2026 Employment Law Update | Part 1

Employment Law Update

By: Shar Bahmani, Katya L. Norris, Evan Hiller, Paige Kemper, and Natalie Zarasian

Arizona businesses and employers are off to the races already in 2026, and with each new year, brings new developments for Arizona employers to be mindful of.  This article provides part of 1 of Sacks Tierney’s 3-part 2026 Employment Law Update series.  Below is a high-level review of some of the employment law developments over the last year and those changes taking effect in 2026.  This article is designed to provide an update regarding both Arizona and federal law.  While this provides a broad overview of recent developments, employers are encouraged to work directly with their local counsel for specific questions relating to the interpretation of law and the impact on their respective businesses. 

Arizona Minimum Wage Increase on January 1, 2026

On January 1, 2026, Arizona’s minimum increased from $14.70 to $15.15.  With this increase, Arizona has the 8th-highest minimum wage in the country.  Employers must conspicuously display an Arizona minimum wage poster reflecting the new minimum wage in a location in the worksite accessible to employees. 

Arizona law allows employers meeting certain requirements to take a tip credit.  Employers can pay tipped employees up to $3.00 per hour less than the Arizona minimum wage, provided that those employees meet certain statutory requirements, including that they earn (when taking into consideration tips received) at least the Arizona minimum wage for all hours worked.  If a tipped employee does not earn at least the Arizona minimum wage after including tips received, the employer is required to make up the difference.

Although under the federal Fair Labor Standards Act (“FLSA”) – which regulates overtime compensation in Arizona – there are various exemptions, on the contrary, under Arizona’s minimum wage laws, there are very few exemptions.  The exemptions from Arizona’s minimum wage include a person employed by a parent or sibling, a person employed performing babysitting services in the employer’s home on a casual basis, a person employed by the State of Arizona or the federal government, and small businesses grossing less than $500,000 in annual revenue if the business is not required to pay minimum wage under the FLSA (this exemption is quite hard to meet).

Moreover, the Cities of Tucson and Flagstaff have established minimum wages higher than Arizona’s minimum wage.  The City of Tucson’s minimum wage increased to $15.45 per hour on January 1, 2026, and the minimum wage established by the City of Flagstaff increased to $18.35 per hour on January 1, 2026.   Thus, employers should also take into account the locale in which the employee is based.

The FTC Still Scrutinizes Non-Compete Agreements

On April 26, 2024, Sacks Tierney employment law attorney Shar Bahmani published an article regarding the United States Federal Trade Commission’s (“FTC”) final rule issued on April 23, 2024, purporting to ban most employer-worker non-compete agreements nationwide.  Given the broad impact of the proposed rule on non-compete agreements, legal challenge to the proposed rule – particularly in circuits such as the Fifth Circuit – was expected at the time the rule was issued.

Legal challenges to the proposed rule indeed soon followed.  On September 3, 2024, Sacks Tierney employment law attorney Katya L. Norris published an article regarding a federal district court’s ruling setting aside the FTC’s final rule banning most non-compete clauses.  Ryan, LLC v. FTC, 739 F. Supp. 3d 496 (N.D. Tex. 2024).  The federal court’s decision to set aside the final rule applies to all employers nationwide. 

Under the previous Presidential Administration, the FTC moved to appeal Fifth Circuit and Eleventh Circuit decisions enjoining the proposed rule.  Under the current Presidential Administration, the FTC reversed course and moved to voluntary dismiss the appeals, thereby voluntarily ending the legal battle over the proposed rule.

Although the FTC withdrew its appeals in the Fifth and Eleventh Circuits, the FTC has signaled in other ways that it will continue to scrutinize and prohibit non-compete agreements that are deceptive, anticompetitive, or unfair.  For example, on February 26, 2025, the FTC issued a Directive Regarding Labor Markets Task Force directing bureaus and an office of the FTC to prioritize rooting out and prosecuting unfair labor-market practices.  The Directive also noted that it is within the FTC’s jurisdiction to scrutinize and evaluate non-compete agreements. 

And on November 26, 2025, the FTC finalized a consent order requiring the nation’s largest pet cremation company, Gateway Services Inc. (“Gateway”), to stop enforcing its non-compete agreements and entering into similar agreements going forward.  The consent order resolved an FTC complaint filed against Gateway alleging its non-compete agreements were anticompetitive and suppressed competition. 

While non-compete agreements are enforceable in Arizona, they are strictly scrutinized.  To be enforceable, non-competes must be narrowly tailored to protect legitimate business interests and must be limited in topical, geographic, and temporal scope.

Employers seeking to develop and enforce restrictive covenant agreements, including, but not limited to non-competes, non-solicitation agreements, and confidential information agreements should work with their counsel so that the agreement remains compliant with the ever-changing legal landscape.

Adult Protective Services Registry Checks for Residential Care Institutions, Nursing Care Institutions, and Home Health Agencies

On April 8, 2024, Governor Katie Hobbs signed into law H.B. 2764, known as the Long-Term Care, Enforcement, and Memory Care Bill.  Under the new law, residential care institutions, nursing care institutions, and home health agencies (“covered entities”) are prohibited from hiring and employing individuals listed on the Adult Protective Services Registry, which is a registry of substantiated reports of abuse, neglect, and exploitation of vulnerable adults, and must verify whether applicants and employees are on the Registry.  Covered entities had until March 31, 2025 to verify that their employees were not listed on the Registry.  If an employee is found to be on the Registry, the covered entity must terminate the employment of that employee.  Covered entities must annually reverify that each of their employees is not on the Registry.

For further information, please do not hesitate to reach out to Sacks Tierney’s employment law team:

Shar Bahmani – Shar.Bahmani@SacksTierney.com

Katya Norris – Katya.Norris@SacksTierney.com

Evan Hiller – Evan.Hiller@SacksTierney.com