Payment of Wages – Governed by State Law in Arizona

The payment of wages in Arizona is governed by state law. The statutes governing payment of wages and wage claims come into play any time there is a wage dispute between an employer and employee.

It probably makes sense to start this article with a defini­tion of “wages.” Wages means “nondiscretionary income due an employee in return for labor or services, … for which the employee had a reasonable expectation of being paid.” It is immaterial whether the amount is determined by a time, task, piece, commission or other method of calculation. Wages include sick pay, vacation pay, severance pay, commissions, bonuses and other amounts promised when the employer has a policy or practice of making those payments. Thus, the defi­nition of wages is very broad.

In November 2006, Arizona voters approved an increase in Arizona’s minimum wage. At that time, the minimum wage went from $5.15 per hour to $6.75 per hour. That initiative also called for a cost of living increase on January 1 of successive years. As of January 1, 2012, Arizona’s minimum wage was $7.65 per hour.

Every employer in Arizona must designate two or more days in each month, not more than 16 days apart, as fixed paydays for the payment of wages to its employees. Wages must be paid in cash (U.S. currency only), in negotiable bank checks, or, with the written consent of the employee, by deposit to the employee’s bank account. When an employee’s wages are paid by deposit in a financial institution, he must be furnished with a statement of his earnings and withholdings.

An employer is permitted to personally deliver the wages to the employee no later than five days after the end of the most recent pay period, or deposit the wages in the mail no later than five days after the end of the most recent pay period for delivery to an address specified by the employee. These rules effectively allow an employer to withhold up to five days’ wages. Overtime pay must be paid no later than 16 days after the end of the most recent pay period.

The above rules do not apply to employers whose princi­pal place of business is located outside Arizona and whose payroll system is centralized outside the state, to school dis­tricts, or to other state agencies. They also do not apply to employees whose salaries are subject to provisions of collec­tive bargaining agreements. The wage statutes are different for these groups.

An employer may withhold wages under the following cir­cumstances:

The employer is required or empowered to do so by law.

The employer has the employee’s prior written authorization.

There is a reasonable good faith dispute as to the amount of wages due.

In the case of discharge, special payment rules apply. When an employee is discharged, he must be paid wages due him within three working days or the end of the next regular pay period, whichever is sooner. When an employee quits, he must be paid in the usual manner all wages due him no later than the regular payday. If requested by the employee, his wages must be mailed to him.

In that wages include sick pay, vacation pay, severance pay, commissions and bonuses, an employee’s last paycheck often will include these extra items. If it does not, the employee may have a valid wage claim.

The wage statutes contain significant penalties for non­compliance. Any employer who fails to pay wages due is guilty of a petty offense, and may be required to pay three times the amount of the unpaid wages, plus costs and attor­ney’s fees.

An employee who is owed wages may file a lawsuit against the employer for three times the amount of unpaid wages, plus his attorney’s fees and costs. If the employee wins the lawsuit, he will be awarded a judgment against the employer, on which he can then execute to get paid.

Instead of filing a lawsuit, an employee with a wage claim that does not exceed $2,500 may file a claim with the labor department of the Industrial Commission of Arizona (“Labor Department”). The claim must be filed within one year from when the wages were due.

If the employee chooses to file a wage claim with the Labor Department, he can only claim the amount of wages actually owed. The Labor Department will investigate the wage claim to determine if wages are due or if a dispute exists between the parties. The employer will be notified of the wage claim and may file a response to it.

Upon completion of its investigation, the Labor Depart­ment will notify the parties of its findings. If it is determined that the claim is valid, the Labor Department will direct that the unpaid wages be paid. The Labor Department’s determina­tion can only be appealed to the superior court. If neither party seeks review of the Labor Department’s determination, it will become final.

If the Labor Department finds that there is a dispute that cannot be resolved by investigation, the employee may attempt to recover the amount of wages claimed by filing a lawsuit against the employer. An employer who has been ordered by the Labor Department or a court to pay wages and who fails to do so within 10 days after the order becomes final must pay, as a penalty, three times the amount of the unpaid wages, plus interest at the legal rate.

For additional information or forms, the reader may wish to visit the Labor Department’s Web site, or call (602) 542-4515 (Phoenix); (520) 628-5459 (Tucson).