A slew of new workplace legislation was passed in 2024, marking it as one of the most active years for state and federal agencies. From worker classification, overtime compensation, non-compete agreements, and a statewide minimum wage increase, to ownership reporting requirements under the Corporate Transparency Act, employers faced an avalanche of changes in employment law and compliance obligations.
While some of these laws are no longer in effect—and some sit on the chopping block—more key changes are coming that may affect your business.
Here is a breakdown of new and changing laws that will affect (and benefit) Arizona employers in 2025.
MORE NEWS: Phoenix bucket list: 25 things you must do
INDUSTRY INSIGHTS: Want more news like this? Get our free newsletter here
2024 LAWS NO LONGER IN EFFECT
Increases to Exempt Salary Threshold and Overtime Requirements
In November, the Department of Labor was thwarted in its attempt to increase the salary threshold for an employee to be exempt from overtime wages, preventing a second raise from becoming effective on January 1, 2025. The first significant raise that went into effect on July 1, 2024, created stringent requirements for employers to exempt employees from the Fair Labor Standards Act (FLSA).
This means that, until further notice, the 2019 salary threshold remains in place, and employees who perform certain executive, administrative, and professional duties and are paid a salary of at least $684 per week, or $35,568 annually, are exempt from the FLSA.
The FTC’s Ban on Non-Competes
The Federal Trade Commission’s (FTC) groundbreaking rule to ban most non-compete agreements for almost all U.S. workers was set to take effect last September. Employers breathed a sigh of relief when a federal court blocked the ban in August.
For now at least, the regulatory landscape for non-competes remains essentially unchanged, and employers may continue to enforce them in accordance with state law.
However, despite the FTC’s setback, employers should still review their restrictive covenants to help ensure non-compete agreements are narrowly tailored and meet state law requirements to strengthen their enforceability.
NEW LAWS AFFECTING ARIZONA BUSINESSES
Statewide Minimum Wage Increase
Arizona’s minimum wage increased 35 cents, from $14.35 to $14.70 per hour, on January 1, 2025. This increase reflects the continued wage increase initiative enacted by The Fair Wages and Healthy Families Act, which requires the minimum wage to increase yearly based on the cost of living.
Employers should note that several Arizona municipalities have minimum wages independent of the statewide minimum, such as Flagstaff, which increased its minimum wage to $17.85 per hour, and Tucson, which raised it to $15.00 per hour.
Certain employees and employers are exempt from the state’s minimum wage requirements, including tipped employees, family businesses, babysitters, small businesses, and government employees (read a more detailed description of these exemptions in the digital version of this article).
Under Arizona’s minimum wage law, certain employees and employers are exempt from the state’s minimum wage requirements. These exemptions include:
- Tipped Employees: Employers can pay tipped employees a base wage of up to $3.00 per hour less than the minimum wage, as long as the total of their base wage plus tips equals at least the minimum wage.
- Family Business: Employees who work for their parents or siblings in a family-owned business are exempt.
- Babysitters: Casual babysitters are exempt from the minimum wage requirements, while regular nannies are not.
- Small Businesses: Businesses generating $500,000 or less in gross annual revenue are exempt (if that small business is exempt from paying a minimum wage under section 206(a) of Title 29 of the United States Code).
- Government Employees: Employees working for the state or federal government are exempt, as they are governed by federal employment laws.
- Other Exemptions: Additional exemptions include certain farm workers, workers with disabilities, and employees under the age of 20 during their first 90 consecutive calendar days of employment.
Note that even if an employee or employer is exempt from the state minimum wage, they may still be subject to the federal minimum wage of $7.25 per hour, unless a higher state or local minimum wage applies.
Reminder to employers to display the updated 2025 Minimum Wage poster in a place that is accessible to employees, such as a breakroom. [ ] END DIGITAL VERSION
Background Check and Verification Requirements for Homecare Workers
Arizona recently passed HB2764, requiring the Department of Health Services to implement stricter standards and oversight for nursing care institutions, residential care institutions, and home health agencies.
Effective January 1, 2025, home care employers are prohibited from hiring anyone listed on the Adult Protective Services (APS) registry. Employers must conduct verification checks for prospective employees and contact previous employers to obtain information relevant to the applicant’s fitness to work in the facility.
By March 31, 2025, employers must verify that no current employee is on the APS registry, are required to re-verify annually for each employee, and must terminate any employee on the registry.
Effective June 30, 2025, assisted living facilities providing memory care services must establish that the entity is licensed to do so and maintain the minimum training standards for staff and contractors, including annual continuing education.
The new law makes it easier to report violations, doubles penalty fines, and allows DHS to pursue legal action against facilities that violate the required standards. Arizona healthcare employers should update hiring and screening policies to ensure they comply with these requirements.
