BRACE YOURSELF: Virginia Employers Should Prepare Now for an Onslaught of Litigation

It is impossible to understate the magnitude of the change in Virginia employment law in 2020. Previously, Virginia had few employment laws and provided few employee rights. The General Assembly in 2020, however, passed several laws greatly expanding employee rights and providing new causes of action, and monetary damages, against employers. Businesses need to understand these changes and take steps now to reduce their risk of liability. This article highlights the major changes and urgent action items for employers.

• New “Wage Theft Law” Allows Employees to Sue Employers for Wages. Effective July 1, 2020, the Wage Theft Law provides Virginia employees with a new private cause of action to sue their employers, either individually or as a collective action, for alleged unpaid wages. Successful plaintiffs can recover unpaid wages, an equal amount as liquidated damages, prejudgment interest, and attorneys’ fees and costs. If the employer’s violation was “knowing,” the plaintiff can recover treble (i.e., triple) damages.
  • Action Items: Review timekeeping and payroll practices and train supervisors to ensure that all time worked is recorded and compensated. Confer with legal counsel on whether arbitration agreements, which can be used to limit collective actions, are a prudent solution for your business.
• Alleged Independent Contractors Can Sue Businesses for Misclassification. Effective July 1, 2020, an individual alleging that he or she was a business’s employee and misclassified as an independent contractor may sue the business. This new law creates a rebuttable presumption that anyone who “performed services for remuneration” is an employee. The business bears the burden to rebut that presumption by proving that the individual was properly classified as an independent contractor under the IRS’s guidance. A successful plaintiff can recover back pay, benefits—including costs that would have been covered by insurance if the employee had been provided employee benefits—attorneys’ fees, and costs. Businesses also face civil penalties, ranging from $1,000 to $5,000, for each employee misclassified as an independent contractor. Further, the business can be barred from bidding on Virginia public contracts for up to two years.
  • Action Items: Identify all individuals currently classified as independent contractors. Confer with legal counsel on whether the classification is proper.
• Expanded Discrimination Protections Increase Potential Litigation and Monetary Damages. We previously reported that, effective July 1, 2020, Virginia has added sexual orientation and gender identity to the list of protected characteristics against which employers cannot discriminate. The Virginia Human Rights Act, which previously applied to businesses with between five and 14 employees, has been expanded to create a cause of action for unlawful discharge against any business with five or more employees. The law provides that an employee may recover damages to compensate for the employee’s loss, punitive damages, attorneys’ fees, and costs. Unlike suits brought under the federal Title VII anti-discrimination law, damages under the Virginia Human Rights Act are not capped. Further, litigation under the Virginia Human Rights Act will be riskier for businesses because it will typically proceed in state court, which generally does not permit summary judgment; therefore, it will be harder to avoid a jury trial.
  • Action Items: Revise handbook policies and train employees on these new employment protections. Confer with legal counsel on whether arbitration agreements may be prudent for your business.
• New Protections for Pregnant Employees. The law, which goes into effect on July 1, 2020, prohibits, and creates a private cause of action for, discrimination based on pregnancy, childbirth, and related medical conditions like lactation and requires reasonable accommodations for the same. Businesses must provide their employees with notice of this prohibition against discrimination and right to a reasonable accommodation. The notice must be posted in conspicuous places, included in the handbook, given to all new hires (including men!), and given to any employee who announces she’s pregnant.
  • Action Items: Revise handbooks to include a notice of these provisions, post a notice in the workplace, and provide a notice to all new hires and to any employee who announces her pregnancy. Train management on the obligation to provide reasonable accommodations and engage in the interactive process.
• Non-Compete Agreements Are Banned for “Low Wage” Employees, i.e., Those Earning Less Than $59,124 per Year. We previously reported on this new law, which goes into effect on July 1, 2020. It carries civil penalties and provides employees with a private cause of action. Businesses must post a copy of the law, or summary approved by DOLI (there isn’t one yet), in their workplaces.
  • Action Items: Identify those employees with restrictive covenants who earn less than $59,124 per year. Discontinue any practice of requiring so-called “low wage” employees to enter into such agreements. Post a copy of the law. Confer with legal counsel on how to address any such agreements that you already have and whether there are alternative protections available for your business.
• Minimum Wage Increases Begin in 2021. On May 1, 2021, Virginia’s minimum wage, which is currently set at the federal minimum wage ($7.25/hour), will increase to $9.50/hour. It will rise again to $11.00 on January 1, 2022, $12.00 on January 1, 2023, $13.50 on January 1, 2025, and $15.00 on January 1, 2026.
  • Action Items: Review current payroll to identify all workers currently making less than $9.50 per hour. Budget for increased costs in straight time and overtime.
• Paystubs Must Include Hours Worked, But Not for FLSA-Exempt Employees. A law passed last year, which went into effect on January 1, 2020, requires employers to provide a written statement with each paycheck showing the number of hours worked, the pay rate, the gross wages, and an itemization of deductions. As written, the law would have applied to all employees—even those exempt under the FLSA—and the Virginia Department of Labor and Industry was poised to begin enforcement this July. The General Assembly, however, has amended the law to restrict the requirement for reporting hours to only employees paid on an hourly basis and those paid a salary less than the FLSA salary threshold. In other words, employers do not have to report hours worked for their FLSA-exempt employees.
  • Action Item: Revise paystubs to include hours worked for non-exempt employees and the other required information for all employees.

These costly changes could not have come at a worse time for businesses, many of which are reeling from the COVID-19 crisis. Nonetheless, businesses must review their existing policies and procedures now to reduce risk under these new laws. We expect to see a dramatic increase in Virginia employment litigation in the coming years. Vandeventer Black’s employment law team is available to assist businesses in addressing these changes.