirements apply. Federal leave requirements may also apply.

  • Compulsory Terms

    • Under Arizona law, there are no compulsory terms that must be included in an employment agreement.

  • Non-Compulsory Terms

    • In Arizona, the employer and employee may agree to any terms provided the terms do not abrogate statutory rights—e.g., employees may not agree to compensation less than the minimum wage or waive their right to overtime compensation.


Types Of Agreement

In Arizona, employers and employees may enter into a variety of agreements related to the employment relationship, including, among others, standard employment agreements (with terms related to hours, wages, benefits, etc.), confidentiality and non-disclosure agreements, non-competition agreements, non-solicitation agreements, assignment of inventions agreements, and other restrictive covenant agreements. Common law and state statutes will determine the enforceability of such agreements. Some employment agreements are for fixed terms while others are “at will.” Employment agreements may contain restrictions on competition or solicitation of customers, and may also include confidentiality clauses.


Secrecy/Confidentiality

In Arizona, there are rules relating to secrecy and confidentiality that are implied in the employment relationship. During the employment relationship, Arizona common law provides that an employee is under a duty of loyalty and must not act contrary to the employer’s interest. Further, Arizona’s Uniform Trade Secrets Act regulates the misappropriation of trade secrets both during and after employment (A.R.S. §44-401 et seq.). Employers and employees may, and often do, enter into confidentiality and non-disclosure agreements.


Ownership of Inventions/Other Intellectual Property (IP) Rights

Arizona has no statutory provisions regarding employee ownership of inventions or other intellectual property rights. Contractual provisions and federal law may apply.


Pre-Employment Considerations

Arizona has its own Fair Credit Reporting Act (A.R.S. § 44-1691 et seq.). There are no other specific Arizona statutes or rules related to pre-employment considerations for non-public employers. Arizona does have a “ban-the-box” law, but it applies only to the public sector. Federal law, such as the federal Fair Credit Reporting Act, may apply.


Hiring Non-Nationals

The Legal Arizona Workers Act requires employers to use the federal “E-Verify” program to verify that new employees have a valid work authorization and provides for sanctions against employers who knowingly or intentionally hire unauthorized workers (A.R.S. § 23-212). All employers must ensure that all employees are eligible to work in the United States in accordance with federal law.


Hiring Specified Categories Of Individuals

Under Arizona law, there are restrictions on the types of work that youth between the age of 16 and 18 years of age may be hired to perform (A.R.S. § 23-231).


Outsourcing And/Or Sub-Contracting/Temporary Agency Work

Arizona has no provisions regarding outsourcing, subcontracting, or temporary agency work.

3

MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

Changes to an employment contract are generally governed by the contractual terms and Arizona common law.


Change In Ownership Of The Business

Arizona has no statutory provisions regarding change in ownership of a business. Contractual provisions and federal law may apply. It is for the old and new employer to decide what happens to the employees.


Social Security Contributions

Employers and employees are both required by federal law to make social security contributions. Arizona has no state laws regarding social security.


Accidents At Work

Employee injuries occurring at work are governed by the Arizona Workers’ Compensation Law (A.R.S. § 23-901 et seq.). Employers may also be responsible under common law for accidents caused by the acts of their employees where the employees were acting in the course and scope of their employment. Federal law may also apply.


Discipline And Grievance

Arizona has no statutory provisions regarding discipline and grievances.


Harassment/Discrimination/Equal pay

The Arizona Civil Rights Act prohibits discrimination in employment on the basis of race, color, religion, sex, age, national origin, and disability (A.R.S. § 41-1463). This law applies to employers with 15 or more employees, except for the prohibition on sexual harassment, which applies to employers with at least one employee (A.R.S. § 41-1461(6)(a)). Arizona’s Employment Protection Act prevents an employer from firing an employee for certain reasons, including retaliation (A.R.S. § 25-1501 et seq.) Certain Arizona municipalities also prohibit discrimination on these and other bases. The Arizona Equal Pay statute prohibits employers from paying females a wage rate less than the wage rate paid to male employees who perform the same quantity and quality of the same classification of work (A.R.S §§ 23-340, -341).


Compulsory Training Obligations

Arizona has no compulsory training obligations.


