As we begin a new year, Arizona employers should be aware of and begin planning for changes, and proposed changes, in local, state, and federal employment laws, which may impact their businesses in 2023. TALG continually monitors changes to these laws and will publish articles throughout the year regarding recent developments that could impact you and your business.
Arizona Minimum Wage
The State of Arizona’s minimum wage is determined based upon inflation and cost-of-living increases, under Proposition 206, also known as the Fair Wages and Healthy Families Act, and A.R.S. 23-363(B). Effective January 1, 2023, and running through December 31, 2023, the minimum wage has been increased to $13.85. This was increased from $12.80 in 2022. However, please note if your business works in or employs individuals in Flagstaff, you must comply with a different minimum wage requirement. Specifically, Flagstaff increased its minimum wage from $15.50 in 2022 to $16.80 in 2023. These minimum wages also vary for tipped individuals.
Arizona employers must display the new minimum wage, along with other state-mandated posting requirements, where it is sufficiently accessible and viewable to all employees. Employers with questions may wish to consult their attorney, tax professional, or the Industrial Commission of Arizona for guidance on compliance.
New Tax Withholding Options
Arizona’s Individual Income Tax Withholding Form (Arizona Form A-4) has recently been updated to reflect Arizona’s lower individual income tax rates. The new A-4 form has seven new withholding election rate boxes – 0.5%, 1.0%, 1.5%, 2.0%, 2.5%, 3.0%, and 3.5% – while retaining both the zero withholding rate option and the line for additional Arizona withholding. If an employee fails to fill out the new A-4 form, the default rate will be 2.0%. Every Arizona employer is required to make this form available to its Arizona employees by January 31, 2023.
These new forms are available on the Arizona Department of Revenue (ADOR) website at Arizona Withholding Percentage Election | Arizona Department of Revenue (azdor.gov), and once completed, should be kept and maintained by both employer and employee.
Transaction Privilege Tax Licenses
The ADOR has also advised businesses to renew their transaction privilege tax (TPT) licenses, which are now past the January 1, 2023 deadline. The Arizona TPT is a tax imposed upon businesses having a presence in or a nexus connection with Arizona, which is (1) required to be licensed, and (2) if engaging in taxable sales, are required to remit applicable TPT to the ADOR. Although commonly referred to as sales tax, TPT is differentiated from a sales tax in most states because it is imposed on the seller, rather than on the purchaser. Therefore, the business, and not the customer, is liable to ADOR for TPT associated with taxable sales made in Arizona, unless the sale is nontaxable or tax-exempt, or unless the business passes the tax to the purchaser.
Failure to renew your TPT license will begin the accrual of penalties as of January 31, 2023, so begin the process of renewing your license today.
Updated EEOC Workplace Discrimination Poster
In October 2022, the Equal Employment Opportunity Commission released an updated “Know Your Rights: Workplace Discrimination is Illegal” poster that covered employers are required to prominently display in their workplace. In addition, given the increased nature of remote work and individuals without a physical location, employers are encouraged to post this notice for digital access. Employers can access the most recent posters for electronic posting and for printing at the EEOC website: “Know Your Rights: Workplace Discrimination is Illegal” Poster | U.S. Equal Employment Opportunity Commission (eeoc.gov).
Salary and Pay Transparency
Although Arizona has not enacted any salary and pay transparency laws, such laws are becoming more widespread – including in New York City (effective November 1, 2022), Westchester County, New York (effective November 6, 2022), California (effective January 1, 2023), and Washington State (effective January 1, 2023) – and Arizona employers should be aware of these developments and the impact upon businesses. Though requirements vary in different jurisdictions, these laws generally require employers to disclose a prospective salary or salary range in any job posting.
Limits on NDAs and Mandatory Arbitration
In 2022, the federal government enacted two laws related to sexual assault and sexual harassment disputes: (1) the “Speak Out Act”, which rendered any nondisclosure and non-disparagement clauses unenforceable when related to sexual assault or sexual harassment disputes, and (2) the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act”, which prohibited enforcement of mandatory pre-dispute arbitration agreements, as well as agreements prohibiting participation in a joint, class or collective action in any forum, at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute.
Many employers have nondisclosure, non-disparagement, and/or arbitration clauses in their employee handbooks, which may be impacted or no longer effective based upon these new laws. Employers may want to consider revising their handbooks to reflect these changes.
Proposed Limits on Non-Compete
On January 5, 2023, the Federal Trade Commission (FTC) released a proposed rule that, if it is finalized, would make wide-ranging changes regarding the traditional “non-compete” definition and the scope of its reach, which would essentially ban all non-compete agreements with very limited exceptions. The proposed rule’s scope also impacts both past and present, which may require employers to rescind prior non-compete agreements or clauses and revise future forms. Although this proposed rule is in its infancy stages, and we expect to see potential changes to its terms based on public feedback, and potential legal challenges to its overarching legality and scope, employers would be wise to consider its impact now and plan for its potential implementation. Businesses should review their existing agreements with these proposed changes in mind, and employers with questions may wish to consult their attorney.
Please do not hesitate to contact TALG if you have any questions or need assistance.