Until this year, most employers doing business in Virginia had to comply with very few employment laws beyond those at the federal level, and the overwhelming number of employment disputes in Virginia were resolved in federal court.
But thanks to a slew of new legislation passed throughout 2020, that situation is about to change dramatically.
All of the legislation discussed below allows Virginia workers to bring their actions in state court. Generally speaking, state courts are viewed as more employee-friendly forums than federal courts. Virginia has unique procedural rules that make summary judgment for employers a near impossibility. That means cases that do not settle are almost sure to go to a full trial. In addition, litigating in Virginia state court can be more costly than litigating in federal court because pretrial disputes that may be handled in federal court “on the papers” (nowadays, via electronic filing) are more likely to be subject to in-person hearings and oral argument in state court.
Minimum wage increases
The change: With SB 7, the Virginia General Assembly increased the minimum wage for Virginia employees from the federally mandated $7.25 an hour to $9.50 an hour, effective May 1, 2021. The minimum wage will increase again on January 1, 2022, to $11 an hour and on January 1, 2023, to $12 an hour. Increases after 2023 will require additional votes in the legislature, but, assuming Democrats continue to control the legislature and the governorship, the state minimum wage is likely to continue to increase after 2023.
The impact: Effective May 1, any employee not otherwise exempt from minimum wage and overtime requirements (commonly referred to as “non-exempt employees”) making less than $9.50 an hour will need to receive an increase to that amount, which will also increase overtime amounts due when those employees work more than 40 hours in a workweek. In addition, Gov. Ralph Northam (D) signed related legislation that provides a new private right of action for Virginia employees to sue in court for unpaid wages. Prevailing employees can recover unpaid wages, liquidated damages, and attorneys’ fees under the state minimum wage and overtime law, and also have the possibility of recovering treble damages under a separate wage payment statute if a court finds that the employer “knowingly” failed to pay wages due.
Misclassified workers
The change: Misclassifying an employee as an “independent contractor” has implications under state and federal laws, many of which often have slightly different (and sometimes changing) definitions of “employee.” With the passage of HB 984, the Virginia General Assembly created a catch-all statute that provides individuals who believe they have been misclassified as independent contractors the right to sue for damages, including wages, salary, benefits, and expenses they would have otherwise been entitled to as employees. Significantly, the law provides that an individual who performs services for remuneration is presumed to be an employee, unless he or she meets the IRS guidelines for independent contractors. Although the law went into effect this year, the presumption of employee status will not go into effect until July 21, 2021, an apparent effort to provide employers time to understand and come into compliance with the new law.
The impact: With various federal laws already providing workers with avenues to sue for damages associated with misclassification, the Virginia law should not have a significant impact on the day-to-day decision-making of Virginia businesses. However, the legislation would allow Virginia workers to sue in state court, which, as mentioned above, is problematic for employers.
Salary history (delayed until sometime in 2021)
The change: With the passage of HB 416, Virginia is set to become one of the many states that prohibit employers from asking about the salary history of prospective employees. The Virginia Employment Commission is charged with enforcement of the bill and may assess fines of up to $100 per violation.
The impact: On February 24, the state Senate’s Committee on Commerce and Labor voted to continue this measure to an unspecified term in 2021. Thus, Virginia companies can -- for now -- continue to ask about salary history. Whether they want to do so is another question. First, establishing pay based on an applicant’s salary history can lead to inequities, giving rise to a claims of pay discrimination under the federal Equal Pay Act (sex discrimination only) or Title VII of the Civil Rights Act of 1964 (race, color, national origin, sex, or religious discrimination). In February 2020, the U.S. Court of Appeals for the Ninth Circuit ruled in Rizo v. Yovino that salary history was not a defense to an employee’s claim of pay discrimination under the federal EPA. Second, many state laws prohibit employers from asking about salary history. Employers who operate in and out of Virginia may want to establish uniform hiring guidelines and train their human resources staff and managers accordingly. Failure to do so could lead to inadvertent violations of other states’ laws -- and, in the not-too-distant future, Virginia law.
Ban on noncompetes for low wage workers
The change: For some employers, noncompete agreements are a routine part of the onboarding process for all employees. HB 330 should change that practice. Virginia employers are no longer permitted to require “low wage workers” to sign noncompete agreements as a condition of employment. “Low wage workers” are defined as those individuals who earn less than the “average wage in the Commonwealth,” which is currently quantified as $1,125 a week (or $58,500 per year). Significantly, however, the law does not apply to employees whose earnings are derived, in whole or in predominant part, from sales commissions, incentives, or bonuses. With regard to what constitutes a prohibited noncompete agreement for a low wage earner, the law restricts both (1) agreements that restrict an employee’s ability to compete with the former employer after termination and (2) agreements that restrict an employee from providing services to the employer’s customers “if the employee does not initiate contact with or solicit the customer or client.” The wording of the latter restriction suggests that an employer may be able to restrict even a low wage earner from soliciting or initiating contact with the employer’s customers that leads to providing services to those customers. However, whether such a restriction would run afoul of the restriction against competition is not clear. Employers should continue to monitor the way that courts enforce this aspect of the new law. The law also expressly states that it does not limit the creation or application of nondisclosure agreements.
The bill provides the low wage worker a two-year statute of limitations to sue a former employer who attempts to enforce a noncompete agreement. A prevailing plaintiff can obtain injunctive relief and recover liquidated damages (undefined by the law), lost compensation, damages, and reasonable attorneys’ fees and costs. Further, the Virginia Employment Commission can assess civil penalties of up to $10,000 for every instance in which an employer enters into, enforces, or threatens to enforce a covenant not to compete with any low wage employee. Finally, Virginia employers are required to post in the workplace a copy of the new law (or an approved summary of it) or be subject to fines as high as $1,000.
The impact: Virginia employers should examine their hiring documents and, for any positions that would be filled by a “low wage worker,” remove from the onboarding process any requirement that the employee or applicant sign a noncompete agreement. The new law applies only to agreements entered into on or after July 1, 2020. This means that any noncompete agreements signed before that date will not run afoul of the new law, but of course could still be deemed unenforceable under existing limitations placed by the courts on those agreements.
Ban on discrimination based on LGBTQ status and hair style, streamlined process for pregnancy claims, and broader applicability
The changes: The U.S. Supreme Court decided last summer that Title VII of the Civil Rights Act prohibits employers from discriminating on the basis of sexual orientation and gender identity. Virginia law now prohibits the same. HB 1049 expressly prohibits discrimination on the basis of sexual orientation and gender identity under Virginia law.
HB 1514 expands the prohibition on race discrimination to include discrimination based on “traits historically associated with race, including hair texture, hair type, and protective hairstyles such as braids, locks, and twists.” Similar laws have been enacted in California and New York.
Moreover, employees claiming pregnancy discrimination are provided an avenue to more quickly have their claims heard in court because they are no longer required to first file a charge with an administrative agency before going to court, as is the case with other discrimination claims.
Finally, SB 868 significantly broadens the scope of Virginia’s existing discrimination laws – which previously prohibited only unlawful discharge and applied only to employers with between 5 and 15 employees. Under the new law, claims of unlawful discharge can be brought against all employers with more than 5 employees, and claims that do not involve discharge may be brought against employers with 15 or more employees.
The impact: In addition to being aware of the new protected categories mentioned above, Virginia employers with 15 or more employees will also have to worry that discrimination claims on the basis of any protected category (except unlawful discharge claims on the basis of age, which continue to apply only to employers with between five and 19 employees) can now be brought against them in state court. In addition, unlike Title VII, the Virginia anti-discrimination law has no cap on compensatory or punitive damages, although most commentators believe that the Commonwealth’s general $350,000 limit on punitive damages is likely to apply.
With regard to the new prohibition on discrimination based on “traits historically associated with race” (such as hair type and style) in particular, Virginia employers should review any grooming or appearance standards, policies, or practices to ensure they do not run afoul of the new law.
Whistleblower protection
The change: The idea of “whistleblower protection” is nothing new to employers. There exists a cornucopia of federal laws that protect workers who raise concerns about perceived violations of the law. With HB 798, for the first time, Virginia now has a “general” whistleblower statute that allows employees to pursue a private cause of action in state court. The law protects from retaliation employees who make internal or external complaints about, among things, “a violation or suspected violation of any federal or state law or regulation to a supervisor or to any governmental body or law-enforcement official.” Remedies available under the law include reinstatement, compensation for lost wages, benefits, and other remuneration, interest, and attorneys’ fees.
The impact: Most employers already have internal policies that prohibit retaliation against employees who raise certain concerns. Before now, however, Virginia had only a limited cause of action for whistleblower retaliation. HB 798 significantly broadens the scope of complaints or disclosures that are likely to be protected. Managers and human resources professionals in Virginia who are thinking about taking action against an employee who has raised any form of complaint or made a disclosure should ensure in advance that the action contemplated is not related to the complaint or disclosure -- and that they will be able to prove it in court.
Conclusion
The General Assembly was very active this year and passed a comprehensive package of employment and labor laws that will have a significant impact on the employment relationship in Virginia. It is critical that employers are aware of these changes and take steps to ensure compliance. This is particularly true, given that these new laws will more easily allow employees and former employees to bring suit in the employee-friendly Virginia state courts, where there is a significantly diminished chance of getting the lawsuits dismissed before trial.