Virginia Enacts New Legislation Offering Additional Protection to Workers

When the Democrats took control of the General Assembly in addition to the governorship in the November 2019 election, many predicted an expansion of workers’ rights.  That prediction was realized with the 2020 Virginia General Assembly session. This included the recent passage and enactment of four bills that grant new protections to workers in the private and public sector on matters of discrimination, whistleblowing, contractual rights, and compensation.

Virginia Values Act Extends Nondiscrimination Protections to the LGBTQ Community

On April 11, 2020, Virginia Governor Ralph Northam signed into law the Virginia Values Act, extending existing non-discrimination protections to the LGBTQ community.  The Act, which is effective July 1, 2020, extends the Commonwealth’s existing non-discrimination protections in employment, housing, public accommodation, and credit applications to individuals based on their sexual orientation or gender identity.  With the enactment of the Virginia Values Act, Virginia joins a list of over 20 states that have similarly extended non-discrimination protections on these bases.

Like Title VII of the Civil Rights Act of 1964, the Virginia Values Act generally covers employers with 15 or more employees.  It broadens the definition of employer under the Virginia Human Rights Act, however, in these circumstances:

  1. for a discharge based on race, color, religion, national origin, status as a veteran, sex, sexual orientation, gender identity, marital status, pregnancy, childbirth or related medical conditions, including lactation, the law applies to employers with over five employees;
  1. for a discharge based on age, the law applies to employers with over five but fewer than 20 employees. 

The Virginia Values Act also repeals § 2.2-3903 of the Virginia Code, thereby removing the cap on attorney’s fees and costs.  Under the new Act, similar to Title VII, a prevailing plaintiff is entitled to compensatory and punitive damages, reasonable attorneys’ fees and costs in an employment discrimination lawsuit.  A court may also grant permanent or temporary injunctive relief, and a temporary restraining order.

Virginia Prohibits Covenants Not to Compete with Low-Wage Employees

Governor Northam also signed a law prohibiting an employer from entering into, enforcing, or threatening to enforce a covenant not to compete with a “low-wage employee.” 

The law broadly defines who is considered a “low-wage employee,” both in terms of the individuals protected by its provisions and the threshold for what is considered a low wage.  The law defines a low-wage employee as one whose average weekly earnings are less than the average weekly wage of the Commonwealth (which is equal to the maximum workers’ compensation benefits allowed by the Virginia Workers’ Compensation Commission (VWC)).  As of July 1, 2020, this threshold will be $1,137 per week (equivalent to an annual salary of $59,124).    

To determine an employee’s average weekly earnings, an employer must look at the period of 52 weeks immediately preceding the date of termination of employment and divide it by 52.  If the employee has not worked for 52 weeks, then an employer must divide the employee’s wages by the number of weeks the employee actually worked to determine the average weekly wages.    

Although most employers rarely have non-competes with these types of employees, the statute specifically states that low-wage employees include interns, students, apprentices, or trainees employed without pay or whose average weekly earnings are less than the average weekly wage of the Commonwealth.  The law also defines low-wage employee to include independent contractors who are compensated at an hourly rate that is less than the median hourly wage for the Commonwealth. 

The law specifically excludes employees whose earnings are derived, in whole or in predominant part, from sales commissions, incentives, or bonuses.  The statute does not define what it means to be “in predominant part,” however, which may lead to litigation. 

There are stiff penalties for an employer that violates the law.  An employer shall be subject to a civil penalty of $10,000 for each violation.  Low-wage employees may bring a private cause of action against an employer that attempts to enforce a covenant not to compete in violation of this section, and permits the low-wage employee to recover reasonable costs and fees.  An employee may sue within two years of:  (i) the date the covenant not to compete was signed; (ii) the date the employee learns of the covenant not to compete; (iii) the date the employment relationship is terminated; or (iv) the date the employer takes any step to enforce the covenant not to compete.  The law also prohibits retaliation or discrimination against an employee for bringing a civil action under this provision.  A prevailing plaintiff may also recover liquidated damages, lost compensation, reasonable attorneys’ fees and costs (including expert witness fees).  

The law applies to covenants not to compete that are entered into on or after July 1, 2020.  Current non-compete agreements are not subject to this new law.  Employers are encouraged to contact their counsel to ensure that any new non-compete that they enter into on or after July 1, 2020 complies with this statute. 

Employers must post a copy of the law or a summary approved by the Virginia Department of Labor and Industry where other required state and federal laws are posted, and could be subject to additional monetary penalties for failing to do so.

