New Virginia Employment Laws Effective July 1, 2020

Virginia has traditionally been viewed as an employer-friendly state.  Part of that reputation arises from the fact that it had relatively few wage payment regulations and that state courts were closed to most employment-related claims.  Instead, employees had to bring their discrimination claims in federal court, where there were statutory caps to damages, and they had to rely on the Department of Labor and Industry to pursue any wage payment claims.  Not any longer. This year, the newly-elected Democrat majorities in both houses of the legislature enacted several far-reaching, “pro employee” laws that were signed by the Governor.  Most of these laws go into effect on July 1, 2020, and they will have a huge impact on employment in Virginia.  The following is a brief summary of those laws and their impact.

Expanded Protections Concerning Discrimination

Recently, the United States Supreme Court held in Bostock v. Clayton, Georgia that Title VII of the Civil Rights Act of 1964 covers individuals who have been discriminated against due to their sexual orientation or transgender status.  The Virginia General Assembly beat the Court to the punch earlier this year when it passed the “Virginia Values Act” (“VVA”) that amends the Virginia Human Rights Act (“VHRA”) to add more protected classes and greater access to legal remedies.  Before, the VHRA only covered employers who had between five and fifteen employees and prohibited discriminatory terminations based on race, color, religion, national origin, sex, pregnancy, childbirth or related medical conditions, and age. It was intended to cover employers who were too small to be covered by federal anti-discrimination statutes. Remedies were limited to 12 months of back pay and attorney’s fees of no more than 25% of the back pay award. 

Under the new VVA, which goes into effect on July 1, 2020, the VHRA’s anti-discrimination provisions (other than those based on age) now cover all employers with fifteen or more employees. For termination claims employers with five or more employees are covered.  For age-related claims employers with nineteen or more employees are covered for general discrimination claims and those with six or more employees for termination claims.  The VVA also expands the VHRA to cover discrimination based on sexual orientation, gender identity, veteran status, and marital status.  Under the new amendments, the VHRA now applies to all discrimination in terms and conditions of employment, such as compensation and promotions, not just terminations.  Employees can now receive unlimited compensatory damages, punitive damages up to $350,000, reasonable attorney’s fees and costs, and court-ordered injunctions that may include reinstatement.  Finally, the VHRA now has a new enforcement scheme that essentially mirrors that of Title VII.  Employees must file their claim with the Virginia Division of Human Rights (“VDHR”) or the Equal Employment Opportunity Commission (“EEOC”).  Once the VDHR or EEOC issue a “right to sue” letter, the employee can bring a claim in state court.

These changes dramatically swing the pendulum in favor of employees and are expected to result in a torrent of discrimination-related litigation against employers in state courts.  Generally, federal courts in Virginia are much more receptive to dealing with spurious claims on a summary judgment motion, which prevents the unnecessary expense of a trial.  Title VII claims make up a large part of the federal court docket, and federal judges have the experience to expeditiously deal with meritless cases.  Now, however, employees can bring their claims in state courts where they are much more likely to get a trial, no matter how weak their claims are and where the judge has little or no experience handling such matters. 

New Accommodations for Pregnant Employees

The General Assembly also passed new legislation that amends the VHRA to (1) specifically prohibit discrimination based on pregnancy, childbirth, or related medical conditions and (2) to require that employers engage in an interactive process to determine reasonable accommodations for limitations based on these protected categories, as long as such accommodation does not cause an undue hardship on the employer.  An example would be more frequent or longer breaks for lactation.  The law specifically prohibits employers from requiring an employee to take leave if another reasonable accommodation is available. It also prohibits employers from retaliating against an employee for exercising her rights under the law.  An employee alleging a violation of this law may sue in court without filing an administrative complaint.

The law also requires employers to post information regarding these rights in a conspicuous location (the Virginia Department of Labor and Industry (“DOLI”) expects to have posters ready by October), include such information in their employee handbook, and provide the information to (1) new employees, (2) any employee who informs the employer she is pregnant within 10 days of receiving the information, and (3) all current employees by October 29, 2020.

Misclassification of Employees as Contractors

Contrary to popular belief, having a written contractor agreement does not guarantee that the “contractor” is not an employee.  Employers often use contractors to avoid paying employee benefits and the transaction costs that come from maintaining an employee.  Studies have shown that Virginia loses millions in taxes every year due to employers’ misclassification of employees as contractors.  The state has made a concerted effort for years to crack down on the practice, and now the legislature has provided additional tools through several new laws. 

Under the new laws,

1. any individual who receives remuneration for services provided is presumed to be an employee of the company unless the company can prove that the employee is a contractor under IRS guidelines (26 C.F.R. § 31.3121(d)-1); 

2. employees may sue an employer for “knowingly” misclassifying them as contractors. A successful employee can receive lost wages, salary, employee benefits, reasonable attorney’s fees and costs, and any expenses that the employee incurred that would have otherwise been covered by insurance;  

3. DOLI is authorized to issue civil penalties against violators, and if they are government contractors, they can be debarred for a year (longer for repeat offenders) from any contract with a Virginia public body or institution; 

4. employers are now prohibited from entering into any written agreement that misclassifies an employee as a contractor or that does not accurately reflect the parties’ relationship; and 

5. employers are prohibited from retaliating against any individual who reports or plans to report a misclassification or who participates in a misclassification investigation.

The presumption and civil penalties do not go into effect until January 1, 2021, but most of the rest take effect on July 1, 2020.

Expanded Enforcement Provisions for “Wage Theft”

Until now, if an employer did not pay wages that were earned, an employee could only seek relief by filing a complaint with DOLI, who would then investigate the matter and could impose a penalty no greater than $1,000 on the employer.  The General Assembly amended the Virginia Wage Payment Act (“VWPA”) to provide employees a private right of action for any unpaid wages. An employee can sue and receive any withheld compensation, an equal amount as liquidated damages, 8% interest from when payment was due, and reasonable attorney’s fees and costs.  If it is determined that the employer “knowingly” failed to pay the wages, the employee can receive triple the amount of unpaid wages, and DOLI can assess a civil penalty of up to $1,000.  Without waiting for administrative exhaustion, an employee can sue individually, with other employees, or can bring a collective action on behalf of a group of employees using the provisions under the Fair Labor Standards Act.

The General Assembly also passed legislation that would allow DOLI to expand its investigation to include other employees if it reasonably believes the employer is violating their rights under the VWPA. If DOLI believes an employer is violating the VWPA, it can sue the employer on behalf of the employee or employees.  It should be noted that the VWPA includes existing provisions covering issues such as the frequency of wage payment and the need for written consent for most deductions.

Limitations on Non-Competition Agreements

There is a national trend to limit, or even prohibit, the use of non-competition agreements, also referred to as “covenants not to compete.”  This year, Virginia has followed the trend by prohibiting employers from “entering into, enforcing, or threatening to enforce a covenant not to compete between the employer and a low-wage employee.” The law applies to any non-competition agreement entered into on or after July 1, 2020.

The law has a rather expansive view of what it considers to be a “low-wage employee,” defining such as anyone who receives less than the average weekly wage of the Commonwealth as determined by the Virginia Employment Commission.  As it stands today, average weekly wages are $1,125 or $58,500 a year. Employers are also prevented from entering into a non-competition agreement with independent contractors whose hourly rate “is less than the median hourly wage for the Commonwealth for all occupations as reported, for the preceding year, by the Bureau of Labor Statistics of the U.S. Department of Labor.”  This rate is currently set at $20.30 an hour, which translates to $56,740 a year.  These rates are adjusted quarterly and annually, so a non-competition agreement that is enforceable today, may not be in the future.  Fortunately for employers, the law does not cover employees whose compensation is derived “in whole or in predominant part” from sales commissions, incentives, or bonuses.

The law defines a covenant not to compete as “a provision of a contract of employment, between an employer and employee that restrains, prohibits, or otherwise restricts an individual's ability, following the termination of the individual's employment, to compete with his former employer.”  While it is an open question, it would appear from the language of the law that such covenants would include any prohibition against soliciting an employer’s customers or clients.

A low-wage employee can sue an employer for violating or attempting to violate the law, and may receive “all appropriate relief, including enjoining the conduct of any person or employer, ordering payment of liquidated damages, and awarding lost compensation, damages, and reasonable attorney fees and costs.”  The law also prohibits an employer from retaliating against an employee who brings such an action.  Additionally, DOLI can impose a $10,000 civil penalty against any employer it determines has violated the law.

Finally, employers are required to post a copy or summary of the relevant section of law (Va. Code § 40.1-28.7:7) by July 1, 2020.

It should be noted that the law specifically states that it does not limit an employer’s ability to enter into a confidentiality or non-disclosure agreement that protects trade secrets and other confidential and proprietary information.

New Whistleblower Protections

Prior to this year, Virginia had no real statutory protections for whistleblowers. However, as of July 1, 2020, employers cannot “discharge, discipline, threaten, discriminate against, or penalize an employee, or take other retaliatory action regarding an employee's compensation, terms, conditions, location, or privileges of employment,” because the employee:

1. 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; 

2. Is requested by a governmental body or law-enforcement official to participate in an investigation, hearing, or inquiry; 

3. Refuses to engage in a criminal act that would subject the employee to criminal liability; 

4. 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 

5. Provides information to or testifies before any governmental body or law-enforcement official conducting an investigation, hearing, or inquiry into any alleged violation by the employer of federal or state law or regulation.

As with the other laws, this new statute allows employees to bring suit to enforce their rights.  A court may award the following remedies: (i) an injunction to restrain continued violation of this section, (ii) the reinstatement of the employee to the same position held before the retaliatory action or to an equivalent position, and (iii) compensation for lost wages, benefits, and other remuneration, together with interest thereon, as well as reasonable attorney fees and costs.

Conclusion

The sea change in employee protections will likely result in a greatly increased litigation burden on the state court system that has been struggling to handle its current caseload from a massive backlog due to the Covid-19 restrictions.  Employers can expect to see disgruntled employees and former employees rushing to take advantage of their new access to more plaintiff-friendly state courts.  Now, more than ever, employers should put in place protocols for documenting and consistently enforcing their policies and legal duties.

Jeff Wilson is a Pender & Coward attorney focusing his practice on employment law matters, including counseling and business litigation.