By: Barry Dorans
There are a number of very significant changes to Virginia employment laws that go into effect July 1, 2020. Below is an executive summary of those changes. They will dramatically impact the landscape in Virginia.
Employment at Will – Firing Without Cause or a “Bad” Cause
While Virginia employers have had the right to discharge employees without cause, as of July 1st, an employer would be in grave danger if it chooses to do so.
As of July 1st, if you have 6 or more employees and discharge an employee, or you have 15 or more employees and take any adverse impact, that employee has a right to bring a claim that the employer discriminated against the employee based on race, color, religion, sex, sexual orientation, gender identity, marital status, pregnancy, child birth or related medical condition, age, status as a veteran or national origin. Under Virginia Code § 2.2-3902 the employee has a right to file a complaint with the Division of Human Rights and the Division has a right to investigate. The Division must issue a notice to the employee that the employee has a right to file a lawsuit. In that suit, the employee may request a jury trial and, if successful, may recover compensatory and punitive damages, plus attorney’s fees, plus a permanent or temporary injunction.
While there have been similar federal laws that applied to some employers, there are important procedural safe guards in Federal Court. In particular, in a federal claim, the defendant may take depositions of witnesses and use depositions and affidavits to have the case terminated early on by what is called summary judgment. In contrast, the state courts generally do not grant summary judgment motions and are prohibited from using affidavits or depositions. Thus, if a suit is filed, the employee will have a right to go before a jury to have a jury make a determination as to why they were disciplined or discharged or not promoted. In addition, in most federal claims, the employer can prevail if it had a good reason, other than discrimination, for the action it took. Under the state law, the employee can still win if the employer had a good reason so long as the jury finds that a bad reason was part of the motivation as well. For example, if an employee is caught stealing and was fired, that employee could sue and win if the jury found that another employee of a different race, sex, creed, national origin, etc., had committed a similar offense and was not fired. As noted at the outset, an employer would be in a very difficult position before a jury if a plaintiff claimed they were discharged due to race, creed or other protected status and the employer defended on the ground that it fired the employee for no reason.
In addition, it is quite likely that many employees who are disciplined or terminated will retain lawyers to send demand letters. Absent a settlement, the employee has the right to go to court and try to recover damages and attorney’s fees and the best that the employer can hope for is to spend money defending the claim since it will have no right to request recovery of its attorney’s fees.
Practice Pointer – Now more than ever, employers need to make sure their HR practices comply with state and federal laws, they need to thoroughly document the reasons why a particular employee is being disciplined or discharged or not promoted. If an employee can show that persons in a different category (race, age, sex, etc.) were not treated as harshly, the employer must have contemporaneous documents that support the difference in treatment.
Classification as Independent Contractors - Employees
Section 40.1-28.7:7 dramatically changes the landscape concerning classification of individuals as either independent contractors or employees. The statute allows any person who is classified as an independent contractor to file suit claiming he should be treated, and paid, as an employee. The statute states that if a company pays compensation to an individual, it is presumed that individual is an employee, not an independent contractor. The company has the burden of proving that the individual is truly an independent contractor according to the IRS guidelines. One major problem is that the IRS guidelines are vague and could be interpreted in a number of different ways. If a court finds that the person is an employee, the employee can recover lost wages, benefits and expenses including those that would have been otherwise covered by insurance (such as expenses of a hospitalization), plus attorney’s fees. Section 40.1-33.1 further states that an employer may not discharge, discipline, discriminate or penalize an employee or independent contractor or take any retaliation because of a complaint concerning classified of an individual.
As of July 1, 2020, employer may not require an employee to sign a covenant not to compete if the employee makes less than $59,124 per year. If an employer attempts to enforce such a restriction signed after July 1, 2020, the affected employee has a right to bring a suit to have the agreement declared invalid plus lost compensation and damages and attorneys’ fees. An employer can require a non-compete if an employee’s earnings are derived predominantly from sales commissions, incentives or bonuses. Thus, an employer should still be able to have non-competition agreements with its sales people who are paid primarily by commission. While it is not clear, it also appears that an employer may require an employee to sign an agreement prohibiting them from soliciting customers so long as it is not a non-competition agreement. The statute does not impact agreements singed prior to July 1, 2020.
Joint and Several Liabilities for Contractors and Subcontractors
Virginia Code § 11-4.6 has been added to state that in any construction contract entered into on or after July 1, 2020, if the value is greater than $500,000, the general contractor is liable for any wages which any lower tier-subcontractor fails to pay to its employees if the general contractor knew or should have known that a subcontractor was not paying his employees all wages due. This includes not only the wages agreed to between the subcontractor and its employees, but also any amounts that are required to be paid under the Fair Labor Standards Act (minimum wage and overtime) and the Virginia Minimum Wage Act. If an employee of a subcontractor is not paid and can show either that the general contractor was aware he was not being paid or was deliberately ignorant or recklessly disregarded that information that would have suggested he was not paid, the employee can recover judgment against both the subcontractor as well as the general contractor. In addition, the employee can recover a doubling of damages plus attorney’s fees unless the failure to pay is knowing in which the case the damages are tripled. Further, there is a potential criminal liability on the general contractor and subcontractor for the failure to pay.
Disclosing a Co-Workers Pay
A new law provides that an employer may not discharge or retaliate against an employee because they discussed their wages or another employee’s wages. This does not apply to employees who have access to that information as part of their job such as a company bookkeeper.
While the Virginia minimum wage may have received the most attention in the most recent session of the General Assembly, it has been delayed so that it will not go into effect until May 1, 2021 at which time the minimum wage in Virginia will be $9.50 per hour.
If an employee is not paid their wages, they will have the right to sue for unpaid wages. Prior law required employees to file an administrative claim with the Virginia Department of Labor. The employee is able to recover all wages owed plus 8% interest from the date wages are due, treble damages and a $1,000 civil penalty per violation. If an employer commits a “knowing violation” of this new law, a court is empowered to award attorney’s fees to the employee. In addition to civil remedies, the law also provides for criminal liability in certain circumstances. It is possible this may apply to a misclassification claim by a person who was paid as an independent contractor.