Sweeping Changes to Virginia Employment Law Set to Take Effect July 1st

Kollman & Saucier
Kollman & Saucier
06/17/2020

This most recent General Assembly session saw a dramatic shift in the employment law landscape in Virginia. Through a number of new bills, Virginia has transitioned from a very “employer friendly” state to one that is significantly more “employee friendly.”  With the exception of the public sector collective bargaining law, the legislation will go into effect on July 1, 2020. Below is a summary of the most significant pieces of legislation that have the potential to impact the liabilities, practices, and policies of employers throughout the state.

The Virginia Values Act: Amendments to the Virginia Human Rights Act  

The Virginia Values Act represents the most significant change to the employment law landscape in Virginia by expanding the protected classes under the Virginia Human Rights Act and creating a private right of action under the Act that applies to virtually all employers. The new classes included under the Act are pregnancy (childbirth and related medical conditions), sexual orientation, and gender identity. Successful plaintiffs are entitled to compensatory damages, punitive damages, attorney’s fees and costs, and injunctive relief. A court may also grant temporary injunctive relief and temporary restraining orders. Employers found to have violated the Act are subject to civil penalties up to $50,000 for a first violation and up to $100,000 for subsequent violations. Employees are required to file a charge of discrimination with the newly created Division of Human Rights of the Department of Law prior to filing suit under this Act.

The broad language changes to the bill can be found in SB 868 which is accompanied by the bills that expand the protected classes:

  • HB 827 / SB 712: Protects workers on the basis of pregnancy, childbirth, or related medical conditions
    • Requires employers to provide reasonable accommodations for pregnancy and childbirth
    • Creates a private cause of action for workplace pregnancy discrimination
  • HB 1049: Prohibits discrimination on the basis of sexual orientation or gender identity in employment, public contracting, and apprenticeship programs
    • Creates a private cause of action for employment discrimination on the basis of sexual orientation or gender identity

Other changes to the Act include:

  • Redefining “employer” to apply to all employers with 15 or more employees (or, for purposes of any unlawful discharge on the basis of a protected class, 5 employees). Previously, the Virginia Human Rights Act applied only to employers with between 6 and 19 employees
  • Removing the cap (25% of back pay awarded) on attorney’s fees and costs
  • Expanding the phrases “on the basis of race” and “because of race” to include hair texture, hair type, and protective hair styles such as braids, locks, and twists (HB 1514 / SB 50) 

Bottom line: The most substantial effects of these changes will be the mass exodus of cases moving from federal to state court. While the maximum recovery for punitive damages under Title VII of the Civil Rights Act is limited to $300,000, the only cap to damages under the amended Virginia Human Rights Act is a $350,000 ceiling on punitive damages. The removal of a cap on attorney’s fees and costs results in nearly limitless damages. Because it is very difficult to obtain summary judgment in Virginia state court, defending employment claims in Virginia will almost certainly become more expensive and will result in a higher likelihood of trial.

Changes to the Virginia Wage Payment Act 

SB 838 drastically changes the Virginia Wage Payment Act by creating a private right of action for employees to bring suits for “failure to pay wages to an employee in accordance with the Virginia Wage Payment Act.” Successful plaintiffs are entitled to remedies including back wages, liquidated damages of equal value to wages due, interest, and attorney’s fees and costs. If it is found that an employer “knowingly” violated the Act, they will be subject to treble damages.

Other changes to the Act include:

  • Expanding the authority of the Commissioner of Labor and Industry to investigate wage theft complaints and commence proceedings on the employee’s behalf (HB 336 / SB 49)
  • Prohibiting retaliatory action (discharging, disciplining, threatening, discriminating against, penalizing, or engaging in other retaliatory conduct that impacts the terms and conditions of employment, such as compensation, location, benefits, or other privileges of employment) against an employee who has filed a complaint or institutes any proceeding related to failure to pay wages. Remedies include reinstatement of the employee, recovery of lost wages, and liquidated damages (HB 337 / SB 48)
  • Making General Contractors liable and subject to penalty for wage theft under certain conditions (SB 838)

Bottom line: Employers need to be aware of this new private right of action created for aggrieved employees. It is very important to pay wages due at termination and to not make unauthorized deductions from an employee’s pay. It is also important that employers abide by the pay statement amendments to Va. Code § 40.1-29 that went into effect in January of this year. These amendments require employers to provide each employee with a written statement, by way of paystub or online accounting, on every regular payday. The statement must display the name and address of employer, the number of hours worked during the pay period, the rate of pay, the gross wages earned during the pay period, and the amount and purpose of any deductions from the paycheck. 

Statutory Prohibition on Noncompete Agreements for Low-Wage Earners 

New legislation prohibits employers from entering into noncompete contracts with any “low-wage employees.” HB 330/ SB 480 not only establishes the prohibition, but also defines who are considered “low-wage employees.” As of July 1, 2020, the threshold will be $1,137/ week or an annual salary of $59,124. This represents all employees whose earnings are less than the average of the Commonwealth. Successful plaintiffs will be entitled to recover reasonable costs and fees, liquidated damages, and lost compensation. Employers will be subject to a civil penalty of $10,000 per violation.

Other employees included in the “low wage” classification:

  • Interns, students, apprentices, or trainees employed without pay or whose average weekly earnings are less than the average weekly wage of the commonwealth
  • Independent contractors who make less than the median hourly wage for the Commonwealth

Employees who are not included in this classification:

  • Employees whose earnings are derived, in whole or in predominant part from sales commissions incentives or bonuses

Bottom line: While noncompete agreements are uncommon for low-wage earners, it is important for employers to realize that the new legislation results in effectively half of Virginia employees falling into the “low-wage” category. Employers are also required to post a copy of the new code section or a summary approved by the Commonwealth in the same location where other employee notices are posted. 

