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December 12, 2016

Election Brings New Dynamics: California Goes to Pot; Arizona Approves Paid Sick Time

California and Arizona residents with a doctor’s recommendation have legally used marijuana for medical purposes since 1996, respectively.  Now voters in California have approved an initiative making it legal to grow, possess or use recreational marijuana.

In the just completed election, California, Massachusetts, and Nevada joined Alaska, Colorado, Washington State, and the District of Columbia, in legalizing weed for recreational use.  Arizona voters rejected a proposal on recreational marijuana use, but approved a ballot initiative raising the minimum wage and mandating paid sick time.

There is a more accepting attitude on marijuana throughout the country.  And while the federal Controlled Substance Abuse Act still designates marijuana as an illegal drug under federal law, the Obama administration has had a mostly hands-off policy toward state-level marijuana legalization efforts.  However, the incoming administration could reverse this approach.  President-Elect Donald Trumps’ appointee for attorney general, Sen. Jeff Sessions of Alabama, has been a fierce opponent of legalizing cannabis.


CA Proposition 64

In 1996, California voters approved Prop 215, the Compassionate Use Act, which made it legal under state law to use marijuana in California for medical purposes.  In 2008, the California Supreme Court upheld the termination of an employee who was discharged for failing a drug test.  The employee sued, alleging that he had a prescription to use marijuana for chronic back pain under the Compassionate Use Act.  Noting that marijuana remains illegal under federal law, the court stated that employers are not required to accommodate marijuana use, even where the employee uses cannabis at home.

Under Prop 64, adults 21 years of age or older can legally grow, possess, and use marijuana for nonmedical purposes, with certain restrictions.  The state will regulate nonmedical marijuana businesses and tax the growing and selling of medical and recreational pot.  Most of the revenue from such taxes is slated to support youth programs, cleanup of environmental damage resulting from the illegal growing of marijuana, and programs designed to reduce impaired driving and other potential negative impacts on public health resulting from the measure.

Prop 64 explicitly provides that it will “Allow public and private employers to enact and enforce workplace policies pertaining to marijuana.”

The initiative also provides that it will not be construed or interpreted to amend, repeal, affect, restrict or pre-empt:

“The rights and obligations of public and private employers to maintain a drug and alcohol free workplace or require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale or growth of marijuana in the workplace, or affect the ability of employers to have policies prohibiting the use of marijuana by employees and prospective employees, or prevent employers from complying with state or federal law.” (Section 11362.45 (f))

Accordingly, even with the passage of Prop 64, employers may continue to enforce their drug-testing policies against employees and applicants who test positive for cannabis, to publish and enforce policies prohibiting the possession or consumption of marijuana during working hours, and to discipline any employee whose job performance is impaired because of the use of marijuana.

It should be noted that the new law took effect one day after the election, on November 9.  If they have not already done so, California employers should review and update existing, or consider creating new drug free workplace policies.  Consider redistributing the employee’s policy and reminding employees that marijuana remains prohibited under the company’s policy.  This will remove any doubt about the company’s position following the passage of the new permissive pot laws.  Finally, training supervisors about the company’s drug-free workplace policy and on identifying the signs of drug or alcohol impairment will help to ensure that the company’s policy is consistently implemented.


Arizona’s Minimum Wage Hike and New Paid Sick Leave Law

Arizona voters passed Proposition 206 (the “Fair Wages and Healthy Families Act”) which raises the minimum wage in Arizona from $8.05 an hour to $10.00 an hour on January 1, 2017, and will increase by 50 cents each year over the next four years to $12 an hour.  Then the minimum wage will increase with the cost of living starting in 2021.

In addition, the initiative mandates employers provide their employees with paid sick time (PST) beginning July 1, 2017.  All full-time, part-time and temporary employees must be allowed to accrue a minimum of one hour of PST for every 30 hours worked as follows:

•   40 hours of PST annually for employers with 15 or more employees; or

•   24 hours of PST for employers with fewer than 15 employees.