The law does not affect an employer’s ability to enter agreements that prohibit the taking, misappropriating or sharing of trade secrets or proprietary or confidential information. 

Virginia Clarifies Worker Misclassification Test

On April 11, 2020, Governor Northam enacted two laws regarding worker misclassification.  The first law incorporates the IRS guidelines for worker misclassification.  According to the law, the Virginia Department of Taxation shall determine whether an individual is an independent contractor by applying Internal Revenue Service guidelines.  All occurrences of misclassification of employees made by the same employer at the same time, or within 72 hours, shall be deemed a single offense.  The statute provides that no one shall require or request that an individual sign an agreement or document that results in the misclassification of the individual as an independent contractor or does not accurately reflect the relationship with the employer. 

This can create liability for employers if they improperly classify individuals as independent contractors and ask or require the individuals to sign independent contractor agreements or similar documents.  Specifically, employers may be subject to civil penalties of up to $1,000 per misclassified individual for a first offense, with increasing penalties for repeat violations.  This law goes into effect on January 1, 2021. 

In addition, effective July 1, 2020, misclassified individuals may bring a civil action against the employer.  A prevailing plaintiff may recover back wages and benefits (including the costs of benefits that the individual incurred and that would have been covered by their employer had they been properly classified), reasonable attorney’s fees, and costs. 

Therefore, employers are encouraged to review their agreements with independent contractors and ensure that they are properly classified before the effective date of these laws. 

Virginia Enacts Whistleblower Protection Act

On July 1, 2020, the new Virginia Whistleblower Law takes effect and protects employees from being retaliated against by their employers for engaging in certain whistleblower conduct.  Prior to the enactment of this law, Virginia provided very narrow statutory protections for whistleblowers, and most had to seek recourse through common law torts; namely a narrow exception that was created in a Virginia Supreme Court case, Bowman v. State Bank of Keysville.  These claims were only viable if an employee was able to prove that a termination violated a clearly stated public policy within a Virginia statute. 

This new law provides significantly broader protections for employees who engage in the four statutorily defined protected conduct categories.  Specifically, an employer is prohibited from discharging, disciplining, threatening, discriminating against, penalizing, or engaging in other retaliatory conduct that impacts the terms and conditions of employment, such as compensation, location, benefits, or other privileges of employment, because:

  1. The employee, or a person acting on behalf of the employee, in good faith reports a violation of any federal or state law or regulation to a supervisor or to any governmental body or law-enforcement official;
  1. A governmental body or law-enforcement official asks the employee to participate in an investigation, hearing, or inquiry;
  1. The employee refuses to engage in a criminal act that would subject the employee to criminal liability;
  1. The employee refuses an employer’s order to engage in conduct that violates any federal or state law or regulation and the employee informs the employer that the order is being refused for that specific reason; or
  1. The employee provides information to or testifies before any governmental body or law-enforcement official that is investigating, inquiring into, or conducting a hearing about any alleged violation by the employer of a federal or state law or regulation.

While these protections are more expansive than before, they are still more narrow than many other states’ whistleblower laws in terms of the specificity of the protected conduct that is recognized, and because the employee’s conduct or statement of refusal must be specific to the statutorily defined protections. The Act also proscribes some employee behavior to protect employers in that the Act does not:

  1. Authorize employees to disclose the employer’s data otherwise protected by law or any legal privilege;
  1. Allow employees to make statements or disclosures that the employee knows to be false or that are in reckless disregard of the truth, or
  1. Permit employees to make disclosures that would violate federal or state law or diminish or impair the rights of any person to the continued protection of confidential communications afforded by common law.

An employee who believes they are aggrieved under this statute may file suit in in any court of competent jurisdiction within one year of the employer’s alleged prohibited retaliatory action. There is no administrative exhaustion requirement before commencing suit. If the court concludes that the employee did suffer prohibited retaliation, the employee may receive any or all of the following remedies:

  1. An injunction against the employer to restrain the employer from continued violation of the Act;
  1. Reinstatement of the employee to the same or equivalent position the employee held before the retaliatory conduct occurred; and/or
  1. Compensation for lost wages, benefits, and other remuneration, with applicable interest, and reasonable attorneys’ fees and costs.

Looking Forward

Virginia employers should be aware that additional changes to the workplace may be coming in the near future.  Governor Northam proposed amendments to a several other bills, including a bill to raise the minimum wage in Virginia.  The Virginia General Assembly will reconvene later this month for a one-day session to consider the governor’s amendments.  Employers should keep themselves informed of any further developments through knowledgeable labor and employment counsel. 

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.