Arizona Termination Laws

July 11th 2024

In Arizona, termination laws govern the conditions under which an employee can be terminated, ensuring that dismissals are conducted fairly and legally. Understanding Arizona termination laws is essential for both employers and employees to conduct the process properly and mitigate potential disputes.

This article explores the key aspects of termination laws in Arizona, providing a comprehensive overview of employee rights and employer responsibilities.

This Guide Covers

Legal Considerations for Termination in Arizona
“At-Will” Employment in Arizona
Lawful Termination in Arizona
Legal Protections During Termination in Arizona
Terminated Employee Benefits in Arizona
Layoffs in Arizona
Resignations in Arizona
Legal Cases Related to Wrongful Termination in Arizona

Legal Considerations for Termination in Arizona

When terminating an employee in Arizona, employers must navigate various legal considerations to ensure the termination process is lawful, considerations for termination in Arizona include:

  • Discrimination Protections: Employers cannot terminate based on protected characteristics under state and federal laws. Employers should document the reasons for termination and ensure they are not based on any protected characteristics.
  • Retaliation Protections: Employees are protected from termination in retaliation for engaging in protected activities, such as filing a discrimination complaint, participating in an investigation, reporting illegal activities (whistleblowing), or exercising rights under various employment laws.
  • Public Policy Violations: Termination for refusing to perform illegal acts at the employer’s request or exercising rights such as voting, jury duty, or taking family and medical leave.
  • Breach of Employment Contract: If there is an employment contract or collective bargaining agreement, with a clause relating to termination, the terms of the contract must be followed.
  • Final Paycheck and Benefits: Under Arizona law, terminated employees must receive their final paycheck within seven working days or by the next regular payday, whichever comes first. This includes all earned wages and any accrued but unused vacation or paid time off (PTO) if company policy provides for such payouts.

“At-Will” Employment in Arizona

What is “At-Will” Employment?

“At-will” employment is a legal doctrine that defines the employment relationship between employers and employees. Under this doctrine, either party can terminate the employment relationship at any time, for any reason, or for no reason at all, without prior notice, as long as the reason for termination does not violate federal and state laws.

What are the Exceptions to “At-Will” Employment in Arizona?

While Arizona follows the doctrine of “at-will” employment, allowing either the employer or the employee to terminate the employment relationship at any time and for any reason, there are several notable exceptions to this rule that provide employees with legal protections against wrongful termination. These exceptions include:

  • Public Policy Exception: An employee cannot be terminated for reasons that violate public policy. This includes situations where the employee is fired for refusing to perform illegal acts, exercising legal rights, and reporting illegal activities (whistleblowing).
  • Implied Contract Exception: Even in the absence of written consent, an implied handbook or policy may exist based on the actions, statements, or policies of the employer. If an employee handbook or policy manual suggests that employees will only be terminated for cause, this can create an implied contract.
  • Covenant of Good Faith and Fair Dealing: Although not universally recognized, some courts in Arizona may interpret an implied covenant of good faith and fair dealing in employment relationships. This means that employers should act fairly and in good faith towards their employees and not terminate them in bad faith or with malice. For example, an employer should not terminate an employee to avoid paying benefits or commissions that the employee has earned.
  • Anti-Discrimination Laws: Terminations based on race, color, religion, sex, national origin, age (40 or older), disability, or genetic information are prohibited under federal and state laws.
  • Retaliation Protections: Employees cannot be terminated in retaliation for engaging in protected activities, such as filing a discrimination complaint, participating in an investigation of discrimination, or reporting safety violations.

Employment Under Contract in Arizona

Employment under contract in Arizona involves a formal agreement between the employer and the employee that outlines the terms and conditions of employment. Unlike “at-will” employment, where either party can terminate the relationship at any time for any reason, employment contracts provide specific protections and obligations for both parties.

An employment contract is a legally binding document that defines the relationship between the employer and the employee. It specifies the terms of employment, including job duties, compensation, duration of employment, and conditions for termination. Employment contracts outline job descriptions, compensation and benefits, duration of employment, termination conditions, and confidentiality and non-compete clauses.

Employees can file a lawsuit if the employer violates the terms of the contract.

Lawful Termination in Arizona

Legal Grounds for Termination in Arizona

  • Performance Issues: Employers in Arizona can legally terminate employees for performance issues if the employee consistently fails to meet job performance standards. This includes an inability to complete job duties effectively or meet productivity benchmarks set by the employer. Employers should document performance issues and provide feedback to the employee before proceeding with termination. Proper documentation helps support the decision if the termination is later challenged.
  • Misconduct: Terminating an employee for misconduct is legally permissible in Arizona, provided the misconduct violates company policies or workplace standards. Examples include dishonesty, theft, harassment, workplace violence, or insubordination. Employers should conduct thorough investigations and document any incidents of misconduct to substantiate the termination.
  • Economic Reasons: Economic reasons, such as company downsizing, restructuring, or financial difficulties, are valid grounds for termination in Arizona. Employers may need to reduce their workforce to manage expenses or adapt to market changes. While economic-based terminations are generally legal, employers should ensure that they are not using economic reasons as a pretext for discriminatory practices. Providing notice and, where possible, severance packages can help ease the transition for affected employees.
  • Expiration of Employment Contract: Termination due to the expiration of an employment contract is legally acceptable in Arizona when the contract specifies a fixed term or project duration. Once the contract term ends or the project is completed, the employment relationship can be lawfully terminated. Employers should ensure that the terms of the contract are clear and that both parties are aware of the contract’s end date.