For determining the size of the employer, all “full-time, part-time or temporary employees” performing work for compensation in a given week are counted.  It is unclear whether “seasonal employees” were intentionally omitted by the initiative’s authors, or whether seasonal workers should be counted for purposes of determining the size of the employer.  There are good legal arguments on each side of the question.  If the number of eligible employees fluctuates from week-to-week, the employer will be treated as having 15 or more employees if it maintained 15 or more employees on the payroll for some portion of a day in any 20 calendar weeks during the current or preceding year.

In some but not all respects, the act is similar to California’s paid sick leave law.  For example, the new Arizona act allows for more generous paid time-off policies by employers, if desired.  And employers may provide all expected earned PST to the employee up front at the beginning of the year, as an alternative to accruing PST.  Employers may set a 90-calendar day waiting period before new employees can begin using PST, as they now can in California.  Overtime-exempt employees are presumed to work 40 hours a week for purposes of accruing PST, unless their normal workweek is less than 40 hours, in which case it accrues based on that normal workweek.

Other PST provisions include the following:

•   Unused PST carries over to the following year, unless the employer elects to pay out accrued PST at the end of the year.

•   Accrued but unused PST is not required to be paid out at separation from employment.

•   If an employee leaves and is rehired within nine months, any accrued PST must be immediately reinstated and available for use upon rehire.

•   If an employer has a paid time off (PTO) policy that (1) meets the minimum accrual or lump sum requirements of the Act, and (2) PTO can be used for the same purpose and under the same conditions of the Act, is not required to provide additional PST.

•   PST can be used for:

·    An employee’s or family member’s illness, injury or health condition;

·    Diagnosis, care or treatment for the employee or a family member;

·    A closure of the employee’s place of business, child’s school or place of care, or other public health emergency; and

·    Addressing domestic or sexual violence, abuse.

•   For medically-related PST absences of three or more consecutive work days, an employer may require a doctor’s note indicating that the PST is necessary for a medical purpose.  However, for PST used for addressing domestic violence or assault, virtually any document, including an unsworn statement from the employee, must be accepted.

Importantly, employers must give employees written notice of their PST rights by July 1, 2017, or when employment begins, whichever is later.  The notice, which will be created and made available by the Commission of Arizona, must be provided in English and Spanish.

Employee paystubs will be required to include: the amount of PST available to the employee; the amount of PST taken by the employee year to date; and the amount of pay the employee has received as PST.

Finally, Prop 206 also prohibits discriminating or retaliating against employees asserting their rights under the act or assisting other employees in doing so, and subjects employers to fines and penalties for failing to comply with the act.


How is PST calculated for Piece-Rate Workers?

Prop 206 is unclear on this point.  The new law requires employees using PST to be compensated “at the same hourly rate… as the employee normally earns during the hours worked, but in no event less than the minimum wage.” Employees paid on a pure piece-rate basis do not earn a “normal” amount; their pay is variable depending on productivity.

Piece-rate will likely be required to be paid PST at their average rate of pay, determined by dividing gross pay by hours worked in the work week.  This will be particularly challenging for employers using the upfront method, which requires employers to pay all expected PST at the beginning of the applicable 12-month period.  It may be difficult to assess what a piece-rate worker’s normally expected pay at the beginning of the year.  This means that if the amount expected and paid upfront turns out to be less than what was truly earned, the employer would likely have to make a subsequent adjustment to true-up the compensation that should have been paid based on the average rate of pay for the year.  It would probably be more feasible to use the accrual method for piece-rate employees.  Subsequent guidance or regulations may be forthcoming and provide more clarity.

Arizona employers who already provide paid sick time to their employees will want to review their policies against the requirements of the new law to ensure compliance.  Employers who currently do not provide paid sick time will want to review the new law and adopt a compliant sick time policy.