Virginia has substantially rewritten its employment laws to provide a number of new protections and rights to employees in the areas of employment discrimination, whistleblower protection, non-compete agreements, independent contractor classification, wage payment, and more. Most of these laws take effect on July 1, 2020, and employers must take action to prepare for them, including updating employment policies and practices, providing certain notices to employees, ensuring non-compete agreements are not being provided to employees earning less than the average wage in Virginia, updating pay stubs, and generally understanding new exposures and risks.
This article summarizes the key changes made by these laws and provides a checklist of essential steps employers should consider taking now to prepare.
Expanded protections relating to discrimination and accommodation
The Virginia Human Rights Act (VHRA), as amended by the 2020 “Virginia Values Act,” will now cover more employers and more protected classes, and it expands the remedies available to employees who sue. The amendments also provide many more employees a path to bring discrimination claims in Virginia state court (instead of federal court), where it is much more difficult for an employer to defeat a discrimination claim without going to trial.
- Broader employer coverage. Prior to the amendments, the VHRA covered only certain small employers not covered by the federal anti-discrimination laws. As amended, the VHRA now covers all private employers with 15 or more This change effectively means that all violations of federal anti-discrimination laws such as Title VII of the Civil Rights Act of 1964 now violate the VHRA, as well. Smaller employers with at least 6 employees remain covered for claims of discriminatory discharge.
- Expanded protected classes. In addition to covering longstanding protected classes of race; color; religion; national origin; sex; and pregnancy, childbirth, or related medical conditions, the VHRA now covers sexual orientation, gender identity, and veteran status. In addition, race discrimination is now defined to include traits historically associated with race, including “hair texture, hair type, and protective hairstyles such as braids, locks, and twists.”
- New claims procedure. Similar to Title VII of the Civil Rights Act, before bringing a VHRA claim in court, employees must exhaust their administrative remedies by first filing an administrative charge either with the Virginia Division of Human Rights (VDHR), or the U.S. Equal Employment Opportunity Commission (EEOC), which is cross-filed with VHDR. VHDR or the EEOC will investigate and, at the conclusion of the investigation, typically will issue a “right to sue” letter, which will give the employee the right to bring a lawsuit in state court.
- Expanded remedies. The VHRA previously authorized only limited back pay and attorneys’ fee awards to prevailing plaintiffs. The amended VHRA, however, authorizes unlimited compensatory damages, punitive damages, attorneys’ fees, costs, and injunctive relief. (Note, however, that Virginia has a separate statutory cap of $350,000 on punitive damages which likely still applies apply.)
- More claims could go to trial. Because the VHRA previously applied only to smaller employers, employees of larger employers could bring discrimination claims only under the federal anti-discrimination laws. These claims were normally litigated in federal court, where employers often move for summary judgment in an effort to defeat the claims without going to trial. Now that the VHRA applies to larger employers, such employees may sue in state court (unless the employer has grounds to remove the claim to federal court). In Virginia courts, it is difficult to obtain summary judgment, because (unlike in federal court) the employer cannot use the employee’s deposition testimony against the employee on a motion for summary judgment. The upshot is that more discrimination claims in Virginia could now go to trial, which may substantially increase the cost and disruption of defending against the claims.
- Accommodations for pregnancy, childbirth, lactation. Employers of 5 or more employees must provide reasonable accommodations (absent undue hardship) to applicants and employees due to pregnancy, childbirth, and related medical conditions, including lactation. The new law provides examples of accommodations that should be considered, such as more frequent or longer breaks. Employees who claim they were not accommodated or that they were discriminated against due to pregnancy, childbirth, or related medical conditions may sue in court without the normal requirement of administrative exhaustion.
- Employers must post information regarding these rights in a conspicuous location in the workplace; include the information in employee handbooks; and provide the information to new employees, to an employee 10 days after she informs the employer she is pregnant, and to current employees by October 29, 2020.
Whistleblower protections expanded to include reporting “a violation of any federal or state law or regulation”
Virginia’s new whistleblower law protects a broad range of activities and gives employees the right to sue for violations. An employee is now, for example, protected for making an internal or external report of a violation of any federal or state law or regulation.
- New protected activity categories. Employers are generally prohibited from retaliating against an employee who engages in one or more of the following actions:
- The employee (or someone “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;”
- “Is requested by a governmental body or law-enforcement official to participate in an investigation, hearing, or inquiry;”
- “Refuses to engage in a criminal act that would subject the employee to criminal liability;”
- “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
- “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.”
- Exceptions to protected activity. An employee’s conduct is not protected if the employee’s disclosure is false or in reckless disregard of the truth, the employee discloses privileged information, or the disclosure by the employee is illegal.