FTC Bans Fake and Misleading Reviews and Testimonials
Last year, the FTC implemented a new rule designed to combat six (6) categories of “deceptive” conduct in online reviews and testimonials:
- providing false or fake reviews/testimonials
- incentivized reviews
- insider reviews
- company-controlled review websites
- review suppression (certain actions to prevent or remove a negative review)
- fake social media indicators
Further, the rule empowers the FTC to seek civil penalties and monetary remedies up to $51,744 per violation—along with other remedial measures—against companies engaging in false and misleading practices relating to online reviews.
Companies should consider re-evaluating their contracts (such as with influencers and affiliates) and update their policies and terms to ensure current marketing practices are compliant.
TRENDING CHANGES IN EMPLOYMENT LAW TO WATCH OUT FOR
Shaking up the National Labor Relations Board
Changes in leadership at the NLRB are likely to have a significant impact on Arizona employers. Certainly, Trump’s firing of the NLRB Chair and general counsel portends a rescission of these restrictive legal interpretations in favor of those more favorable to business owners.
Under Biden, the NLRB banned non-competes and non-disparagement clauses, aggressively scrutinized employee handbooks and personnel manuals for rules and policies it felt might discourage collective action, and prohibited certain workplace monitoring practices like security cameras, RFID badges, GPS trackers on company vehicles, and software to monitor employee productivity.
Under Trump, we can expect the three empty Board seats to be filled with conservative members who will adopt the position that federal law does not prohibit these workplace practices.
In short, employers can breathe a sigh of relief and expect reversals on the current restrictions on non-compete and non-solicitation agreements, hostility to non-disparagement clauses in separation agreements, strict limits on captive audience meetings, and strict limitations on workplace monitoring practices.
The Corporate Transparency Act – An Act in Limbo
The hot potato that is the Corporate Transparency Act has even Wimbledon fans rubbing their necks. Multiple lawsuits and court decisions issued late last year, plus two more decisions issued in January, have resulted in a nationwide injunction preventing the government from enforcing the Act.
The government appealed the second injunction. And if the Supreme Court is asked to rule on that case, mandatory filing may return soon.
However, as of the writing of this article, the FinCEN website states:
In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
The Act requires the majority of U.S. companies to report the identity of their beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”), a division of the U.S. Treasury, no later than January 1, 2025. Companies formed in 2024 also must file within 90 days of formation, and companies formed thereafter would have to file within 30 days. The Act would also impose significant penalties for failure to file.
FinCEN’s website continues to accept filings, and in the absence of additional guidance, the cautious and prudent strategy is to proceed with preparation. Some companies are waiting to file until the court issues a final decision, while others are moving forward with filing if the injunction is lifted.
Either way, Arizona business owners should stay informed on this piece of legislation. fincen.gov/boi
Artificial Intelligence
One of the most significant tech advances of the past few years, artificial intelligence (AI), has resulted in numerous statewide attempts to regulate AI in the workplace. Aimed at protecting employees and employment applicants from harm arising out of the use of AI systems, these laws are designed to mitigate the risk of algorithmic discrimination arising from an employer’s use of AI.
Arizona may be next.
At the federal level, President Trump issued an Executive Order, Removing Barriers to American Leadership in Artificial Intelligence, on January 23, 2025. Section 1. Purpose states:
The United States has long been at the forefront of artificial intelligence (AI) innovation, driven by the strength of our free markets, world-class research institutions, and entrepreneurial spirit. To maintain this leadership, we must develop AI systems that are free from ideological bias or engineered social agendas. With the right Government policies, we can solidify our position as the global leader in AI and secure a brighter future for all Americans.
This order revokes certain existing AI policies and directives that act as barriers to American AI innovation, clearing a path for the United States to act decisively to retain global leadership in artificial intelligence.
Employers should take note of state and federal legislation and consider implementing workplace policies that regulate the use of AI, including how AI systems communicate, make employment decisions (particularly hiring decisions), and use employee data.
NEXT STEPS
Now is the time to ensure your business complies with today’s rapidly changing employment and labor laws. As federal, state, and local regulations continue to evolve, Arizona employers have much to keep track of to stay compliant and protect their interests.
ABOUT THE AUTHORS
Haley A. Harrigan is a shareholder at Gallagher & Kennedy in Phoenix and chair of the firm’s employment and labor law department. She represents and counsels individuals, small businesses, franchised operations, and large companies on a wide range of employment and business disputes, and litigates matters spanning labor and employment, commercial litigation, and general liability.
Donald Peder Johnsen is a shareholder at Gallagher & Kennedy in Phoenix, practicing exclusively in the area of employment and labor law. Don represents employers in such matters as discrimination, harassment, wrongful discharge, breach of contract, wage and hour disputes, arbitrations, labor relations and labor practice charges, and all types of employment-related policies and procedures.
Otto S. Shill, III helps business owners, employers, and individuals comply with and plan for laws and regulations related to federal and state taxation, employee benefits, and executive compensation. A Certified Tax Specialist, he assists with audits, investigations, and regulatory disputes related to these areas and advises business owners on transactions and long-term succession and estate planning.
