It is hard to overstate the significance of the employment law changes going into effect as of July 1, 2020. As Virginia employers presently consider how to return to work following an unprecedented global pandemic, they will soon meet the added challenge of a radically different legal landscape governing employment matters. The affected areas of Virginia employment law are broad, covering wage and hour laws, employee misclassification, LGBTQ rights, employment thresholds for coverage under anti-discrimination laws, and expanded whistleblower protections. Whereas, Virginia was once considered a State where employee rights were extremely narrow, effective July 1, it will have some of the broadest protections available for employees to assert their rights. The following is a summary of the more significant laws going into effect.
Virginia’s “Wage Theft Law” Authorizes Threefold Liquidated Damages and FLSA-Styled Collective Action Treatment of Employees’ Claims
In HB 123, the “Wage Theft Law” creates a novel, private right of action for employees to sue employers for unpaid wages. The law also permits an employee to recover liquidated damages equal to three times the amount of unpaid wages and the law appears drafted with Fair Labor Standards Act (FLSA) collective actions in mind.
The Wage Theft Law amends the Virginia Wage Payment Act, which previously did not provide a private right of action to employees and thus required aggrieved employees to bring breach of contract or quantum meruit actions to recover monies owed, or to file a claim with the Virginia Department of Labor and Industry. The new law not only opens the courthouse doors to employees but permits recovery of the unpaid wages plus liquidated damages, including damages for knowing violations in an amount equal to three times the unpaid sum, along with 8 percent pre-judgment interest, plus costs and reasonable attorney’s fees. A broad, 3-year statute of limitations is also included. The Wage Theft Law also expressly permits FLSA collective action treatment for aggrieved employees to bring their claims individually and on behalf of similarly situated employees.
LGBTQ Discrimination is Illegal, Large Employers are Now Covered by Most State Anti-Discrimination Laws, and Prevailing Employees May Recover More in Damages
In SB 868, the Virginia Values Act (“VVA”) prohibits public and private sector employment discrimination on the basis of sexual orientation or gender identity. This provision is, however, far from the most dramatic change in the law compared to other areas, including the significant expansion of the statute’s coverage thresholds based on the number of employees in addition to the significant increase in damages available.
Previously, the Virginia Human Rights Act provided employment discrimination protection only for employees employed by small employers (between 5-15 employees for most claims and between 5-19 for age discrimination). Larger employers were covered (and remain so) by federal statutes prohibiting employment discrimination, such as Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act.
Under the new law, specifically for wrongful discharge claims based on protected class, the VVA amends the coverage threshold to apply to employers with more than 5 employees, including race, religion, gender, marital status, and now sexual orientation and gender identity. Thus, for wrongful discharge claims going forward, there will be no maximum employee threshold to limit the application of the VVA, except age-based claims, for which the statute will still be limited to employers with more than 5 but fewer than 20 employees.
For claims that do not involve wrongful discharge, the VVA raises the coverage floor but eliminates the ceiling. Going forward, the law will begin to apply where employers have employed 15 or more employees for the requisite period.
Employment discrimination litigation may also become significantly more expensive by the new law’s elimination on the damages cap and authorization of punitive damages to a prevailing employee, among other items of relief. In Section 2.2-3908(B), the law authorizes recovery of compensatory and punitive damages in addition to reasonable attorney fees, costs, and injunctive relief. Prior to the passage of the VVA, damages were limited to 180 days of pay. Now, the statute omits any limit on damages.
As a result of the VVA, large Virginia employers will suddenly become subject to both state and federal anti-discrimination laws. Due to the procedural advantages of suing in Virginia state courts and the more generous damages available under the VVA, employees will increasingly elect to drop their federal claims and sue exclusively under the VVA. As a result, most employers will not have a basis for removing these lawsuits to federal court. As Virginia courts do not typically grant summary judgment, this means a lot more employment claims will get to a jury. In conjunction with the elimination of damage caps and the express authorization of punitive damages, the costs to employers could be staggering.
Employers Will Soon Be Prohibited from Entering or Enforcing Noncompetes with “Low-Wage” Workers
In HB 330, the General Assembly prohibited employers from entering, enforcing, or threatening to enforce a covenant not to compete against any low-wage employee. The law defines a low-wage employee as anyone earning less than the average weekly wage in the Commonwealth, per data collected by the Virginia Employment Commission. According to the most recent BLS data, $1,125 is the average weekly wage for Virginia, which comes out to an annualized wage of $58,500. Thus, employers requiring employees to enter noncompete agreements will need to pay close attention to their employee’s rate of compensation.
This prohibition also covers students and individuals who are independently contracted to perform services that are not part of an employment relationship if their hourly rate of pay is less than the median hourly rate in the Commonwealth.
Employers are also required to post notice of this law and employees have a 2-year private right of action to file suit for relief. Retaliation protections are also included for employees bringing civil actions under this law.
Employees May Sue Employers Directly for Misclassification
In HB984, the General Assembly enacted a private right of action for employees to sue their employer for damages arising from the knowing misclassification of employment status. Employees may recover wages, salary, employment benefits, including expenses incurred by the employee that would otherwise have been covered by insurance or other compensation lost to the individual, plus attorney’s fees and costs.
Importantly, the new law also establishes a presumption that individuals performing compensated services are employees, unless an independent contractor relationship is established by applicable IRS guidelines.
Whistleblower Protections are Significantly Expanded
In HB 798, the Virginia General Assembly enacted a far-reaching whistleblower protection law where one did not previously exist. Specifically, the new Va. Code § 40.1-27.3 will protect an employee from retaliatory action in the following circumstances:
- The employee or a person acting on behalf of the employee in good faith reports a violation of any federal or state law or regulation to a supervisor or to any governmental body or law-enforcement official;
- The employee is requested by a governmental body or law-enforcement official to participate in an investigation, hearing, or inquiry;
- The employee refuses to engage in a criminal act that would subject the employee to criminal liability;
- The employee refuses an employer’s order to perform an action that violates any federal or state law or regulation and the employee informs the employer that the order is being refused for that reason; or
- The employee provides information to or testifies before any governmental body or law-enforcement official conducting an investigation, a hearing, or an inquiry into any alleged violation by the employer of federal or state law or regulation.
Generally, the new law protects opposition activity where the employee has a good faith belief in the violation of a federal or state law or regulation and protects both internal and external complaints. The law also broadly protects participation in investigations conducted by governmental bodies or law enforcement.
This is new ground for Virginia by including federal law as a basis for protection from retaliation. An aggrieved employee has 1-year to file suit and may recover compensation for lost wages, benefits, and other remuneration, including pre-judgment interest, costs, and attorney’s fees.
This is a new world for Virginia employers, and personnel decisions will now take on even greater importance. These new laws and potential for increased damages will inevitably produce more frequent and costly litigation. Troutman Sanders’ team of Virginia employment lawyers look forward to assisting our clients in avoiding litigation before it happens but defending them when the need arises.