- Private right of action. Employees may sue directly in court without filing an administrative charge, and may obtain: injunctive relief; reinstatement; lost wages, benefits, and other remuneration, plus interest; and reasonable attorneys’ fees and costs.
Triple damages and other protections for wage payment violations
Virginia’s amended wage payment law creates substantial new rights and protections for employees.
- Private right of action; collective action. Employees may sue an employer directly in court for failure to pay wages, including by bringing claims as a collective action with similarly situated co-workers. The Virginia Commissioner of Labor and Industry (Commissioner) is also authorized to investigate and institute proceedings, including on behalf of multiple employees.
- Remedies. Employees may recover (1) wages owed; (2) an additional amount as liquidated damages; (3) prejudgment interest; and (4) attorneys’ fees and costs. If an employer knowingly fails to pay wages, the employee can recover “triple the amount of wages due and reasonable attorney fees and costs.”
- Anti-retaliation. Retaliation against employees who file a complaint or institute proceedings to recover unpaid wages is prohibited. Employees do not have a private right of action to enforce this prohibition; it is enforced by the Commissioner, who may recover for the employee reinstatement, lost wages, and an additional amount equal to the lost wages as liquidated damages.
Worker misclassification: new presumption of “employee” (rather than independent contractor) status
Virginia is making it more difficult for businesses to treat service providers as independent contractors due to a “presumption” of employee status and a new private right of action. The risks of misclassification are heightened for businesses that have government contracts with the Commonwealth due to the threat of debarment.
- Presumption. Any individual who performs services for remuneration is presumed to be an employee, unless the company can prove the individual is an independent contractor pursuant to IRS guidelines (these guidelines, described at 26 C.F.R. 31.3121(d)(1) and here, focus on the level of control the business exercises over the individual, broken into considerations of (1) behavioral control; (2) financial control; and (3) the type of relationship).
- Private right of action. Employees may sue in court for “knowing” misclassifications and can recover wages, salary, reasonable attorneys’ fees, costs, and “employment benefits, including expenses incurred by the employee that would otherwise have been covered by insurance.” This latter provision could be significant if an individual incurs a major medical expense while serving as an independent contractor.
- Public enforcement and debarment. The Department of Labor and Industry is also authorized to enforce this law. In addition to civil penalties, upon two or more misclassification violations, the employer and “any firm, corporation, or partnership in which the employer has an interest” will be debarred for one year (or two years for a third or subsequent offense) from contracts with all Virginia “public bodies and covered institutions.”
- Anti-retaliation. The law prohibits retaliation against an individual who has reported or “plans to report” a misclassification or is requested or subpoenaed by an appropriate authority regarding a misclassification investigation, hearing, inquiry, or court action. Retaliation claims are enforced by the Commissioner, who may seek reinstatement, lost wages, and a civil penalty equal to lost wages.
- Effective date. Some of these provisions, including the presumption and civil penalties, do not take effect until January 1, 2021, however, other provisions, including the provisions authorizing civil actions, take effect on July 1, 2020.
New prohibition on “low-wage” non-competes, including financial liability to employers who violate the prohibition
Employers who require all employees to agree to non-compete agreements may need to change their practice. Not only are non-competes now unenforceable against “low-wage employees” (defined to include some independent contractors), but requiring or enforcing such non-competes may expose the employer to substantial monetary liability. The law applies only to covenants not to compete entered into on or after July 1, 2020.
- Prohibition on “low-wage employee” non-compete agreements. An employer may not enter into, enforce, or threaten to enforce a “covenant not to compete” against any “low-wage employee.”
- A “low-wage employee” is, generally, an employee or independent contractor (if paid by the hour) whose average weekly earnings are less than the average weekly wage in Virginia. Effective July 1, 2020, that amount is US$1,137 per week (or US$59,124 per year). Employers can check this link for updates to the rate. Low-wage employees do not include employees paid in whole or predominant part from sales commissions, incentives, or bonuses.
- A “covenant not to compete” is an agreement “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.”
- Public enforcement. The Commissioner may impose a civil penalty of US$10,000 for each violation of the prohibition on low-wage worker non-competes.
- Private right of action. If an employer tries to enforce a non-compete against a “low-wage employee,” the employee may sue the employer in court and receive an order voiding the covenant, along with “all appropriate relief,” which can include an injunction, liquidated damages, lost compensation, attorneys’ fees, expert fees, and costs.
- Confidentiality agreements. The law does not affect the enforceability of standard confidentiality agreements, such as those designed to prohibit sharing and misappropriation of trade secrets and proprietary or confidential information.
- Unsolicited business restrictions. A covenant not to compete may not “restrict an employee from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.”
- Anti-retaliation. The law prohibits retaliation as a result of an employee bringing a civil action to enforce rights under this law, but does not specify how the anti-retaliation right will be enforced.