Offsetting Earnings

Under Arizona’s wage statute, an employer cannot withhold or divert any portion of an employee’s wages except where (1) the employer is required or empowered to do so under state or federal law (e.g., taxes); (2) the employer has prior written authorization from the employee; or (3) there is a good faith dispute as to the amount of wages due (A.R.S. §23-352). Deductions from wages for garnishments must also comply with state and federal requirements (A.R.S. §12-1598 et seq.).


Payments For Maternity And Disability Leave

Arizona has no statutory provisions regarding payments for maternity or disability leave.


Compulsory Insurance

Arizona employers with one or more employees must carry workers’ compensation insurance (A.R.S. § 23-901 et seq.).


Absence For Military Or Public Service Duties

Under Arizona law, employers are prohibited from dissuading employees from joining the National Guard or retaliating against employees who serve. Employees who are ordered to active state duty are entitled, upon return from duty, to reinstatement to their previous position or to a higher position commensurate with their ability and experience (A.R.S. §§ 26-167, 168). Federal law may also apply.

Further, Arizona employers may not dismiss or in any way penalize an employee because of the employee’s jury summons or service. The employer is not required to pay the employee for time away during jury duty. Absences due to jury service may not affect the employee’s vacation or seniority rights (A.R.S. § 21-236).

In addition, employees working in Arizona with less than three hours between the opening of the polls and the beginning of their normal work hours or the end of their normal work hours and the closing of the polls are entitled to take paid leave from work, at the employer’s cost, at either the beginning or end of a shift for such an amount of time that provides three consecutive hours in which to vote (A.R.S. § 16-402).


Works Councils or Trade Unions

Arizona law affords to agricultural and some public safety employees the right to organize and bargain collectively through representatives of their own choosing (A.R.S. §§ 23-1381, 23-1411). Some municipalities have enacted ordinances providing for municipal employee organizing rights as well. Federal law may also apply.


Employees’ Right To Strike

Striking for the purpose of forcing an employer to replace non-union employees with union members is prohibited by Article 25 of the Arizona Constitution. The Arizona Constitution also provides that an individual may not be denied employment because of non-membership in a labor organization (right- to-work).


Employees On Strike

Federal law may apply; the National Labor Relations Act gives employees the right to strike.


Employers’ Responsibility For Actions Of Their Employees

Under the doctrine of respondeat superior, which is recognized in Arizona, an employer may be liable for the negligent acts or omissions by an employee that are committed within the course and scope of employment. Employers may also be liable for negligent hiring or retention where the plaintiff can prove the following: (1) the employee is unfit; (2) the employee presents a probable danger; (3) the employer knew or should have known of the employee’s unfitness or danger; and (4) the employer’s negligence (in hiring or supervision) was the proximate cause of the plaintiff’s injury.

4

FIRING THE EMPLOYEE

Procedures For Terminating the Agreement

Arizona has no statutory provisions regarding procedures for terminating an employment agreement. Unless an employment contract with a specific term applies, the employment relationship is at-will and may be terminated at any time. An employment contract or collective bargaining agreement may specify termination procedures.


Instant Dismissal

Arizona has no statutory provisions regarding procedures for instant dismissal of an employee. Unless an employment contract with a specific term applies, the employment relationship is at-will and may be terminated at any time. An employment contract or collective bargaining agreement may contain notice requirements. However, under Arizona law, employees terminated by the employer must receive their final paycheck within seven working days of their last day, or by the end of the next pay period, whichever is sooner (A.R.S. § 23-353 (A)).


Employee's Resignation

Under Arizona law, employees who resign must receive their final paycheck no later than the next regular payday after they resigned (A.R.S. § 23-353 (B)).


Termination On Notice

Arizona has no statutory provisions regarding termination on notice. An employment contract or collective bargaining agreement may contain notice requirements.


Termination By Reason Of The Employee's Age

The Arizona Civil Rights Act prohibits discrimination in employment on the basis of age (40 or older), which would include termination for reason of an employee’s age. This provision applies to employers with 15 or more employees (A.R.S. § 41-1401 et seq.). Federal law may also apply.


Automatic Termination In Cases Of Force Majeure

Arizona has no statutory provisions regarding termination in cases of force majeure.