Read our comprehensive guide to firing employees in Arizona for further information.

How Do I File a Wrongful Termination Claim in Arizona?

Before filing a claim in Arizona, you must determine if your termination was wrongful. Common grounds for wrongful termination include discrimination, retaliation, violation of public policy, and breach of contract. Gather all relevant documents and evidence that support your claim of wrongful termination.

If your claim involves discrimination or retaliation, you must file a charge with the Equal Employment Opportunity Commission (EEOC) within 300 days of the alleged wrongful termination or with the Arizona Civil Rights Division (ACRD). You can file a lawsuit in state or federal court if you have a “Right to Sue” letter from the EEOC or if your claim is based on breach of contract or other state law violations.

Legal Protections During Termination in Arizona

When an employee faces termination in Arizona, several state and federal laws provide legal protections to ensure fair treatment and to protect against wrongful termination. These laws cover a range of issues from discrimination and retaliation to leave entitlements. Here are key legal protections that employees should be aware of:

  • Arizona Civil Rights Act: The Arizona Civil Rights Act prohibits employment discrimination based on race, color, religion, sex, pregnancy, age, disability, national origin, and genetic information. While it aligns with many protections under the federal anti-discrimination law, the Arizona Rights Act includes additional protections under state law, such as age, pregnancy, and disability discrimination that are covered by separate federal laws (ADEA and ADA).
  • Arizona Employment Protection Act (AEPA): The Arizona Employment Protection Act protects employees from termination that violates Arizona public policy, such as retaliation for whistleblowing or refusing to engage in illegal activities. It provides a framework for employees to file wrongful termination lawsuits if they believe their termination violated public policy or contractual agreements.
  • Arizona Paid Sick Time Law: The Arizona Paid Sick Time Law mandates that employees accrue paid sick time at a rate of one hour for every 30 hours worked, up to a specified limit. Employees can use accrued sick time for their own illness, to care for a family member, or for reasons related to domestic violence, sexual violence, abuse, or stalking.
  • Arizona Minimum Wage Law: The Arizona Minimum Wage Law establishes the minimum wage rate employers must pay, adjusted annually based on inflation. The law prohibits employers from terminating or retaliating against employees for asserting their rights to the minimum wage. Employees can file wage complaints with the Industrial Commission of Arizona if they believe they have been paid less than the minimum wage.
  • Title VII of the Civil Rights Act of 1964: Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, and national origin. The law prohibits sexual harassment and requires employers to take reasonable steps to prevent and address it. In addition, the law protects employees from termination or retaliation for filing a discrimination complaint or participating in an investigation or lawsuit under Title VII.
  • Age Discrimination in Employment Act (ADEA): The Age Discrimination in Employment Act is a federal law that protects employees aged 40 and older from discrimination and ensures termination decisions cannot be based solely on age. Employers covered under ADEA must consider qualifications and performance rather than age when making termination decisions.
  • Americans with Disabilities Act (ADA): The Americans with Disabilities Act prohibits discrimination against individuals with disabilities in employment, including termination decisions. Employers must provide reasonable accommodations to qualified individuals unless it causes undue hardship.
  • Family and Medical Leave Act (FMLA): The Family and Medical Leave Act provides eligible employees with up to 12 weeks of unpaid, job-protected leave per year for certain family and medical reasons, including the birth or adoption of a child, serious health conditions, or to care for a family member with a serious health condition. This allows employees to balance work and family responsibilities without the fear of losing their jobs. In addition, the act prohibits employers from retaliating against employees for taking FMLA leave.

Terminated Employee Benefits in Arizona

When an employee is terminated in Arizona, they may be entitled to certain benefits and rights, depending on the circumstances of their termination and the employer’s policies. Here is an overview of the benefits and considerations for terminated employees in Arizona:

  • Final Paycheck: Arizona law requires that terminated employees receive their final paycheck within seven days or by the next regular payday, whichever comes first. The final paycheck must include all wages earned, including any accrued but unused vacation or paid time off (PTO) if the employer’s policy or employment contract stipulates it.
  • Unemployment Benefits: Terminated employees may be eligible for unemployment benefits if they were let go through no fault of their own (e.g., layoffs, company downsizing, company restructuring). To continue receiving benefits, individuals must actively seek new employment and meet ongoing eligibility requirements set by the Department of Economic Security (DES).
  • Health Insurance Continuation (COBRA): Under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA), employees of companies with 20 or more employees have the right to continue their group health insurance coverage for a limited time after termination.
  • Severance Pay: No legal requirement for Arizona employers to provide severance pay. However, some companies offer severance packages as part of their employment contracts or company policies.
  • Retraining and Placement Services: Some employers offer rapid response services to assist terminated employees in finding new jobs. These services include resume writing assistance, job search strategies, and career counseling. The Arizona Workforce Connection provides various programs and resources to help displaced workers with job training, career development, and job placement.
  • Employee Assistance Programs (EAPs): Some employers provide access to Employee Assistance Programs (EAPs) for a short period after termination. These programs can offer counseling and support services to help employees cope with job loss.

Layoffs in Arizona

Layoffs, a form of termination for economic reasons, are legally permissible in Arizona. They occur when employers need to reduce their workforce due to financial constraints, company restructuring, or changes in business needs. While Arizona does not have state-specific notice requirements for layoffs, federal laws like the Worker Adjustment and Retraining Notification (WARN) Act may apply. The WARN Act mandates that employers with 100 or more employees provide at least 60 days’ notice before a mass layoff or plant closing affecting 50 or more employees.

Resignations in Arizona

Employee resignations in Arizona can be classified as voluntary or involuntary, each with distinct implications for employees and employers. Understanding the differences and associated rights and obligations is crucial for managing the resignation process effectively.

Voluntary Resignations

A voluntary resignation in Arizona occurs when an employee leaves their job on their own accord. Employees can resign anytime and for any reason, given Arizona is an “at-will” state. It is considered professional for employees to provide notice, typically two weeks, although this is not legally required unless specified in an employment contract. Voluntary resignations should be documented in writing to avoid misunderstandings about the employee’s intentions. Employers should ensure that the resignation process is handled respectfully and that all final pay, including any accrued benefits, is promptly provided as required by state law.

Involuntary Resignations

Involuntary resignation in Arizona occurs when an employer initiates or forces an employee’s departure under circumstances that might appear as if the employee is resigning voluntarily, but in reality, the decision is coerced by the employer. Employers might use direct threats, set unrealistic goals or deadlines to pressure employees, bully, discriminate, or other forms of harassment that make the work environment intolerable.

Legal Cases Related to Wrongful Termination in Arizona

1. Former Assman Electronics, Inc. Employee Awarded $300,000 in Sexual Assualt and Wrongful Termination Case

In the case of Higgins v. Assmann Electronics, INC., Kristina Higgins was a former employee of Assman Electronics, where she entered into a consensual sexual relationship with her boss and CEO, Hans Ulrich Meyer. Over time, their relationship became strained, and Meyer continued to pursue Higgins. One night, Meyer entered Higgins’ apartment uninvited and found her with another man. Enraged, Meyer became violent, punched Higgins, and fired her on the spot. Higgins did not return to work and later retrieved her belongings with a police escort. She received an official termination letter weeks later. Higgins sued the company and Meyer for assault and wrongful termination. She was awarded $300,000 in damages, a decision affirmed by the court of appeals.

Key lessons learned from this case:
  • Consensual relationships between employees and supervisors can lead to complex and potentially harmful situations, highlighting the need for clear company policies on workplace relationships.
  • The case underscores the importance of following legal and ethical procedures in terminating employees, ensuring that personal conflicts do not lead to unlawful dismissals.
  • Employers must ensure a zero-tolerance policy for any form of workplace violence, and immediate action should be taken to protect employees and address such incidents.

2. Swift Aviation to Pay $50,000 to Settle EEOC National Origin and Religions Discrimination Lawsuit

In the case of EEOC v Swift Aviation Group, Swift Aviation Services, Inc., a Phoenix-based aeronautical services company, was sued by the U.S. Equal Employment Opportunity Commission (EEOC) for subjecting former employee Adam Donmez to harassment based on his Turkish/Palestinian national origin and Muslim faith. The harassment included derogatory comments from supervisors, such as statements about killing “towelheads” and jokes about Arabs. Despite Donmez reporting the harassment, the company failed to take action, leading to a hostile work environment that forced Donmez to resign.

Discrimination in the workplace based on national origin and religion is prohibited in the USA under Title VII of the Civil Rights Act of 1964. The EEOC filed a lawsuit against the employer on behalf of the victim. A consent decree was reached, mandating the employer to pay $50,000 in back wages and compensatory damages to the victim

Key lessons learned from this case:
  • When harassment is reported, employers have a legal and ethical obligation to investigate and take corrective action to prevent further misconduct.
  • Employers must enforce a strict zero-tolerance policy for harassment based on national origin or religion to ensure a safe and inclusive workplace.
  • Failure to address harassment can result in significant legal consequences, including lawsuits, settlements, and damage to the company’s reputation.

Learn more about Arizona Labor Laws through our detailed guide.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.