Penalizing  Worker Misclassification 

According to the Governor’s Inter-Agency Task Force on Misclassification and Payroll Fraud, an estimated 214,000 Virginia employees were misclassified as “independent contractors” in 2012. This most recent legislative session saw several pieces of legislation passed in an attempt to reduce this number. The most significant development is the creation of an independent cause of action, even in the absence of an allegation of unpaid wages (HB 984 / SB 894). In other words, misclassification alone will now be enough trigger liability. This marks a significant change from current law, which traditionally saw misclassification disputes brought under the Fair Labor Standards Act in the form of claims for unpaid overtime wages. Successful plaintiffs are entitled to back wages and benefits (including the benefits they would have enjoyed had they been treated as an employee), reasonable attorney’s fees, and costs. Employers will be subject to penalties of up to $1000 per misclassified individual for a first offense, with increasing penalties for repeat violations.

Other changes include:

  • Authorization of the Department of Taxation to oversee investigations into suspected cases of worker misclassification and levy penalties as appropriate (HB 1407 / SB 744)
  • Prohibiting retaliatory action (discharging, disciplining, threatening, discriminating against, penalizing, or engaging in other retaliatory conduct that impacts the terms and conditions of employment, such as compensation, location, benefits, or other privileges of employment). Employers found to have engaged in retaliatory action will be subject to a civil penalty up to the value of the employee’s lost wages (HB 1199 / SB 662)
  • Requiring contractors to properly classify all workers as employees or independent contractors. The Board of Contractors has the ability to sanction contractors who are found to have intentionally misclassified workers (HB 1646)
  • Adopting the IRS definition of Independent Contractor
  • Creating a presumption of employee status that the employer must rebut

Bottom line: Now that employees have an independent cause of action that allows suits based on misclassification alone, it becomes increasingly important that employees be properly classified. 

Increased Whistleblower Protections

Prior to the most recent legislative session, Virginia had only very narrow statutory protections for whistleblowers. Most plaintiffs had to seek recourse through common law torts. Virginia employees now have a whistleblower statute to shield them from retaliatory acts in response to whistleblowing. Successful plaintiffs who show retaliatory action by their employer are entitled to injunctive relief, reinstatement, and compensation for lost wages, benefits, and other remuneration. (HB 798).

Employees are protected from retaliatory action (discharging, disciplining, threatening, discriminating against, penalizing, or engaging in other retaliatory conduct that impacts the terms and conditions of employment) in response to:

  1. In good faith reporting of a violation of any federal or state law or regulation to a supervisor or to any governmental body or law-enforcement official;
  2. A governmental body or law-enforcement official asks the employee to participate in an investigation, hearing, or inquiry;
  3. The employee refuses an employer’s order to engage in conduct that would subject the employee to criminal liability;
  4. The employee refuses an employer’s order to engage in conduct that violates any federal or state law or regulation and the employee informs the employer that the order is being refused for that specific reason; or
  5. The employee provides information to or testifies before any governmental body or law-enforcement official that is investigating, inquiring into, or conducting a hearing about any alleged violation by the employer of a federal or state law or regulation

Bottom line: This new legislation provides broad, statutory whistleblower protection that employers need to be aware of. However, the legislation is not as expansive as it may appear. These protections are still more narrow than some states due to the specificity of the protected conduct and the employee’s conduct or statement of refusal must align with the specific statutory requirements. 

Public-Sector Collective Bargaining (effective May 1, 2021) 

Under current Virginia law, public employees are prohibited from recognizing unions. Public employees were permitted to form voluntary associations, but they lacked the power and recognition of an official union. After the passing of HB 582 in the most recent legislative session, localities (cities, towns, counties, and political subdivisions) are permitted (not required) to recognize and bargain with labor unions. Movement to authorize collective bargaining on a statewide level was quelled, with this new piece of legislation acting as the compromise.

Specifications of the bill are as follows:

  • If a group of public employees informs their locality that they have majority support for a union, then that locality must vote on the collective bargaining ordinance within 120 days
  • Strikes by public sector employees remain prohibited
  • If a locality passes an ordinance to recognize unions, the ordinance must contain specific procedures for certifying and decertifying unions

Bottom line: While it is impossible to predict which and how many localities will implement such ordinances, public sector employers can expect substantial organizing activities across their workforce. 

Minimum Wage Increase 

The 2020 legislative session implemented a schedule to raise the minimum wage to $15.00 by January 1, 2026. The bill, as enacted with Governor Ralph Northam recommendation, delays the implementation from to January 1, 2021 to May 1, 2021. The schedule is as follows:

  • $9.50/hour beginning May 1, 2021
  • $11.00/hour beginning January 1, 2022
  • $12.00/hour beginning January 1, 2023
  • $13.50/hour beginning January 1, 2025, provided the General Assembly reenacts by July 1, 2024
  • $15.00/hour beginning January 1, 2026, provided the General Assembly reenacts by July 1, 2024[1]

For help navigating the new laws taking effect in July, please call us at (410) 727-4300.

[1] Kollman & Saucier wishes to acknowledge the contribution of Luke Versweyveld, who is the primary author of this article.  Mr. Versweyveld is an Intern with the Firm and a student at the University of Virginia School of Law – Class of 2022.

 

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