Collective Dismissals

While Arizona has no layoff notice requirements of its own, state agencies assist in enforcing the requirements of the federal Worker Adjustment and Retraining Notification Act (WARN).

Also, when two (2) or more employees are terminated on the same day or within a short period of time for the same reason, such as with a reduction in force, the OWBPA requires employers to include specific language in any severance agreement offered to employees if at least one of them is 40 or older, and a waiver of rights is included. Specifically, the employees that are 40 or older must be given up to 45 days to consider the severance agreement (instead of 21 days), and the employer must provide specific information related to the “decisional unit” of the company affected by the terminations (including ages and positions).


Termination By Parties’ Agreement

In Arizona, the parties are free to terminate the employment relationship on any grounds they desire, except for unlawful reasons proscribed by federal, state, or local law.


Directors Or Other Senior Officers

Arizona has no statutory provisions regarding termination of directors and senior officers. An employment contract may apply and contain termination procedures. The termination of employment does not automatically terminate board membership. Separate steps, generally set out in the bylaws or articles of incorporation/organization, are required to terminate board membership.


Special Rules For Categories Of Employee

Arizona has no statutory provisions regarding the termination of certain categories of employees. However, termination decisions must not violate the anti-discrimination provisions of the Arizona Civil Rights Act or the anti-retaliation provisions of Arizona’s Employment Protection Act.


Specific Rules For Companies in Financial Difficulties

Arizona has no statutory provisions regarding companies in financial difficulty. Federal bankruptcy law, the Employee Retirement Income Security Act, the Worker Adjustment and Retraining Notification Act, and other federal laws may apply.


Restricting Future Activities

Contracts in restraint of trade are unlawful in Arizona. Restrictive covenants limiting individuals in the exercise or pursuit of their occupations are in restraint of trade and are also unlawful. However, reasonable non-competition and non-solicitation agreements are permitted between employers and employees in order to protect (1) confidential or trade secret business information; or (2) customer or supplier relationships, goodwill, or loyalty. The agreement must be reasonable in both duration and geographic scope and must be supported by consideration (at-will employment, including continued employment, constitutes sufficient consideration under Arizona law). Enforceability of restrictive covenants is determined on a case-by-case basis. Agreements that prohibit an employee from soliciting employees of a former employer, or that prohibit disclosure of confidential information, are generally enforceable. In Arizona, if a court finds that an agreement is too broad, the court does not have the power to modify the agreement to the extent necessary to make it reasonable unless the parties to the agreement have already set out alternative temporal or geographic limitations among which the court can choose—i.e., step-down provisions.


Whistleblower Laws

Whistleblowers in Arizona are protected under Arizona’s Employment Protection Act and common law. Federal law may also apply.


Special Rules For Garden Leave

Arizona has no special rules for garden leave.


Severance Payments

Arizona has no statutory provisions regarding or requiring severance payments. Severance payments are not required unless the employer and the employee have a contract providing for severance. There are specific rules governing the validity of a release provided in exchange for severance payments.


Special Tax Provisions And Severance Payments

In Arizona, severance payments are taxed in the same way as other wages. Federal law may also apply.


Allowances Payable To Employees After Termination

Arizona law provides that employees may be entitled to unemployment benefits after termination of employment so long as they meet certain requirements (A.R.S. § 23-601 et seq.).


Time Limits For Claims Following Termination

Statutes of limitations vary under Arizona law depending upon the nature of the claim.

Damages for wrongful termination: Under Arizona law, an action for damages for wrongful termination must be brought within one year after the cause of action accrues (A.R.S. § 12-541(4)).

5

GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

Constructive discharge: Arizona’s constructive discharge statute defines the kind of conduct and working conditions necessary for constructive discharge claims under Arizona statutes and common law (but does not affect constructive discharge claims under federal law) (A.R.S. §23-1502).

Breach of employment contract: Under Arizona law, a breach of employment contract must be brought within one year after the cause of action accrues (A.R.S. § 12-541(3)).



Search by:
Need more information?
Contact a Contributing Author:
Adam Merrill
Polsinelli LLP
United States


Disclaimer:

© 2021, Polsinelli LLP. All rights reserved by Polsinelli LLP as author and the owner of the copyright in this chapter. Polsinelli LLP has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021