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Pro-employee changes to state laws passed in Virginia

Written by
FordHarrison LLP, nationwide U.S. law firm with a singular focus on HR law.
Recent legislative action in the US state of Virginia will introduce an increase in the minimum wage, expand state anti-discrimination laws to include sexual orientation and gender identity discrimination, and create new liabilities for misclassifying employees as independent contractors.

The Virginia General Assembly took a number of employee-favourable actions in its 2020 Session and its Reconvened Session in April 2020, which will require employers to revise their employment policies and procedures, including implementing a gradual increase in the minimum wage, expanding state anti-discrimination laws to include sexual orientation and gender identity discrimination, and creating new employer liabilities for misclassifying employees as independent contractors. In the most striking change, the General Assembly amended the Virginia Human Rights Act (VHRA) to now allow for a private right of action. Accordingly, many employees will obtain new rights of action against Virginia employers on 1 July 2020.

Anti-discrimination expansion

The General Assembly passed the Virginia Values Act, amending the VHRA to prohibit discrimination in private employment on the basis of a number of protected characteristics, which now include sexual orientation and gender identity, by employers with five or more employees. The Virginia Values Act overhauls the VHRA by creating a private right of action for employment discrimination that allows most employees to file claims in state court following exhaustion of administrative requirements similar to those under Title VII of the Civil Rights Act. Administrative claims will be filed with the Department of Law, which will investigate the claims before issuing a notice of right to sue, similar to the federal procedure. Importantly, the VHRA will permit plaintiffs to seek compensatory and punitive damages without limitation. These changes likely will shift the focus of Virginia discrimination litigation from being filed primarily in federal court to a more state court-focused approach because employers, if found liable for discriminatory conduct, are no longer protected by compensatory damages caps like they are under Title VII. Moreover, the VHRA will cover more Virginia employers than federal laws, many of which have a 15-employee requirement to be considered a covered employer. These changes are effective 1 July 2020.

Minimum wage increase

The General Assembly passed legislation breaking with Virginia’s long-held assimilation to the federal minimum wage of USD 7.25 per hour, and requiring employers to increase the minimum wages paid to employees to USD 9.50 per hour by 1 May 2021, USD 11.00 by 1 January 2022, and USD 12.00 per hour by 1 January 2023. The legislation includes additional provisions that could move the minimum wage to USD 15.00 by 2026, but the General Assembly would have to reenact the legislation by 1 July 2024, or the annual increases would rise at a slower rate tied to the consumer price index.

Non-compete agreements

Beginning on 1 July 2020, and looking only prospectively, all non-compete agreements entered into by ‘low-wage employees’ will be deemed unenforceable by state law. ‘Low-wage employees’ are defined as employees who earn less than the average weekly wage of the Commonwealth of Virginia, which is currently around USD 1,107.00 per week. Similarly, independent contractors who are compensated for services at an hourly rate less than the median hourly wage for all occupations, which was USD 19.63 per hour in 2019, are included in the definition of ‘low-wage employees’. Workers who receive a predominant portion of their pay through bonuses and commissions, as opposed to hourly rates or base salary, however, are not included. Low-wage employees will have a private right of action against employers that attempt to bind them to impermissible non-compete agreements.

Wage non-payment

In addition to the new private rights of action under the VHRA, the General Assembly also created a private right of action for violations of the Virginia Wage Payment Act, which governs the form and frequency of pay for employees and imposes restrictions on withholding and forfeiture of wages. Under the newly amended law, employees are permitted to bring individual and collective actions in court for failure ‘to pay wages to an employee in accordance with’ the Virginia W age Payment Act, and can recover back wages, liquidated damages, interest, and attorneys’ fees and costs. Similar to the Fair Labor Standards Act, claimants will be awarded treble damages for knowing violations of the law.

The Virginia Department of Labor and Industry will also obtain broadened authority to investigate employers’ failure to pay wages in accordance with the Virginia Wage Payment Act. These amendments are effective on 1 July 2020.

Employee misclassification

The General Assembly passed legislation to clarify the test by which workers will be classified as employees or independent contractors, and detailing the liability for employers engaged in such misclassifications. Specifically, the Virginia Department of Taxation will now determine whether an individual is an independent contractor by applying the applicable IRS guidelines, and all misclassifications made by the same employer at the same time, or within 72 hours, will be treated as a single offence. Employers that fail to properly classify workers as employees, or ask or require individuals to sign documents that misclassify workers as independent contractors, are potentially liable for up to USD 1,000 per misclassifications for a first offence, and increasing penalties for repeated violations. This law goes into effect on 1 January 2021.

In addition to clarifying the test by which workers will be classified as employees or independent contractors, the Virginia legislature created a private right of action for workers who allege they were misclassified as independent contractors or asked to sign a document that misclassifies them as independent contractors. If successful, claimants could be entitled to back wages and benefits (including the cost of benefits to which the individuals may have been entitled during the period of misclassification and which would have been covered by the employer if they were properly classified), and reasonable attorneys’ fees and costs. This right of action is effective on 1 July 2020.

Public collective bargaining

The General Assembly approved a limited public-sector bargaining law permitting localities to recognize and bargain with labor unions. Historically, public sector employers in Virginia have been prohibited from recognizing labor unions. Now, localities may, but are not required to, pass ordinances authorizing public sector union recognition and bargaining within their jurisdictions. Though not required to put an ordinance to a vote voluntarily, if a group of public employees informs the locality it has majority support for a union, the locality must vote on a collective bargaining ordinance within 120 days. Further, the collective bargaining ordinances must contain specific procedures for certifying and decertifying unions, including a procedure for providing public notice and the opportunity for unions to intervene in the certification process. Nonetheless, public sector employee strikes remain prohibited.

Exchanging Lee-Jackson Day for Election Day as state holiday

Governor Northam signed into law a bill that eliminates Lee-Jackson Day (commemorating Confederate generals Robert E. Lee and Stonewall Jackson), which was observed on the Friday preceding the third Monday in January (Martin Luther King, Jr. Day). In its place, the same bill makes Election Day a state holiday, which will take place on ‘the Tuesday following the first Monday in November.’ Though the text of the statute is silent on the matter, this law presumably goes into effect immediately.

Employers’ bottom line

With a new array of employment laws becoming effective soon, and in light of the pro-employee tilt of the new laws, employers should make a concerted effort to review their employment policies and practices to ensure they are in the best position to avoid new liability to the state of Virginia and to individual employees/workers through the new private rights of action. This requires a revision of not only handbook policies, but also pay structures to ensure compliance with the new state minimum wage revisions and wage payment laws, and independent contractor classifications to avoid liability for misclassifications. We recommend that you reach out to your employment lawyer to assist with an update to your policies and procedures.