On the first day of 2022, the minimum wage in Arizona increased by 65 cents to $12.80 per hour. Overtime wages, to be paid for any hours worked over the standard 40-hour work week, are set at a minimum of 1.5 times the standard hourly rate. That brings the minimum wage for overtime hours in Arizona to $19.20 an hour.
By an Arizona state law known as the Fair Wages and Healthy Families Act, the state’s minimum wage increases each year to match the rise in the Consumer Price Index. This is meant to allow workers in Arizona a minimum standard of living by earning wages that rise with household expenses such as food, rent and utilities.
Federal Minimum Wage Lags Inflation
Arizona’s 2022 hourly minimum wage is $5.55 higher than the federal minimum wage of $7.25 an hour. In cases where the state and federal minimums differ in this way, the higher wage prevails for employers within the state.
The federal minimum wage dates to 1938, when Congress passed the Fair Labor Standards Act. This law set a federal minimum of 25 cents per hour for workers engaged in interstate commerce. The last increase occurred in 2009, bringing the federal rate to $7.25.
Working for the federal minimum wage, a full-time worker will earn $15,080 over a year. In 2022, the federal poverty guidelines set an annual income of $27,750 as the official poverty line for a family of four.
The long delay in action on the federal minimum wage means this rate has not kept pace with inflation. After 13 years without a raise, the buying power of 2022’s federal minimum wage had fallen to a bit more than half that of the minimum in 1968. In that year, the purchasing power of the minimum wage hit its peak, at $13.86 an hour if measured in 2022 dollars.
Exemptions from the Arizona Minimum Wage
The minimum wage is a general rule, but doesn’t apply across the board. Some employers and workers are exempt from the minimum wage.
Tipped Employees and Exempt Employers in Arizona
For tipped employees, such as restaurant workers, Arizona sets a minimum wage that is $3 less than the regular minimum wage. Employers with tipped employees must credit them with sufficient tip income to make up the difference between the tipped wage and the regular state minimum.
In a tipped employee situation, the employer must allow the employee to retain all tips, whether or not they exceed the tip credit paid according to the employer’s records. The exception to this would be an employee who takes part in tip pooling with other workers.
State law allows employers to require tip sharing and pooling among employees who normally receive tips. The employees involved in a tip pool must add only reasonable and customary tips to the pool, and can keep any tip amount they may need to meet the minimum wage requirement. The management or owners of an establishment with a tip pool are not entitled to share the tips.
Small Employer Exemption
Arizona exempts employers making less than $500,000 in revenue from the minimum wage, but these employers must also be exempt under current federal law. The law subjects anyone engaged in interstate commerce to pay a minimum wage, meaning only small Arizona businesses that do not bank or trade with an out-of-state company or customer would be exempt.
Many states allow a training wage, or a less-than-minimum salary for minors or students. Some states also allow payment of less than the minimum to employees with disabilities. Arizona, however, applies its minimum wage to all non-exempt employers, no matter the age, employment or disability status of their workers.
Workers Exempt from Arizona’s Minimum Wage
Not all workers in Arizona are entitled to the state’s minimum wage. The Fair Wages and Healthy Families Act exempts babysitters, anybody employed by a parent or sibling and state and federal public employees. In 2022, federal workers in Arizona and other states are covered by wage guidelines set by the federal government, including a minimum rate of $15 an hour.
Local Minimum Wages
Local jurisdictions, including the cities of Flagstaff and Tucson, have set minimum wage rates that vary from Arizona’s statewide minimum. This is part of a larger national movement to get states and cities to raise their minimums to $15 per hour.
In November, 2021, for example, the city of Tucson passed the Tucson Minimum Wage Act. This ballot initiative raised the minimum wage in the city beginning April 1, 2022, and increases it yearly in January until it reaches $15 per hour in 2025. After that, yearly increases will be based on inflation.
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In 2016, voters in Flagstaff approved Proposition 216, a ballot initiative that raised the city’s minimum wage to $15 an hour. That rate rose to $15.50 per hour in 2022, with a $13 hourly minimum for tipped employees. The minimum wage in Flagstaff rises with the Consumer Price Index, with the tipped minimum set to reach parity with the standard minimum wage in 2026.
Minimum wage can be a difficult subject to understand. The “minimum wage” is actually a patchwork of federal, state and local laws and ordinances that often conflict with each other, and the many exceptions and exemptions in the laws may make an employee uncertain about whether or not they’re covered by their state’s standard minimum wage.
Further complicating the picture are employers who pay their employees “off the books,” or without documentation of the hours worked and the wages paid. Arizona, like other states, has documentation requirements that are often difficult for employers without legal expertise to understand and follow.
Any Arizona employee seeking redress for non-payment of legal wages can file a complaint with the Labor Department of the Industrial Commission of Arizona. Employers are barred from retaliating against employees for filing these complaints, or for assisting anyone else in doing so.
For further information on Arizona’s minimum wage laws, visit the Industrial Commission of Arizona website at www.azica.gov or contact the commission directly at 602-542-4515.
Information is accurate as of Sept. 8, 2022, and is subject to change.