Last year, we discussed several major changes made to Virginia employment laws that provided new protections and rights to employees. Once again, another significant change will occur on July 1, 2021 when Virginia’s new Overtime Wage Act (HB 2063) takes effect. In large part, this new law follows the federal Fair Labor Standards Act (FLSA)’s overtime protections by requiring employers to pay time and half of the employee’s regular rate of pay to employees who work in excess of 40 hours in a workweek. However, in several key ways, the new Virginia law will expand Virginia employers’ potential exposure with respect to wage and hour claims.
First, the new Virginia law introduces a new employee-friendly methodology for calculating a salaried employee’s regular rate of pay. Specifically, instead of calculating a salaried employee’s regular rate of pay by dividing the weekly salary by the number of hours worked in a workweek, the law provides that the salaried employer’s regular rate of pay is calculated by dividing weekly salary by forty hours. This means that the regular rate for any salaried non-exempt employee will be higher under Virginia law than under the FLSA in each workweek where an employee works overtime. By calculating the regular rate of pay in this way, the new law will increase – perhaps substantially in some situations – the potential liability an employer will face if the employer is found to have misclassified a salaried employee as exempt. Additionally, the law makes it unattractive to pay non-exempt workers on a salaried basis, given that such employees’ overtime rate will now change from week to week, and it appears impossible to pay non-exempt workers under a fluctuating workweek or similar method of payment. Note that the new Virginia law does not change the calculation of the regular rate of pay for hourly-paid employees.
Second, the statute of limitations for bringing overtime claims under the new Virginia law is another deviation from the FLSA. Whereas the FLSA generally imposes a two year statute of limitations, and three years where the violation is willful, under the new Virginia law a three year statute of limitations is the default. This exposes employers to potentially greater liability because employees will have more time to bring a claim, and a longer period for which the employees can collect liability.
Finally, all overtime wage violations in Virginia will be subject to double damages – plus pre-judgment interest of 8 percent per year. Whereas the FLSA allows for a good faith defense to double damages, no such defense will be available to employers under Virginia’s new law. Indeed, Virginia’s law is harsher insofar that it permits triple damages for “knowing” violations, where the employer had actual knowledge that it failed to pay overtime wages due to employees and deliberately ignored or recklessly disregarded this obligation.
Some additional points of concern for employers are:
- The law incorporates provisions of Virginia law permitting employees to bring collective actions against employers for violations.
- The law permits the Virginia Commissioner of Labor and Industry to investigate alleged overtime violations, and has the authority to expand an investigation of one employee’s allegation to consider whether other employees of the employer have not been paid overtime.
- Employees may attempt to bring claims under this new law in state court, where it is difficult to secure summary judgment (as described in our prior post).
- There is some ambiguity in the Virginia law regarding whether and how the Virginia law restricts Virginia employers from relying on certain FLSA overtime exemptions other than the executive, administrative, and professional exemptions. Although the definitional section of the Virginia law states that it only covers an “employee,” which is defined as “any person who is exempt . . . pursuant to 29 U.S.C. § 213(a) . . . [or] 29 U.S.C. §§ 213(b)(1) or 213(b)(11)” (emphasis added), a later section in the law states that “[a]n employer may assert an exemption to the overtime requirement of this section for employees who meet the exemptions set forth in 29 U.S.C. § 213(a)(1) or for employees who meet the exemptions set forth in 29 U.S.C. §§ 213(b)(1) or 213(b)(11).” (emphasis added). If only FLSA Section 213(a)(1) is a permissible exemption under the Virginia law rather than all of 213(a), then it becomes unclear whether Virginia employers can rely on other exemptions under Section 213(a) such as the computer exemption (§ 213(a)(17)) or the amusement or recreational establishment exemption (§ 213(a)(2)). As for FLSA Section 213(b), the Virginia law only references as permissible exemptions Sections 213(b)(1) (transportation employees) and 213(b)(11) (certain local delivery employees), and does not mention other 213(b) exemptions such as rail or air carrier employees, agricultural employees, or taxi drivers. It is possible that employees may assert that the exemptions not expressly mentioned in the Virginia law are not available to Virginia employers.
In light of the increased exposure under this new law, Virginia employers should review their wage and hour practices and employee classifications. If an employer has potential wage and hour vulnerabilities, now may be a good time to consider whether to make reclassifications of employees. Additionally, Virginia employers who pay non-exempt employees on a salaried basis should consider changing that practice. Further, Virginia employers who rely on the computer exemption or other exemptions not expressly mentioned in the Virginia law should consider whether to continue reliance on those provisions of the FLSA in Virginia. For questions regarding the changes in the law, or for assistance in ensuring compliance please reach out to the authors of this post or the Hogan Lovells lawyer with whom you typically work.
*An author of this post, Shannon Finnegan, is a Law Clerk in the New York Office.