Arizona Minimum Wage: Rates, Tipped Workers, and City Rules

The Arizona minimum wage is $15.15 per hour as of January 1, 2026, up from $14.70 in 2025. The rate adjusts every year for inflation, so it changes without any vote in the legislature. Tipped workers, a narrow group of exempt employees, and two cities with their own higher wage floors follow slightly different rules.

How the Annual Adjustment Works

The rate is set by the Fair Wages and Healthy Families Act (A.R.S. § 23-363) and recalculated each year using the Consumer Price Index for All Urban Consumers, U.S. city average.¹ The Industrial Commission of Arizona compares the CPI-U for August of the current year against August of the prior year, applies that percentage to the current wage, and rounds to the nearest five cents.² The new figure always takes effect on January 1. In a year with flat or negative inflation, the rate holds steady rather than dropping.

Tipped Workers

Employers of tipped workers can pay a cash wage as low as $12.15 per hour in 2026 by claiming a tip credit of up to $3.00 per hour. Tips plus the cash wage must equal at least $15.15 for every payroll period; if they fall short, the employer owes the difference.¹ Compliance is measured by averaging tips over the payroll period, not shift by shift.

Before taking the credit, the employer must give written notice that a tip credit will be used, then report the per-hour credit amount in writing every workweek. Tipped employees keep all their tips unless they take part in a valid tip pool. Skipping any of these steps voids the employer’s right to claim the credit at all.³

Flagstaff and Tucson Set Higher Rates

Two Arizona cities require more than the state figure. When a local rate is higher, that’s what the employer pays.

Flagstaff’s minimum wage is $18.35 per hour for 2026.⁴ It covers anyone who works or is expected to work 25 or more hours in a calendar year within city limits, so part-time and occasional workers are included. Flagstaff also has no tip credit: every employee gets the full minimum wage regardless of tip income.

Tucson’s minimum wage is $15.45 per hour for 2026 and does allow a $3.00 tip credit, matching the state approach. Tipped workers in Tucson must receive a cash wage of at least $12.45 per hour.⁵

Who Is Not Covered

Arizona’s exemptions under A.R.S. § 23-362 are narrower than the federal Fair Labor Standards Act:⁶

Employees of the State of Arizona or the federal government.
Anyone employed by a parent or sibling.
Casual babysitters working in the employer’s home.
Small businesses with less than $500,000 in gross annual revenue that are also exempt from the FLSA’s minimum wage requirement (meaning they have no employees engaged in interstate commerce).

Both conditions must apply to the small-business exemption. Many small operations cross the interstate commerce threshold without realizing it, which puts them back under the state wage floor.⁷

Independent contractors are also outside the law, but the burden is on the employer to prove independent contractor status by clear and convincing evidence.⁶ The label in a written agreement doesn’t decide the question if the working relationship looks like employment.

A Note on Overtime

Arizona has no private-sector overtime law. Private employers follow the federal FLSA, which requires time-and-a-half after 40 hours in a workweek for non-exempt employees. The federal salary threshold for the executive, administrative, and professional exemption is $684 per week, or $35,568 annually; workers earning below that generally cannot be classified as exempt regardless of job title.⁸

If You Were Paid Less Than the Minimum

You have two options: file a complaint with the Industrial Commission of Arizona, or sue in court. The ICA route is free and doesn’t require an attorney. Any person or organization can file, and the commission can review payroll records for the entire worksite to look for patterns. Your identity stays confidential unless further investigation requires disclosure and you consent to it.⁹ Bring pay stubs, time records, and any written agreement about your pay rate.¹⁰

The deadline for a civil suit is two years from the last violation, or three years if the underpayment was willful. The clock pauses during any ICA or law enforcement investigation, and a single lawsuit can reach back through a continuing pattern of violations even if some pay periods would otherwise fall outside that window.

Damages are steep. A confirmed violation means the unpaid wages, plus interest, plus a penalty equal to twice the underpaid amount. A worker shorted $1,000 can recover $3,000. A successful civil action can also require the employer to pay the worker’s attorney fees and court costs.⁹

Retaliation Is Prohibited

Employers cannot punish workers for asserting minimum wage rights, helping a coworker do so, or informing someone else about their rights. Firing and suspension count, and so do quieter moves like cutting hours, demoting someone, or interfering with a wage investigation.

The law puts a heavy thumb on the scale for workers. Any adverse action within 90 days of a wage claim is presumed to be retaliation, and the employer can rebut that presumption only with clear and convincing evidence of a legitimate, unrelated reason. Employers who can’t clear that bar face a penalty of at least $150 for each day the violation continues.⁹

1
Arizona Legislature. Arizona Revised Statutes Title 23-363 – Minimum Wage
2
Industrial Commission of Arizona. 2026 Minimum Wage
3
Industrial Commission of Arizona. Arizona Minimum Wage Act – Frequently Asked Questions and Answers
4
City of Flagstaff Official Website. Minimum Wage
5
City of Tucson. Tucson Minimum Wage Act
6
Arizona Legislature. Arizona Revised Statutes Title 23-362 – Definitions
7
Industrial Commission of Arizona. Frequently Asked Questions About Minimum Wage and Earned Paid Sick Time
8
U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemption From Minimum Wage and Overtime Protections Under the FLSA
9
Arizona Legislature. Arizona Revised Statutes Title 23-364 – Enforcement
10
Industrial Commission of Arizona. Minimum Wage Claim Form