- Posting requirement. Employers must post a copy of Virginia Code Section 40.1-28.7:7 (or a summary approved by the Department of Labor and Industry) in the same location where other required workplace posters are posted. The text of the law is located here.
Changes regarding pay transparency and pay stubs
Two other changes to Virginia law with regard to pay transparency and pay stubs deserve mention.
- Pay transparency. Employers may not retaliate against employees who inquire about, discuss, or disclose wages or other compensation information (except for employees such as human resources personnel who have access to such information as part of their jobs and disclose such information to those without access). This law is enforced by the Commissioner through a civil penalty of US$100 per violation; there is no private right of action.
- Pay stubs. Effective January 1, 2020 (and as amended by more recent legislation), Virginia now requires employers to provide employees with a paystub each pay period, which must contain (i) the name and address of the employer; (ii) the number of hours worked by the employee in the pay period (except for employees who are salaried and exempt); (iii) the employee’s rate of pay for those hours; (iv) the gross wages earned by the employee during the pay period; and (v) the amount of, and reason for, any payroll deductions. The paystub must also include “sufficient information to enable the employee to determine how the gross and net pay were calculated.”
Employers are prohibited from asking employees, in an application, interview, or otherwise, from disclosing information concerning any arrest, criminal charge, or conviction relating to simple marijuana possession (i.e., up to one ounce of marijuana).
Below is a checklist of actions that all employers with operations in Virginia should consider implementing in response to the new laws:
- Update anti-discrimination/harassment policies to specifically prohibit discrimination or harassment on the basis of the new protected classes of sexual orientation, gender identity, traits historically associated with race (including hairstyle), and veteran status.
- Update handbooks and policies to include information concerning the prohibition against unlawful discrimination on the basis of pregnancy, childbirth, or related medical conditions and the right to reasonable accommodation for pregnancy, childbirth, or related medical conditions. In addition:
- Post this information in a conspicuous place in the workplace (if an employer normally posts notices online, consider posting there, as well).
- Provide the information to:
- new employees at time of hire;
- pregnant employees within 10 days of receiving notice from the employee that she is pregnant; and
- current employees by October 29, 2020.
- Update or create whistleblower policies and procedures to:
- Ensure consistency with the new categories of protected whistleblower activity (including protecting an employee who “in good faith reports a violation of any federal or state law or regulation”); and
- Adhere to best practices, e.g., including a clear complaint procedure and multiple adequate potential complaint recipients, such as an ethics officer, human resources, and/or an anonymous complaint line.
- Review and consider auditing wage payment policies and practices, as well as documents defining rights of employees to pay (such as employment agreements or commission plans), to ensure:
- Employees are being paid in full and on time;
- Pay stubs satisfy the new pay stub informational requirements;
- The company is on solid footing on larger pay types that can be subject to dispute, such as commissions and bonus payments; and
- The company’s pay practices otherwise strictly comply with wage payment law (including with respect to any deductions made from employee pay).
- Audit all independent contractor arrangements to determine whether individuals presently treated as independent contractors should be reclassified as employees. This is particularly important for Virginia government contractors who are subject to potential debarment for misclassification.
- Audit practices for providing non-compete agreements and other restrictive covenants to workers. Employees earning less than US$59,124 per year should not be asked to agree to a non-compete. Also, post a copy of the low-wage non-compete statute, Virginia Code Section 40.1-28.7:7 (or a summary approved by the Department of Labor and Industry).
- Update handbooks and policies to ensure there are no prohibitions on employees inquiring about or discussing compensation information. (Federal contractors should already have an affirmative statement on this topic in their handbooks and policies.)
- Conduct appropriate training for supervisors and employees on the changes in the relevant policies referenced above. In particular, supervisors should be well-prepared on how to deal with complaints of discrimination/harassment or unlawful activity made by employees, and, in particular, trained not to retaliate (and what retaliation, which courts may interpret broadly, means) if they are accused of discrimination, harassment, or unlawful activity.
- Employers should have a plan for investigating allegations of discrimination/harassment or unlawful activity, and, where appropriate, remediating problems discovered in the investigation.
- Because of the substantial new employee protections posed by these laws, now is a good time to ensure that supervisors are reminded of the importance of good employee relations, and properly documenting the legitimate bases for any discipline and performance deficiencies when relevant. Supervisors should also work closely with human resources in connection with any adverse employment actions.
- Ensure that applicants are not required to disclose an arrest, criminal charge, or conviction pertaining only to simple marijuana possession (i.e., less than one ounce).
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For more information regarding changes to the Virginia employment laws or other issues impacting your workplace, please contact one of the authors of this article or the Hogan Lovells lawyer with whom you work.