On January 1, 2012, Arizona’s minimum wage will increase by 30 cents to $7.65 per hour. Arizona’s minimum wage is higher than the federal minimum wage, which is currently $7.25 per hour.

In 2006, Arizona voters enacted a voter initiative, known originally as the “Raise the Minimum Wage for Working Arizonans Act” (the “Arizona Minimum Wage Act”). The Arizona Minimum Wage Act, which became effective January 1, 2007, established an Arizona minimum wage and also provided that the minimum wage was subject to an annual increase based on the increase in the cost of living. The cost of living is measured by the federal Consumer Price Index for All Urban Consumers, U.S. City Average, for all items during the 12 months ending each August 31. Pursuant to the authority granted by this law, the Industrial Commission reviewed the cost of living information and determined that Arizona’s minimum wage would be increased for calendar year 2011. In October 2011, the Industrial Commission of Arizona determined that the state’s hourly wage should increase based on a 3.8 percent increase in the federal Consumer Price Index this year.

Under federal law, a state may require a minimum wage that exceeds the federal wage. If there is a difference between the laws, the employer must follow the requirement that is the most beneficial to the employee. Thus, an Arizona employer that is subject to both the federal and state laws must pay the Arizona minimum wage rate. Further, Arizona employers must make sure they are in compliance with both the federal and the state laws. Our labor and employment attorneys can answer questions regarding the laws and regulations, and advise you on compliance issues. As you review your individual compliance, some further information regarding the Arizona Minimum Wage Act and regulations may be helpful.

Exceptions

The Arizona Minimum Wage Act provides only a few exceptions from its coverage. One exception is for small businesses that generate less than $500,000 in gross annual revenue, if that small business is not covered by the federal Fair Labor Standards Act (FLSA). From a practical standpoint, most employers are subject to the FLSA. Another exception applies to the state of Arizona and the U.S. government. Additionally, the Arizona Minimum Wage Act does not apply to any person who is employed by a parent or a sibling, or who is employed performing babysitting services in the employer’s home on a casual basis.