Virginia Enacts a New Overtime Law

Historically, the Commonwealth of Virginia has followed the federal Fair Labor Standards Act (FLSA) when it comes to overtime pay violations.  However, that will soon change.  On March 30, 2021, Virginia Governor Northam signed into law the Virginia Overtime Wage Act (HB 2063), which will become effective on July 2, 2021.  For employers, the good news is that the new law will still coincide with the FLSA standard of overtime being due only for those hours worked in excess of forty (40) in a workweek.  However, there are some differences in the new Virginia law that will make it easier for employees to bring claims and recover damages.

Increased Statute of Limitations

Under the FLSA, there is a presumptive 2-year statute of limitations on claims, with a maximum 3-year limitations period for violations deemed to be “willful.”  The new Virginia law makes all overtime violations automatically subject to a 3-year limitations period, which will expand by a year the limitations period for many run-of-the-mill overtime claims.

Increased Potential for Liquidated Damages

Under the FLSA, successful employees may recover “liquidated damages” equal to the amount of unpaid back wages – commonly termed “double damages.”  But the FLSA provides a defense to such “double damages” if the employer can show that it acted in “good faith” and had “reasonable grounds” for thinking its actions were compliant with the FLSA.

Under the new Virginia law, all overtime violations are subject to double damages, and the law contains no similar “good faith” defense that exists under the FLSA.  Furthermore, the Virginia law permits treble damages (i.e., “triple damages”) for “knowing” violations of the law.  This means that employers would pay triple damages if they had actual knowledge that they failed to pay the overtime wages due and acted in deliberate ignorance or reckless disregard as to whether it was paying overtime correctly.

Regular Rate Calculation Changes

The new law also changes how an employee’s “regular rate” is calculated for determining how to calculate the amount of unpaid overtime.  Under the FLSA, the same formula is used to determine every employee’s regular rate (all compensation divided by all hours worked in a workweek). The new Virginia law, however, creates a new method for determining the “regular rate” of those employees paid via salary. 

For salaried employees, the regular rate will be calculated as “one-fortieth of all wages paid for that workweek.  This seems to prevent employers from paying non-exempt employees a fixed salary that covers straight-time wages for hours in excess of forty (40) hours in a workweek, or from utilizing the “fluctuating workweek” method of calculating overtime that is permissible under the FLSA.

Furthermore, the new calculation method will result in larger damages awards to employees who have been misclassified. Under the FLSA, employers may successfully argue that salaried employees who were misclassified as “exempt” have been paid “straight time” or their regular hourly rate for all hours worked – meaning that all the employer owes the misclassified employee is the remaining “half time” for those overtime hours worked.  But Virginia’s new “regular rate” calculation method will eliminate this defense for Virginia employers.  Instead, misclassified employees can recover damages equal to “time and a half” their regular rate for any hours worked over 40 in a workweek.