Holiday Pay, Overtime, and Paid Sick Time in Arizona: What the Law Requires

By Tyler Allen, Employment Law Attorney at Tyler Allen Law Firm in Phoenix, Arizona

Holiday pay is not required by Arizona law, and neither is premium pay for working on a holiday, which surprises people on both sides of the employment relationship every November. Private employers in Arizona can decide whether to pay for Thanksgiving, whether to pay time and a half for working it, and whether to close at all. What changes the analysis is not the calendar. It is what the employer has already promised in writing, and what the state's earned paid sick time law requires regardless of any policy.

Is holiday pay required in Arizona?

No. Neither Arizona law nor federal law requires private employers to provide paid holidays or to pay a premium rate for hours worked on a holiday. Paid holidays are a benefit the employer chooses to offer, and once offered through a written policy they can become enforceable.

Overtime follows hours worked, not the calendar

The Fair Labor Standards Act requires overtime at one and one half times the regular rate for hours worked over forty in a workweek for nonexempt employees. There is no federal or Arizona rule requiring extra pay because the day happens to be a holiday, and Arizona has no daily overtime requirement, so a twelve hour shift on December 25 is ordinary straight time unless the week crosses forty hours.

The detail that catches employers is how holiday hours interact with that threshold. Paid time that was not actually worked, including holiday pay, vacation, and sick leave, generally does not count toward the forty hour calculation unless the employer's own policy says it does. An employee who takes a paid holiday Thursday and works forty hours across the other four days has worked forty hours and is owed overtime only if the policy counts the holiday. Employers who have written a more generous rule into the handbook are bound by it. Employers who have not should expect the question, because many employees assume the holiday counts.

Exempt status is the other place this gets expensive. An employee is not exempt because they are salaried or because they have a manager title. Exemption depends on salary level and on actual duties, and reclassifying someone in December because of a scheduling crunch does not work retroactively.

What an employer has already promised usually controls

Arizona's wage statutes define wages as nondiscretionary compensation due an employee in return for labor or services, for which the employee has a reasonable expectation of payment. The operative word is nondiscretionary. A holiday bonus the owner decides on each December, in an amount nobody can predict, is generally discretionary. A bonus tied to a stated formula, or a handbook provision promising a specific holiday pay rate, or an accrued paid time off balance the policy says is paid on separation, looks much more like earned compensation.

This is why the year-end review of the handbook matters more than most owners think. Policies that were drafted loosely tend to create obligations by accident, and policies that were changed verbally but never updated in writing tend to be read against the employer. Employees, on the other side, should keep the version of the handbook they were given, because that is the document that establishes the expectation. Where a dispute does develop over what was earned and never paid, the analysis runs through the same wage rules that govern final paychecks final paychecks after quitting or termination quitting or termination, and unpaid amounts can carry treble damages, which is covered further on the firm's page on unpaid wages for Arizona employees.

Earned paid sick time does not pause for the holidays

This is the one genuine statutory entitlement in the mix, and it applies whether or not the employer offers any holiday benefits at all.

Under A.R.S. § 23-372, employees accrue one hour of earned paid sick time for every thirty hours worked. Employers with fifteen or more employees must allow accrual and use of at least forty hours per year. Employers with fewer than fifteen must allow at least twenty four hours per year. Unused time carries over to the following year, subject to the usage caps, or the employer may pay it out at year end and provide the full accrual at the start of the new year.

The permitted uses under A.R.S. § 23-373 are broader than most handbooks describe. They include the employee's own illness, injury, or health condition, preventive care, the same needs for a family member, closure of the workplace or a child's school by order of a public official during a public health emergency, and absences connected to domestic violence, sexual violence, abuse, or stalking, including time to obtain legal services or to relocate.

Notice rules cut both ways. For foreseeable use, the employee has to make a good faith effort to give advance notice and to schedule the time so it does not unduly disrupt operations. For unforeseeable use, an employer may require notice under a written policy, but cannot deny the time for noncompliance if the employer never provided that policy. Documentation may be required only for absences of three or more consecutive workdays, and the statute accepts a range of proof, including an employee's own written statement in violence-related cases.

December is when this gets tested, because employers are short staffed and employees are sick. An employer who denies statutory sick time because the request landed during a blackout period has a problem. An employee who assumes sick time can be used as a substitute for a denied vacation request has a different one.

Can an employer require employees to work on Thanksgiving or Christmas in Arizona?

Generally yes. Arizona is an at-will employment state, and absent a contract, a collective bargaining agreement, or an enforceable policy, an employer may set the schedule and require holiday work. Discipline for refusing an assigned holiday shift is lawful in most circumstances.

The exception that matters is religious accommodation. Title VII requires an employer to accommodate an employee's sincerely held religious practice unless doing so imposes an undue hardship on the business, and the Supreme Court raised that standard considerably in Groff v. DeJoy, holding that an employer must show a substantial increased cost in relation to the conduct of its particular business rather than the minimal burden courts had accepted for decades. The firm covered that decision when it came down, in a post on the mail carrier who declined Sunday shifts.

In practice this means a holiday scheduling request tied to religious observance deserves an actual interactive discussion about shift swaps, voluntary coverage, and schedule adjustments, documented at the time. Employers who deny these requests reflexively are relying on a standard that no longer exists. Employees who want the accommodation should make the request in writing and early, because the reasonableness of what the employer could have done is judged against the time it had to work with.

Scheduling is also where the other year-end employment issues tend to surface, including classification of seasonal and temporary workers and the wage changes taking effect in January, several of which were covered in this year's Arizona employment law update.

The practical year-end checkpoint

Employers benefit from confirming three things before the first holiday shift is scheduled: that the handbook says what the company actually does about holiday pay and overtime crediting, that sick time accrual and carryover are being tracked correctly under the applicable cap, and that anyone treated as exempt still satisfies both the salary and the duties test. Employees benefit from keeping the handbook, the schedule, and any written request or denial, since those documents decide most of these disputes long before anyone gets to a hearing.

If you have questions about holiday scheduling, overtime, or paid sick time in Arizona, whether you are an employer setting policy or an employee trying to understand one, you can reach the firm at (602) 456-0545.