Recently, Virginia, which had a reputation of hostility to employees, has added new employee rights and protections in the areas of:
- Employment discrimination (Va. Code §2.2-3900 et seq.);
- Whistleblower protection (Va. Code §2.2-3009 et seq.);
- Prohibition on “low-wage” non-compete agreements (Va. Code §40.1-28.7:8);
- Presumption of employee rather than independent contractor status (Va. Code §40.1-28.7); and
- An amended time and medium of payment law (Va. Code §40.1-29).
On March 31, 2021, Virginia continued this progress when Governor Ralph Northam signed into law the Virginia Overtime Wage Act. Va. Code §40.1-29.2(B) (effective July 1, 2021). The Virginia Overtime Wage Act obligates employers to pay one and one-half times an employee’s regular rate of pay for hours worked in excess of 40 in a workweek. With its enactment, Virginia employees now have additional protections to guard against non-payment of overtime wages.
Historically, Virginia employees relied upon the overtime pay requirements of the federal Fair Labor Standards Act (FLSA). However, not every employer is subject to the FLSA. In several respects, Virginia’s new law provides notable enhancements. First, the Virginia Overtime Wage Act provides that an employee may recover for overtime up to three years and establishes a three-year statute of limitations on overtime claims. By comparison, the FLSA has a two-year limitations period (three years for willful violations). Thus, not only is the Virginia statute of limitations longer, but an employee will be able to recover back wages for a full three years, rather than two years, prior to the date the claim was filed.
Second, the Virginia Overtime Wage Act expressly authorizes collective actions. Specifically, amendments to existing sections of the Virginia Code accompanying the new law authorize collective actions “consistent with the collective action procedures of the Fair Labor Standards Act” for violations under the Virginia Overtime Wage Act. This change means that if an employer has been violating the overtime rules for an entire business, the employees may join together and collectively sue the employer, rather than being required to file claims individually. This provision helps to lessen the economic disparity typically enjoyed by employers in litigation.
Third, liquidated damages – in effect, requiring an employer to pay twice the overtime owed – will now be more readily available to employees because the Virginia Overtime Wage Act does not include the “good faith” with “reasonable grounds” defense available to employers under the FLSA. Under the federal law, an employer who failed to pay overtime could escape paying double damages by arguing that it had a good faith reasonable belief it did not have to pay the overtime. Instead, all overtime wage violations in Virginia will be subject to double damages plus pre-judgment interest at eight percent a year. In addition, the law provides for treble damages – three times the overtime owed to one or more employees – for “knowing” violations, which are found when the employer had actual knowledge that it was failing to pay overtime wages and acted in deliberate ignorance or reckless disregard of its obligation to pay all overtime wages owed.
Significantly, employers also may face greater liability for misclassifying employees as “salaried,” which means they would be exempt from the overtime rules. Under the FLSA, employers commonly argue that a misclassified employee’s salary already covers the employee’s straight-time wages for all hours worked and, therefore, it is liable only for the additional “half-time” amount for any hours in excess of 40. The Virginia Overtime Wage Act eliminates this argument, providing instead that misclassified employees are entitled to one and one-half times their regular rate for any hours worked over 40. For Virginia employees paid on a salary or other regular basis, the regular rate will be calculated as “one-fortieth of all wages paid for that workweek.” Moreover, the divisor used to calculate the regular rate will be capped at 40 hours, so the base rate used to determine overtime liability will be higher as well.
Fourth, the Virginia Overtime Wage Act uses a different calculation than the FLSA – one that depends on whether the employee is paid on an hourly or a salary basis. For hourly employees, the regular rate of pay under the Virginia Overtime Wage Act is the hourly rate plus any other non-overtime wages paid or allocated for the workweek (notwithstanding exclusions) divided by the total number of hours worked in the workweek. For salaried employees, the regular rate of pay is one-fortieth of all wages paid for the workweek. Notwithstanding certain exclusions, the FLSA uses the same basic formula to determine an employee’s regular rate of pay which is the sum of all remuneration for employment divided by total hours worked in a workweek.
Overall, the Virginia Overtime Wage Act is a valuable addition to the rights of Virginia workers to be able to support their families.