PUBLICATIONS

The Virginia General Assembly is currently considering new legislation with substantial impact on Virginia businesses.  Two of these new bills are House Bill 2561 and Senate Bill 1052.  These bills would significantly increase the penalties for payroll mistakes, increase the time for employees to file several different types of claims, expand the types of lawsuits employees can bring as a collective action against employers, and expose small businesses with between five and fifteen employees to lawsuits for discrimination, harassment, and retaliation under state law.

If these bills are enacted, Virginia will be one of the most employee-friendly states with some of the harshest remedies for payroll mistakes in the nation.  House Bill 2561 was passed by the House Labor and Commerce Committee, and it is now headed to a House floor vote on Monday, February 3, 2025. There is no Senate version of the bill.   Senate Bill 1052 has already passed the Senate.  It will crossover to the House Tuesday, February 4, 2025.

If Virginia employers want their voices heard, they should contact their legislators on Monday, February 3, 2025 before the House Bill 2561 floor vote and before crossover on Tuesday, February 4, 2025.

What does HB 2561 Change?

Increased look back period and potential triple damages for overtime lawsuits 

Virginia Code §40.1-29.2 Employer Liability

• Current law:  Employer Liability provides Virginia employees a right to sue in state court for an employer’s failure to pay overtime pursuant to the rules and damages available under the federal Fair Labor Standards Act (FLSA).  This means current overtime lawsuits filed in state court generally cover owed wages going back two years (or three years if the violation was willful).  If they prevail, employees can be awarded double damages and attorneys’ fees.

• Proposed change:  HB 2561 eliminates the FLSA as the standard for damages.  Instead, overtime lawsuits filed in state court would be brought under the framework set out in the Virginia Wage Payment Act (§40.1-29 (J)).  This increases the lookback period from 2 years to 3 years (regardless of whether the violation was willful). It also increases damages from double to triple (if the violation was “knowing”).  So, Virginia employers who make overtime pay mistakes may be liable for triple damages plus attorneys’ fees with a three-year lookback.

• What this means:  Under the FLSA and current Virginia law, employers who fail to pay overtime pursuant to the law must pay back owed wages plus the same amount in liquidated damages with a two-year lookback (or three-year lookback if the violation was willful).  The doubling of damages is to compensate employees for the loss of the use of timely paid overtime wages. 

With the proposed change in HB 2561, the look-back period will no longer distinguish between a good faith attempt to follow/interpret the law and an intentional or reckless failure to follow the law.  All Virginia businesses will be subject to an automatic three-year lookback regardless of whether the failure is intentional.  Employers defending these cases will face triple damages unless they can show the violation was not “knowing.” This is challenging, as it is always difficult to prove a negative at trial.  Settlements will be more difficult and expensive as a result.  Note that Derivative Carriers relating to the airline industry will similarly face triple damages with a three-year look back pursuant to proposed changes in Virginia Code §40.1-29.3, and there is also a proposed bill to extend overtime rights to domestic workers.

Minimum wage violations can be brought as a collective action for triple damages

Virginia Code §40.1-28.12 - Employee Remedies (for minimum wage violations)

• Current law: Employers who fail to pay the correct minimum wage are liable under state law for the unpaid wages plus 8% interest per year.  Although the Minimum Wage Act does not establish a specific look-back period, employers can argue that a two-year lookback applies. (Employees also may bring minimum wage claims under the federal FLSA if they meet the requirements).

• Proposed change:  Minimum wage mistakes will be subject to the damages in §40.1-29 (J) (three-year lookback, triple damages available, and right to bring claims as a collective.) 

• What this means:  Rather than paying the wage and 8% interest, damages will increase to a possible triple damage with a three-year lookback.  Also, under current law, employees may only bring these claims on behalf of themselves.  Under HB 2561, employees can bring these claims as collective actions.

