Recently, the Virginia General Assembly passed a collection of new laws that transform employment law in Virginia, creating more protections for employees. While previously Virginia had been considered a reasonably business-friendly state, the changes resulting from these new laws will create challenges for employers in Virginia. These new laws cover a series of employment law topics, including discrimination, wages, non-competition agreements, and misclassification. The changes are effective July 1, 2020, so employers should act now to ensure they are in compliance when the bills take effect.
The Virginia Values Act broadly expanded Virginia’s Human Rights Act to add protections for LGBT and pregnant employees. The Act now prohibits discrimination on the basis of sexual orientation and gender identity in housing, public and private employment, public accommodations, and access to credit. The Act also expands the scope and remedies for other types of discrimination under the Act. While previously the VHRA only applied to small employers and covered discriminatory discharge claims, the Act expands the VHRA to apply to nearly all employers in Virginia. Importantly, the Act also allows employees to file charges in state court and removes the caps on attorneys’ fees and costs for prevailing plaintiffs. These changes will likely lead to an increase in employment discrimination claims in Virginia state courts.
Two other bills also expand the VHRA to increase protections for employees relating to pregnancy, childbirth and related medical conditions, and lactation. The bills prohibit discrimination on the basis of pregnancy and require employers to provide reasonable accommodations related to pregnancy, childbirth and related medical conditions, and lactation. The bills also creates a private right of action for pregnancy discrimination. Under the bills, employers must post notice of the law in the workplace and employee handbook, as well as provide this information to new employees and any employee within ten days of the employee’s notification of pregnancy to the employer.
An amendment was passed that will increase Virginia’s minimum wage to $12.00 per hour by January 1, 2023. The minimum wage will increase to $9.50 per hour on May 1, 2021, then to $11.00 per hour on January 1, 2022, and finally $12.00 per hour on January 1, 2023. The amendment also includes a provision providing for a $15.00 per hour minimum wage by 2026, but the General Assembly must reenact those specific provisions before July 1, 2024 for the provisions to take effect. If the General Assembly doesn’t reenact those provisions, the minimum wage will continue to increase after January 1, 2025, but at a slower rate tied to inflation. The amendment also removes exempt status from a variety of previously exempt individuals, including home care providers, domestic service workers, and individuals with certain disabilities.
Under this new law, employees now have a private right of action to sue their employers for unpaid wages, instead of filing a claim with the Virginia Department of Labor, as previously required. Employees will also be entitled to treble damages and employers may be liable for a $1,000 civil penalty per violation. Employers also may face criminal penalties for knowing violations of the law. If an employer “willfully and with intent to defraud fails or refuses to pay wages,” they may be found guilty of a misdemeanor if the wages owed are less than $10,000 or a felony if the wages owed are $10,000 or more.
Another law requires employers to report the number of hours worked during the pay period if the employee is an hourly employee or a salaried employee with a salary below the standard salary level adopted by the Department of Labor. If the employee receives a salary that meets or exceeds the DOL’s salary requirements for exempt employees, this reporting is not required. The law also requires the wage statement to include enough information for employees to determine how the gross and net pay were calculated, including the rate of pay, the gross wages earned, and any deductions taken.
Non-Compete Agreement Ban
Under the new law, “no employer shall enter into, enforce, or threaten to enforce a covenant not to compete with any low-wage employee.” A low-wage employee is one whose average weekly earnings is less than the average weekly wage of the Commonwealth ($1,137 per week as of July 1, 2020), and specifically includes interns, students, apprentices or trainees, but excludes employees whose earnings are derived “in whole or in predominant part” from sales commissions, incentives, or bonuses. The law also creates a private right of action for employees seeking to challenge restrictive covenants. Employers that violate the law may be liable for a $10,000 civil penalty for each violation. The law also includes a notice requirement, tasking employers with posting the law or a summary in the workplace.
The law applies to covenants not to compete that are entered into on or after July 1, 2020 and will not apply retroactively to agreements already in place. The law doesn’t prevent employers from entering into agreements with employees that prohibit the taking, misappropriating, or sharing of trade secrets or proprietary or confidential information.
Misclassification of Workers
The General Assembly also passed a series of laws focusing on employee misclassification. The first creates a private right of action for individuals that were not properly classified as employees. The law also creates a presumption that any individual “who performs services for a person for remuneration” is an employee, unless it is established that the individual is instead an independent contractor. The next prohibits retaliation against employee for reporting misclassifications. Specifically, employers “shall not discharge, discipline, threaten, discriminate against, or penalize an employee or independent contractor” because the individual has or plans to report an employer for misclassification or is requested to participate in an investigation or hearing. An individual that is retaliated against in violation of the law can file a complaint with the Commissioner, who may institute proceedings against the employer. An employer who violates the law may be liable for a civil penalty “not to exceed the amount of the employee’s wages that are lost as a result of the violation.”
Another law gives investigative powers to the Department of Taxation to determine whether an individual is an employee or independent contractor. An employer that misclassifies an individual and fails to pay taxes, benefits, or other contributions with respect to an employee may be subject to a civil penalty. Additionally, contractors that violate the law will be prohibited from being awarded public contracts for a period of time after the employer’s second offense. This law doesn’t become effective until January 1, 2021.
The law also prohibits employers from requesting individuals to enter into agreements resulting in the misclassification of the individual as an independent contractor. Finally, employers are prohibited from discriminating or taking adverse action against an individual in retaliation for exercising rights protected under the law.
This series of legislation includes many changes to the employment law landscape in Virginia and will require modifications of many employers’ policies to remain in compliance with applicable regulations. Since most of the legislation becomes effective July 1, 2020, employers should act now and use this time to review existing policies and make any changes necessary. Some specific areas that employers should look at and consider changes to include: employers currently using independent contractors should assess those worker relationships to ensure that individuals are properly classified; review and update payroll practices to be compliant with the new reporting requirements; post any required notices; and review and amend, as necessary, policies regarding employee contracts with non-compete agreements. Employers should also update employee handbooks to reflect new policies and make sure relevant personnel are educated on the new laws and corresponding changes in policies.
For more information on these developments or how they impact your business, contact the employment law experts at General Counsel, PC today at 703-991-7973.