New Employment Laws Affecting Arizona Businesses: A Glimpse Into 2025

Authored by Haley Harrigan
Published by In Business Magazine

New Employment Laws Affecting Arizona Businesses: A Glimpse Into 2025

2024 was one of the most active years for federal and state agencies in passing workplace legislation—many of which created new compliance obligations for employers (click here for a recap on the 2024 proposed legislation). Although 2025 does not currently have as much on the agenda, there are some key changes that may affect your business. Here is a preview of what employers should expect in 2025.

Statewide Minimum Wage Increase

Effective January 1, 2025, Arizona's minimum wage increased by 35 cents—from $14.35 to $14.70 per hour, representing a 2.4 percent raise. This increase reflects the continued wage increase initiative enacted by The Fair Wages and Healthy Families Act, which requires Arizona’s minimum wage to increase yearly based on the cost of living. 

In addition to the statewide minimum wage requirements, employers should be aware of local minimum wage requirements. Several Arizona municipalities have independent minimum wages. This includes Flagstaff, which increased its minimum wage to $17.85 per hour, and Tucson, which increased its minimum wage to $15.00 per hour, effective January 1, 2025. 

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 having to pay 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.

It’s important to note that even if an employee or employer is exempt from the Arizona 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.

Employers should remember to update their workplace posters and display the 2025 Minimum Wage poster in a place that is accessible to employees. The 2025 wage poster can be downloaded and printed here.

FTC Bans Fake and Other Misleading Reviews and Testimonials

In August 2024, the Federal Trade Commission (FTC) announced a final rule banning fake reviews and testimonials. The rule, which is designed to combat deceptive practices in online reviews and testimonials, covers six (6) categories of "deceptive" conduct, including:

  1. Providing false or fake reviews/testimonials;
  2. Incentivized reviews;
  3. Insider reviews;
  4. Company-controlled review websites;
  5. Review suppression; and
  6. Fake social media indicators.

The new rule took effect on October 21, 2024.

In a nutshell, the rule prohibits using reviews and testimonials from someone who does not exist, such as AI-generated fake reviews, or those who did not have actual experience with the business. The rule also prohibits businesses from providing compensation or other incentives conditioned on writing consumer reviews (positive or negative) and clarifies certain disclosure obligations for insider reviews and consumer testimonials. Companies are also prohibited from using unfounded or groundless legal threats, physical threats, intimidation, or certain false public accusations to prevent or remove a negative consumer review. 

The rule allows the FTC to seek civil penalties and monetary remedies against those engaging in false and misleading practices relating to online reviews. Specifically, the rule empowers the FTC to impose penalties of up to $51,744 per rule violation, along with other relief, including consumer redress, conduct restraints, broad oversight authority, and other remedial measures.

Companies that utilize testimonials and consumer reviews should review the final rule, consider re-evaluating their contracts (such as those with influencers and affiliates) and promotional material, and update applicable review policies and terms to ensure current marketing practices are compliant. Hiring professional counsel to train legal and marketing teams on these issues can enhance compliance with these nuanced rules and their application to different types of reviews and testimonials.

Background Check and Verification Requirements for Homecare Workers

Arizona recently passed new legislation (under Arizona HB 2764) requiring more stringent background checks and verification of home health care workers. This legislation requires the Arizona Department of Health Services to implement stricter standards and oversight for home care facilities—particularly in memory care services—to ensure public health, safety, and welfare are maintained. The law makes it easier to report such conditions, increases (doubles) fines to penalize those who seek to take advantage of those who need assistance, and provides additional resources for the Department to deny certain proposed actions by health care institutions if they are not in compliance with the licensing requirements or pursue legal action against facilities that violate the required standards.

Beginning January 1, 2025, nursing care institutions, residential care institutions, and home health agencies are prohibited from hiring potential employees who are listed on the Adult Protective Services (APS) registry. These employers are required to conduct registry verification checks for all new prospective employees and to contact an applicant’s previous employers to obtain information or recommendations that may be relevant to the applicant’s fitness to work in the health care institution.

Similarly, by March 31, 2025, nursing care institutions, residential care institutions, and home health agencies must also verify that each current employee is not on the APS registry, will be required to annually re-verify this for each employee, and must terminate any employee who is found to be on the APS registry.

Effective June 30, 2025, assisted living facilities that represent to the public or advertise that the entity provides memory care services must establish that the entity is licensed to provide memory care services, and has established the minimum training standards for staff and contractors, including annual continuing education.

Arizona healthcare employers should update their hiring and screening policies to make sure they comply with these requirements.

2024 Legislation — What is No Longer in Effect

Increases to Exempt Salary Threshold and Overtime Requirements 

On November 15, 2024, a Texas district court judge vacated the Department of Labor’s attempt to increase the minimum salary needed for an employee to be exempt from the requirements under the Fair Labor Standards Act (FLSA), such as the right to overtime wages. A significant raise went into effect on July 1, 2024, and another was set to go into effect on January 1, 2025, creating more stringent requirements for employers to exempt employees from the FLSA. Thus, the 2019 salary threshold will remain in place until further notice.

This means that, for the time being, 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. Businesses that implemented pay increases in June 2024 and announced pay increases for January 2025 are advised to seek professional counsel for assistance, as unwinding the pay increases may be difficult. Any increases planned but not announced can now be reevaluated. 

The FTC's Non-Compete Ban 

As most businesses have likely heard, the FTC introduced a groundbreaking rule designed to ban non-compete agreements for almost all U.S. workers. Well, worry not. The FTC's ban has been blocked and it has no effect (to read a more detailed analysis and procedural history of this rule, click here.) Until further notice, the regulatory landscape for non-competes remains largely unchanged: employers may continue to enforce non-compete agreements in accordance with state law. 

However, despite the FTC’s setback, employers should continue to review their non-compete agreements to ensure compliance with state and local regulations. Employers should seek professional counsel to help ensure non-compete agreements are narrowly tailored and meet state law requirements to strengthen their enforceability.

A major recent trend has been statewide attempts to regulate artificial intelligence (AI) use in the workplace. Several states have recently proposed or implemented new regulations aimed at protecting employees and employment applicants from harm arising out of the use of AI systems. These laws are intended to mitigate the risk of algorithmic discrimination arising from an employer’s use of an AI system. Arizona may be next on the list. 

Employers should take note of this trend and consider implementing policies that regulate the use of AI in the workplace, including regulating how AI systems communicate, make employment decisions (particularly, hiring decisions), and use employee data.

Next Steps for 2025

With 2025 underway, now is the time to ensure your business complies with today’s rapidly changing employment and labor laws. From minimum wage increases to new pay transparency requirements, employers have a lot to keep track of to stay ahead of the curve with annual updates to federal, state, and local legislation. 

Gallagher & Kennedy is committed to helping businesses and individuals navigate the complexities of business and employment law. As regulations continue to evolve, we will offer the support to keep businesses compliant and protect their interests. Contact us today to schedule a consultation and ensure your business is well-prepared for whatever comes next.

Click here to read Haley's article published by In Business Magazine.


about the author

Haley Harrigan 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. She serves as chair of the firm’s employment and labor law department.


Media Contact

For media inquiries, please contact:

Anna Walp
Marketing Manager

Tel: (602) 530-8019
Email: anna.walp@gknet.com

RELATED NEWS & RESOURCES: