Employment Law Update – Fall 2020
RECENT VIRGINIA EMPLOYMENT LAW CHANGES DRAMATICALLY INCREASE RISK FOR EMPLOYERS
Over the years, Virginia has been regarded as a somewhat employer-friendly state in terms of workplace regulation. Virginia courts afforded substantial protection against state law claims due to the at-will nature of most employment relationships in the Commonwealth. When employees sued employers, their lawyers relied on federal laws. Such lawsuits were filed in, or removed to, federal court where employers have a much stronger chance of avoiding a jury trial and obtaining summary judgment than they do in state court. Effective July 1, 2020, that all changed.
Although 2020 brought about numerous other legislative changes to Virginia laws, the enactment of the Virginia Values Act (VVA) leads the list of new laws imposing employment risk on Virginia employers. Without fanfare, while most employers focused their attention on pandemic-related federal legislation, Governor Northam signed the VVA into law. While the most publicized aspect of the VVA was the addition of a number of new protected classes, namely sexual orientation, gender identity, hairstyle, and lactation, federal laws mostly already covered these added protected classes and thus did not tip the scale much in terms of risk. Instead, the remedies that employees can now seek under the VVA in state court are the game-changer. Virginia employees now have a private right of action allowing them to sue their employers for unlimited damages (other than a cap of $350,000 for punitive damages) and attorney’s fees for most types of discrimination and for almost any negative employment action. While they may need to file with a state agency for investigation and possible resolution, ultimately employees will be able to file claims in state court where avoiding a jury will be very difficult even for tenuous claims.
Another new law substantially weakened the employment-at-will doctrine in Virginia. Effective July 1, Virginia employees now have a private right of action to sue their employers if they are retaliated against for reporting any violation of federal or state law to a supervisor, government body, or law enforcement official. So employees may now sue for wrongful discharge whenever they contend they were discharged because they previously complained about some purported misdeed by their employer. As with the VVA, since such lawsuits will be filed in state court, employers again may face an expensive jury trial before unsympathetic jurors.
With the VVA and other changes to Virginia’s employment laws, employment lawsuits against Virginia employers will no longer be the almost exclusive domain of federal courts. Lawyers who sue employers in Virginia will almost certainly take advantage of greater remedies under state law with a greater likelihood of avoiding summary judgment in state court. When contacted for this article, Jamie Shoemaker, a Peninsula lawyer who regularly sues employers, stated, “the Virginia Values Act is the most important development in Virginia employment law of my lifetime. It will substantially increase the number of state court claims I file.”
On October 28, 2020, Mr. Shoemaker will join a session as part of a special virtual edition of the 36th Annual Employment Law Update. This full-day program is designed to help employers avoid risks they face in court resulting from numerous recent changes to federal and Virginia employment laws. You may register for the seminar by visiting www.kaufcan.com/events [kaufcan.us2.list-manage.com].
NEW VIRGINIA STATUTES TARGET EMPLOYEE MISCLASSIFICATION AND WAGE ISSUES
On July 1, 2020, Virginia enacted a host of new employment laws that provide new protections for employees and impose new obligations and restrictions on employers. Among those new laws that went into effect on July 1st are significant legal changes relating to the misclassification of employees as independent contractors and to wage payment and compensation issues.
Effective July 1, 2020, workers that are misclassified as independent contractors, rather than employees, can bring a lawsuit against employers for such misclassification. Importantly, the new law provides a presumption that a person providing services for pay is an employee. The employer may only overcome this presumption by showing that the worker is a contractor under the rigorous guidelines adopted by the IRS. In an action under this section, a misclassified employee may receive as damages any compensation and employment benefits lost as a result of the misclassification, plus attorneys’ fees and costs expended in bringing the action. Virginia bolstered this new provision by prohibiting employers from retaliating against workers who “in good faith and upon a reasonable belief” report suspected misclassification or participate in investigations or court proceedings.
Adding to Virginia’s efforts to crack down on employee misclassification, beginning on January 1, 2021, the Virginia Department of Taxation will be charged with applying IRS guidelines to make determinations of whether an employee is misclassified as a contractor. Again, any worker providing services in exchange for pay will be presumed to be an employee. If the Department of Taxation determines that misclassification has occurred, it may impose civil penalties up to $1,000 for a first offense, up to $2,500 for a second offense, and up to $5,000 for subsequent offenses. And the Department of Taxation will notify all public agencies and bodies of the misclassification determination against the employer. The employer could be debarred from receiving contracts from such public agencies for up to one year for a second offense and for up to three years for a third and subsequent offense. As of January 1, 2021, employers cannot “require or request” that a worker sign any agreement or document that misclassifies the worker as an independent contractor and cannot discriminate or retaliate against any person for exercising rights under the statute.
Aside from targeting misclassification issues, Virginia also added teeth to its wage payment statute. As of July 1, 2020, employees can bring lawsuits—either individually, in conjunction with other employees, or as a collective action on behalf of similarly situated workers—for failure to pay wages. Similar to the provisions of federal wage and hour law, employees, if successful on their claims, can recover the back wages owed, liquidated damages in an amount equal to the back wages, and attorneys’ fees and costs incurred in bringing the action. However, if an employer knowingly fails to pay wages, the employer can be liable for triple the amount of back wages. The revised statute also allows the Department of Labor and Industry (DOLI) to accept, investigate, and determine complaints for non-payment of wages, to file civil actions to collect wages due, and to impose civil penalties up to $1,000 for each violation.
Finally, Virginia enacted a “wage transparency” law, protecting employees when they are discussing compensation with their co-workers. Employers cannot take retaliatory action against an employee for inquiring about, disclosing, or discussing compensation with another employee. However, employers can prevent employees who have access to compensation as “part of their essential job functions” from disclosing compensation information to persons not having access, unless the disclosure occurred as part of a formal complaint, an investigation (including an internal investigation), or the employee’s legal duty to furnish such information. The DOLI has the final authority to determine violations and can impose civil penalties up to $100 per violation.
Given these new laws, the balance has tipped significantly in favor of employees in Virginia. As such, employers need to be especially careful when using independent contractors and need to make sure their payroll practices and personnel policies are updated to ensure compliance with the new requirements. Otherwise, they could be faced with significant liability under Virginia’s new statutes.
VIRGINIA EMPLOYERS: DON’T ASK ABOUT BEING BUSTED FOR MARIJUANA POSSESSION
Virginia employers are now prohibited from seeking information regarding charges, arrests, or convictions related to the possession of marijuana under Virginia Code section 19.2-389.3. The law forbids most employers from requiring applicants in applications, interviews, or otherwise to disclose information related to arrests, charges, or convictions for simple possession of marijuana. Ironically, while it’s no longer a misdemeanor here to possess marijuana, an employer that asks about criminal background information about pot possession may be subject to a Class 1 misdemeanor.
This law does NOT, however, prevent a private employer from testing for marijuana use during the hiring process or the employment relationship, or from seeking information related to any other marijuana-related criminal offenses. Employers should review their employment applications, background authorizations, employment agreements, and hiring procedures to ensure compliance.
NEW VIRGINIA LAW PROHIBITS NON-COMPETES FOR LOW-WAGE EARNERS
Effective July 1, 2020, Virginia employers may not enter into, enforce or threaten to enforce, a covenant not to compete against a low-wage earner. Low-wage earners are defined as those employees whose average weekly earnings (during the preceding 52-week period or the actual number worked if fewer than 52 weeks) are less than the average weekly wage of the Commonwealth as calculated by the Virginia Workers Compensation Commission. The 2020 weekly wage rate as set forth on the Virginia WCC website is $1,137 effective July 1, 2020, or $59,124 annualized. However, low-wage earners do not include employees whose earnings are derived, in whole or in predominant part, from sales commissions, incentives or bonuses. This new law does not prevent employers from requiring employees to sign agreements prohibiting solicitation of customers or employees or non-disclosure agreements intended to protect confidential information and trade secrets.
If an employer violates this new law, it provides for a private right of action for the employee to ask a court to void the non-compete and award damages, including lost compensation, liquidated damages, and reasonable attorneys’ fees. The Commissioner of the Virginia Department of Labor and Industry may also fine the employer up to $10,000 per violation. As with a number of the new Virginia employment laws, employers are also required to post a copy of this new law where other required posters are posted.
K&C SEMINAR TO HELP EMPLOYERS DEAL WITH CHANGE
During the COVID-19 pandemic, Virginia employers have not only been forced to deal with complex emergency federal legislation, but a number of state laws were also enacted that will dramatically impact workplace risks and obligations going forward. On October 28, 2020, the K&C Employment Team will host a special virtual edition of the 36th Annual Employment Law Update to help employers deal with all the legal and practical changes they now face. In addition to the K&C Employment Team, presenters will include the new Charlotte EEOC District Director Thomas Colclough, “Top Gun” employee lawyer Jamie Shoemaker, Unemployment Insurance Director William Walton, and dynamic diversity trainer, Mauricio Velasquez. Legal, practical, and government agency perspectives will all be presented to help employers navigate the new “normal.” Attendees can also earn up to 6 credit hours toward PHR and SPHR recertification through the Human Resource Certification Institute (HRCI) and 5 PPCs toward SHRM-CP or SHRM-SCP. To register, visit www.kaufcan.com/events.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2023.