AZ’s Hidden Employer Wage/Hour Gift

By John Alan Doran

Much has been said about AZ Governor Ducey’s recent decision to sign into law HB 2579, which preempts local governments from enacting their own living wage or fringe benefits ordinances for private employers.  See here for more information.  But next to nothing has been said about the impact of HB 2579 on treble damages wage claims under Arizona law, and that’s a shame, because HB 2579 incidentally provided Arizona Employers with a hidden gift.

Arizona law permits a trial court to award treble damages when an employer fails to pay wages that are due.  Previously, Arizona law defined wages extremely broadly to include sick pay, vacation pay, severance pay, discretionary and non-discretionary bonuses, and the like.  However, in the course of narrowly re-defining wages to limit local government enactments of local minimum wage or fringe benefits ordinances, HB 2579 deleted the broad definition of wages under Arizona law.  As a result of HB 2579, the term “wages” now refers to nondiscretionary compensation only.  This means when an employee brings a treble damages claim, the claim will be limited to nondiscretionary wages, and employees won’t be able to seek treble damages for unpaid sick pay, vacation pay, severance pay, discretionary bonuses and more.  This means the specter of treble damages wage awards will be far less menacing going forward.

Note that HB 2579 is already facing legal challenges because some argue that the legislation effectively repeals Proposition 202, which the voters approved in 2006.  See here for more information.  However, even were HB 2579 struck down for that reason, the provision narrowly redefining wages under Arizona law should not be impacted.