Effective January 1, 2011, Arizona’s minimum wage will increase to $7.35 per hour. This is the first increase since 2009, when the minimum wage became $7.25 per hour. The new state minimum wage will exceed the federal minimum wage, which is currently $7.25 per hour.

The Arizona Minimum Wage Act, which became Arizona law on January 1, 2007, authorized the Industrial Commission of Arizona (ICA) to implement an increase in minimum wage on January 1 of successive years according to the increase in the cost of living.

According to ICA guidance, employers covered under the Act must pay every employee at least the minimum wage amount. Thus, Arizona does not provide sub-minimum wages for different classes of workers, such as young workers or students. Note that this is different, and more restrictive, than the Fair Labor Standards Act (FLSA). The Act provides a narrow exception for small businesses that are not subject to the FLSA and which have less than $500,000 in gross annual revenue. Also excluded are the state of Arizona and the U.S. government.

The Act includes a separate provision for employees who customarily and regularly receive tips or gratuities from patrons. For employees falling in this category, the employer may pay up to $3.00 less per hour than the minimum wage if the employer can establish that the employee received not less than the minimum wage. To establish that the employee received the minimum wage, the employer must maintain a record of the tips considered and the amount per hour that the employer takes as a tip credit must be reported to the employee, in writing, each work week. If the employee is receiving less than the minimum wage, the employer must make up the difference.

Additionally, employers must maintain records showing the hours worked for each day worked, and the wages paid to all employees for a period of four years. Employers are required to post the Arizona Minimum Wage Poster in an area where employees can read the poster.

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