A new year, and a new minimum wage in Arizona. Effective January 1, Arizona’s minimum wage will increase by 10 cents to $7.35 per hour, which exceeds the federal minimum wage of $7.25 per hour. In 2006, voters approved an initiative to establish a minimum wage in Arizona and provide for annual increases based on the cost of living. The Raise the Minimum Wage for Working Arizonans Act, which went into effect January 1, 2007, established an initial minimum wage and authorized the Industrial Commission of Arizona to calculate any increases in the cost of living based on the Consumer Price Index and reflect those changes in an increased minimum wage every successive January 1. The last such increase was in January of 2009.

The Arizona Act applies to all Arizona employers except the federal government, the State of Arizona, and small businesses that are not subject to the minimum wage provisions of the FLSA and which earn less than $500,000 in gross annual revenue. All employees except casual babysitters and persons employed by a sibling or parent are entitled to receive the minimum wage. For employees who regularly receive tips as part of their compensation, the employer may pay up to $3.00 less per hour, but if the employee’s tips combined with the employer’s direct wages do not equal the Arizona minimum hourly wage, the employer must make up the difference. In addition to paying the correct Arizona minimum wage, employers should make sure they are keeping accurate payroll records and that they have posted notice of employees’ rights under the Arizona Act.