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Virginia Governor Ralph Northam Signs Spate of Pro-worker Statutes

Last week, Gov. Ralph Northam approved a spate of new pro-employee laws covering a broad array of matters.

“Every Virginian deserves access to a safe and well-paying job,” explained the Governor. “These new laws will support workers and help our economy rebound as quickly as possible from COVID-19.  I am grateful for the General Assembly’s ongoing partnership as we address these critical issues.”

Yesterday, we highlighted two of the new statutes that have garnered significant attention, the Virginia Value’s Act, and the state’s expanded whistleblower protection law. Today, we summarize what you most need to know about the other enactments.

Laws Combatting Worker Misclassification

Effective January 1, 2021, this enactment prohibits employers from classifying workers as independent contractors if they are employees. A worker who performs services for compensation is presumed to be the payer’s employee unless the worker or the payer proves, based on Internal Revenue Service guidelines, that the worker is an independent contractor.

Employers, their officers, and other agents who misclassify workers face debarment and escalating civil penalties: Up to $1,000 per misclassified worker for the first offense; up to $2,500 per misclassified worker for the second offense; and up to $5,000 per misclassified worker for subsequent offenses.

No one may require or ask a worker to enter into an agreement or sign a document that misclassifies the worker as an independent contractor or otherwise inaccurately reflects his or her relationship with the employer. Also, the law bans discrimination and retaliation against anyone for exercising his or her rights under the statute.

This law authorizes misclassified workers to sue their employer for damages if the employer knew about the misclassification. The court may award damages equal to any wages, salary, employment benefits, including expenses that the worker incurred that would otherwise have been covered by insurance, or other compensation lost to the individual, costs, and reasonable attorneys’ fees. Workers who perform services for remuneration are presumed to be employees, unless it is shown, based on Internal Revenue Service guidelines, that they are independent contractors.

This measure goes into effect on July 1, 2020

This law prohibits employers from discharging, disciplining, threatening, discriminating against, or penalizing a worker because he or she (1) has reported or plans to report a misclassification and failure to pay required benefits or other contributions.; or (2) is asked or subpoenaed by an appropriate authority to participate in an investigation, hearing, or inquiry related to misclassification by an appropriate authority or in a court action. These prohibitions apply only if the worker acts in good faith and upon a reasonable belief that his or her information is accurate.

Virginia’s Commissioner of Labor and Industry may commence legal proceedings against employers who violate the law. Available remedies include reinstatement and recovery of lost wages. Also, an employer who violates these provisions is subject to a civil penalty equal to the employee's lost wages.

This enactment is effective on July 1, 2020.

Effective July 1, 2020, this measure requires contractors to properly classify all workers as employees or independent contractors. Also, it authorizes Virginia’s Board of Contractors to sanction contractors that intentionally misclassify workers.

Laws Banning Employment Discrimination

Under this statute, employers must reasonably accommodate workers who are impaired due to pregnancy, childbirth, or related medical conditions, unless the accommodation would impose an undue hardship on the employer. Employers may not retaliate against employees for requesting or using a reasonable accommodation. Nor may employers deny employment or promotion opportunities to otherwise qualified applicants or employees because they must be accommodated. Aggrieved employees may sue for compensatory damages, back pay, and other equitable relief.

The statute covers employers with five or more employees. And, it goes into effect on July 1, 2020.

Combatting Wage Theft

Effective July 21, 2020, this statute allows employees to sue their employer to recover unpaid wages, plus interest at eight percent annually. Employers who knowingly fail to pay wages to an employee also may be liable for reasonable attorneys’ fees and other costs and liquidated damages equal to triple the amount of wages due.

Under this statute, employees have a private cause of action, individually and collectively, against their employer to recover unpaid wages, plus interest at eight percent annually, an additional amount as liquidated damages, and reasonable attorneys’ fees and costs. Employers who knowingly fail to pay wages are subject to a civil penalty of up to $1,000 for each violation. Employers who willfully fail to pay wages with an intent to defraud the aggrieved employee may be assessed liquidated damages equal to triple the amount of wages due.

All construction contracts entered into on or after July 1, 2020, shall be deemed to include a provision under which the general contractor and the subcontractor are jointly and severally liable to pay the wages due to the subcontractor's employees. If those wages are not paid, the general contractor is subject to criminal and civil penalties for which the employer is liable for failing or refusing to pay wages.

Subcontractors must indemnify the general contractor for wages, damages, interest, penalties, and attorneys’ fees owed due to the subcontractor's failure to pay wages, unless the subcontractor's failure results from the general contractor's failure to pay moneys due to the subcontractor.

The statute’s construction contract provisions only apply if: (1) the general contractor knew or should have known that the subcontractor was not paying its employees all wages due; (2) the construction contract is related to a project other than a single-family residential project; and (3) the project’s value, or an aggregate of projects under one construction contract, exceed $500,000.

The statute goes into effect on July 1, 2020.

This measure, which goes into effect on July 1, 2020, prohibits employers from retaliating against employees for filing a complaint, instituting or causing to be instituted a proceeding related to a failure to pay wages, or testifying, or being poised to testify in any such proceeding. The Commissioner of Labor and Industry may institute legal proceedings against offending employers. Available remedies include reinstatement, recovery of lost wages, and liquidated damages.

Limitations on Non-Compete Agreements

This enactment bars employers from entering into, enforcing, or threatening to enforce a covenant not to compete between the employer and a low-wage employee. Employers are subject to a civil penalty equal to $10,000 per violation.

The statute defines "low-wage employee" as either:

  • An employee, intern, student, apprentice, or trainee whose average weekly earnings are less than the average weekly wage of the Commonwealth or who is employed without pay; or
  • An independent contractor who is compensated for his or her services at an hourly rate that is less than the median hourly wage for the Commonwealth for all occupations as reported by the Bureau of Labor Statistics of the US Department of Labor.

Under the statute, a "covenant not to compete" is an agreement that restrains, prohibits, or otherwise restricts an individual's ability to compete with his former employer.

Aggrieved employees may sue their employer for appropriate relief, such as an injunction, liquidated damages, lost compensation, damages, and reasonable attorneys’ fees and costs.

Employers must post in the workplace a notice of the statute’s prohibition or a Department of Labor and Industry-approved summary. Failure to do so will subject the employer to a warning for the first offense and to a civil penalty for a subsequent offense.

The statue applies to covenants not to compete entered into on or after July 1, 2020.

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