Increased statute of limitations on misclassification claims (i.e., incorrectly classifying an employee as an independent contractor)

Virginia Code §40.1-28.7:7 Misclassification of Workers

• Current law:  All workers in Virginia are presumed to be employees and not independent contractors. If challenged, the burden is on the employer to prove the independent contractor status using the IRS guidelines.  This presumption of employment status is more employee-friendly than similar laws in most states. 

• Proposed change:  The time for the independent contractor who seeks to be deemed an employee increases from two years to three years.

• What this means:  Employers will face exposure to misclassification claims for an extra year.  Employers will need to review document retention policies on independent contractor relationships to make sure they keep documentation for a long enough time to defend against such claims for a minimum of three years after the relationship ends.

Increased time to file an administrative charge with the Virginia Office of Civil Rights

Virginia Code §2.2-3907 - Procedures for a charge of unlawful discrimination; notice; investigation; report; conciliation; notice of the right to file a civil action; temporary relief.

• Current law:  Currently, employees who seek to file a claim of discrimination under Virginia law, which in large part mirrors federal anti-discrimination laws, must do so within 300 days after the act of discrimination.  Employees are required to file charges of discrimination to exhaust their administrative remedies before bringing discrimination lawsuits to court. The Office of Civil Rights of the Attorney General (“OCR”) receives, accepts, and investigates these charges.  Most cases are dual filed with the federal EEOC through a work-sharing agreement between the EEOC and the Commonwealth.

• Proposed change: Extend the deadline to file a claim of discrimination under Virginia law from 300 days after the event of concern to two years (730 days). 

• What this means:  Extending the deadline to file a charge of discrimination significantly increases liability for employers because the longer the time between the event of concern and the filing of the charge, the less information the employer may have, and the fewer the witnesses who may be identifiable, or even employed, making it very difficult for the employer to defend the charge.

A two-year deadline is also out of line with similar state and federal deadlines.  Currently, nearly all states have a 180-day or 300-day deadline to file a charge.  Extending the deadline to two years means Virginia employers face increased liability over other employers in 47 states.  The deadline to file a federal charge with the EEOC (based on the work sharing agreement with the Commonwealth) is 300 days.  The incongruity between a longer deadline at the state level will create a problem for Virginia courts, as employees may proceed to court after exhausting the EEOC process and still have time to try to exhaust state OCR remedies amid ongoing litigation. 

What does Senate Bill 1052 Change?

Expanding the definition of “employer” under the VHRA, thus exposing businesses with five or more employees to discrimination claims

Va. Code § 2.2-3905. Nondiscrimination in employment; definitions; exceptions

• Current law:  The Virginia Human Rights Act (“VHRA”) prohibits discrimination, harassment, and retaliation based on certain protected categories.  However, the VHRA only provides a private cause of action for employees based on how many employees an employer employs and the nature of the claim.  Currently, if the claim involves discrimination regarding actions other than unlawful discharge, the employer must employ 15 or more employees before the employee may file a charge (the same as under federal law). If the claim involves unlawful discharge (other than for age), the employer must have five or more employees before a charge may be filed (federal law requires 15 or more employees).  For unlawful discharge for age claims under state law, employees may file a charge if the employer employs between five and 19 employees (federal law applies at 20 or more employees for age claims).  The one exception to all of the limitations is that “domestic workers” may bring claims under the VHRA regardless of the number or workers employed. 

• Proposed change:  SB 1052 removes the “small business exception.”  If passed, all VHRA discrimination, retaliation and harassment causes of action will be available to employees against any business that employs more than five employees.  The current law protects businesses with less than fifteen employees from causes of action that did not result in termination. SB 1052 would eliminate that protection and expand state law protection over what is available under Federal law to cover many smaller businesses.

• What this means:  Small businesses will face significantly increased exposure to state law claims.  In conjunction with HB 2561, many more employees will have the ability to file administrative charges with OCR, and they will also be able to do so for a longer period.  If passed, this will have a significant impact on state courts because more employees may sue under state law and for a longer time than under federal law.  This also potentially increases the cost of Employer Liability Protection Insurance, as well as increases the total exposure to small businesses for these types of claims.