Virginia Enacts Several New Employment Laws

While COVID-19 has been garnering the headlines, Virginia has quietly enacted several new employment-related laws that will redefine employees’ rights and remedies in the Commonwealth.  In addition to the Virginia Values Act, which fundamentally changes the legal rights and remedies available to employees who sue their employers under the Virginia Human Rights Act, Virginia has enacted a new whistleblower protection law, a contractor misclassification law, new wage protection measures, a restrictive covenant law, and revised the handling of marijuana offenses in Virginia.


New Wage Theft Law

Virginia’s HB 123/SB 838 (Wage Theft Law) creates a private right of action for employees to sue their employers for allegedly unpaid wages – a “first” for Virginia. Previously, Virginia employees had no private right of action under state law, but rather could only file an administrative claim with the Virginia Department of Labor and Industry (DOLI).

The new Wage Theft Law permits recovery of wages owed (plus 8% interest from the date the wages were due, which is higher than Virginia’s 6% statutory pre-judgment interest for most other judgments). The law also permits recovery of treble damages and a $1,000 civil penalty per violation. If an employer is found to have committed a “knowing violation,” a court can award attorneys’ fees.

The law also carries potential criminal penalties for “knowing” violations. If the amount owed is less than $10,000, employers can be found guilty of a misdemeanor. If the amount owed is more than $10,000, or if an employer has similar previous offenses, employers can be found guilty of a felony and subject to a corresponding prison sentence. The definition of “knowing” includes actual knowledge, deliberate ignorance, or acts in reckless disregard of the truth. Establishing that an employer acting knowingly does not require proof of a specific intent to defraud the employee.


No Restrictive Covenants for “Low-Wage” Employees

Virginia’s HB 330/SB 480 (Restrictive Covenant Law) prohibits employers from entering into, enforcing, or threatening to enforce a restrictive covenant against “low-wage” employees. The new law takes effect July 1, 2020, and does not apply retroactively.

The Restrictive Covenant Law defines restrictive covenants as “an agreement that restrains, prohibits, or otherwise restricts an individual’s ability to compete with his former employer.” The text supports nondisclosure agreements and other efforts to prevent misappropriation “of certain information, including trade secrets, as defined in §59.1-336, and proprietary or confidential information” and suggests that non-solicitation provisions are still viable as well.

“Low-wage” employees are broadly defined as those whose average weekly earnings are less than the average weekly wage of the Commonwealth (currently, a little over $1,000). The definition expressly includes “interns, students, apprentices, or trainees employed, with or without pay, at a trade or occupation in order to gain work or educational experience.” Even independent contractors who earn “an hourly rate that is less than the median hourly wage for the Commonwealth for all occupations” (a bit less than $20 per hour right now) are included.  Significantly, “any employee whose earnings are derived, in whole or in predominant part, from sales commissions, incentives, or bonuses paid to the employee by the employer” are excluded.

The Restrictive Covenant Law requires an employer to post a DOLI-approved notice in the workplace summarizing the law. The new law also directly puts the DOLI into an active role in evaluating restrictive covenants. Not only does it direct the Commissioner to impose a civil penalty of up to $10,000 for each violation it determines, but also provides:

[The] Commissioner shall prescribe procedures for the payment of proposed assessments of penalties that are not contested by employers. Such procedures shall include provisions for an employer to consent to abatement of the alleged violation and to pay a proposed penalty or a negotiated sum in lieu of such penalty without admission of any civil liability arising from such alleged violation.

The new law places a blanket prohibition on any restrictive covenant for half of the workers in Virginia. Essentially, any Virginia employee who earns less than $52,000 per year cannot be bound by a prohibited restrictive covenant.  Employers will need to be more selective in determining which employees they ask to sign such agreements.


Law Decriminalizing Marijuana Possession

Governor Northam recently approved Virginia SB 2 and HB 972 to decriminalize simple marijuana possession offenses. The law reduces penalties for simple possession offenses (up to one ounce of marijuana) to a civil violation. It also seals the records related to prior convictions under the marijuana law and prohibits employers (and educational institutions) from requiring an applicant to disclose information concerning any now-decriminalized marijuana arrests, criminal charges, or convictions.


Employee Misclassification Changes

 Effective July 1, 2020, new § 40.1-28.7:7 of the Code of Virginia allows any individual not properly classified as an employee to bring a civil action for damages against their employer for failing to properly classify them as an employee if the employer had knowledge of the individual’s misclassification. The new law will open the door for class actions. 

The person paying the remuneration is presumed to be the “employer” of the individual who was paid for performing the services, unless it is shown that the individual is an independent contractor as determined under the Internal Revenue Service guidelines. If a plaintiff is successful, a court may award damages in the amount of any wages, salary, employment benefits (including expenses incurred by the employee that would otherwise have been covered by insurance), or other compensation lost to the individual, reasonable attorneys’ fees, and associated litigation costs.

In addition, effective January 1, 2021, Virginia HB 1407 amends Virginia’s tax laws. Under § 58.1-1900, an individual performing services for an employer for remuneration will be considered an employee of the party that pays that remuneration, unless the individual or the employer affirmatively demonstrates an independent contractor status.


New Whistleblower Protections

Virginia Governor Ralph Northam has signed a comprehensive whistleblower protection law, which takes effect on July 1, 2020.  Virginia HB 798 (Whistleblower Law) protects employees from retaliation for:

  • Reporting to a supervisor or any governmental body violations or suspected violations of federal or state law;
  • Refusing to engage in a criminal act or carry out an order that would violate federal or state law; or
  • Otherwise engaging in protected activity by participating in an investigation. 

The definition of protected activity under the Whistleblower Law is broad and includes the following:

  • Reporting in good faith a violation of any federal or state law or regulation to a supervisor or to any governmental body or law enforcement official;
  • Being requested by a governmental body or law enforcement official to participate in an investigation, hearing, or inquiry;
  • Refusing to engage in a criminal act that would subject the employee to criminal liability;
  • Refusing an employer’s order to perform an action that violates any federal or state law or regulation when the employee informs the employer that the order is being refused for that reason; or
  • Providing information to or testifying 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.