Virginia’s New Battle Over Minimum Wage

Virginia’s General Assembly 2022 session is now well underway, and the election result’s impacts on businesses is beginning to take shape. While the legislature has focused in large part the politically charged debates regarding parents’ rights regarding masks in schools and the need for masks during the pandemic, there have been other business-oriented bills that have advanced that are equally contentious.

For example, the prior General Assembly, which was then controlled by the Democrats, voted to increase Virginia’s minimum in January 2022 to $11 per hour and voted for subsequent increases thereafter until 2024. In this session, Republican members of the House of Delegates, which is now controlled by the Republicans, introduced a bill to freeze any minimum wage increases at the current $11 per hour figure. That bill recently passed the House of Delegates. However, the Senate, which is controlled by the Democrats, recently rejected a similar bill and are expected to reject the bill from the House of Delegates. Similarly, in another example, when the Democrats controlled both chambers they passed legislation that allowed local governments to engage in collective bargaining with local unions, which had previously been banned for government entities. The new House of Delegates has passed a measure to effectively repeal such legislative, while the state Senate has blocked such legislation. In other words, divided government is now the norm in Virginia and dramatic policy swings are unlikely.

That said, Virginia businesses still need to carefully monitor developments. The Democrats have a one seat advantage in the Senate and cannot lose a single senator for any reason because the new Republican Lieutenant Governor Winsome Earle-Sears can break any ties in favor of the Republicans. The school masking issue is advancing in the Senate because of a few democrat cross over votes.

In many ways, the current environment in Virginia mirrors the larger national environment in the U.S. Senate in which the party nominally in charge has at times found that a divided Senate means exercising control is harder than party members think it should be. Indeed, the recent stroke suffered by New Mexico U.S. Senator Ben Ray Luján is forcing capital hill leadership to rearrange votes and could impact the timing of U.S. Supreme Court confirmation hearings.

For the time being, in Virginia, changes to the minimum wage law and collective bargaining are unlikely, but the close margins in the Generally Assembly means that sickness, death, or simply disagreement from one member could change results or control on any number of issues. Businesses and citizens should therefore carefully monitor the situation in Richmond between now and the next state elections in 2023.

General Assembly Guts 2021 Overtime Wage Act

In 2021, the Virginia General Assembly passed the Virginia Overtime Wage Act which expanded the state’s overtime requirements beyond those set forth in the federal Fair Labor Standards Act. This change in law increased the statute of limitations for bringing a claim, an important change in the calculation requirements for overtime pay, and new penalties for employers that do not pay the proper amount.

However, the recent elections resulted in a new General Assembly that has undone these recent changes. During the last legislative session, the House of Delegates and the State Senate both considered and adopted identical bills that effectively repelled the 2021 law. Thirty-two senators and fifty-eight house members from both parties agreed to essentially reinstate the old law.

What’s Changed?
If signed by the Governor, a large section of Virginia Code § 4.01-29.2 that provided for the enhanced employer liability will be stricken and instead, liability will only result from violations of the federal Fair Labor Standards Act. Likewise, the provision for the three-year statute of limitations has been removed in favor of the former two-year statute, and the overtime calculations has been reset to the same as those in the federal act. In addition, the new law has restored the good faith defense that is part of federal law and functions as an escape hatch for employers that make good faith mistakes by allowing courts not to award liquidated damages or an amount that exceeds the lost wages.

Power Of Elections
While other issues such as collective bargaining and minimum wage changes were rejected by the General Assembly, the reversal of this Overtime Wage Act in such as short span of time is a testament to the power of elections. Moreover, Virginia businesses will to have to re-evaluate their business practices again in short order, and employees with lost wage claims will find pursuit of those claims harder in the future.

General Assembly Punts on Commercial Pot Sales

Divided government has sunk the chances for a regulated market to sell marijuana in the Old Dominion, at least for now. Last year when the General Assembly and the Governor’s mansion was controlled by the Democrat Party, Virginia took the historic step of legalizing marijuana. While the legalization is permanent, the mechanisms setup by the General Assembly to regulate sales, to regulate licenses, and the taxing scheme is not permanent. At the time, the General Assembly quickly pushed through legislation on a party line vote but included a reenactment clause in which the next General Assembly would have to revote on the sales and taxing structure before it could become permanent. However, since that time, Virginia elected a new Republican Governor and a Republican House of Delegates which has complicated those plans.

What’s the Hold Up?
The reenactment clause in the original marijuana legislation means that marijuana legislation is different from other recent changes that passed when the Democrats controlled the entire government. In those cases, a Democrat controlled Senate could block any attempts by Republicans to undo the law, but marijuana sales can only become regulated if all side cooperate. But that was not the end result.

While both sides have publicly stated that they wanted to move forward with legal sales, the Republican controlled House did not pass its own legislation about marijuana, and by the end of the session, decided to table the Senate’s version. Proponents of passing a bill had wanted quick passage of a bill and argued that not acting would allow a black market to form, and some opponents argued that the bill was too complicated to rush. Ultimately, no action occurred.

Legal Limbo for Pot Sales.
The upshot is that while marijuana remains legal because the reenactment clause did not apply to that side of the bill, the mechanisms for actually selling marijuana legally remain in legal limbo. Important questions such as what tax rate will apply, what tax revenues will be used for, and who will be prioritized to get dispensary licenses remain. Virginia business are now left guessing what the answers to these and a myriad of other important business issues involving marijuana until next year, unless a special legislative session is called.

Criminal Sentences Remain In Place
Gridlock also doomed a Senate Bill that would have allowed judges to reconsider the criminal sentences of individuals convicted of marijuana-only related offenses after the Senate bill died in the House Appropriations Committee. While some members of both sides of the isle have expressed support for such legislation, disputes over whether studies should occur and whether such legislation should be part of the larger marijuana bill persisted.

New Limits for Delta-8 Products
The House and Senate did come together to restrict the sale of products containing the chemical Delta-8 by redefining that chemical as marijuana. Marijuana sales can only be done through dispensaries, despite the regulatory structure not being in place. Delta-8 is a chemical that can be synthetic or natural and it is hemp and a variety of other products. The bill was passed by both chambers with overwhelming support, and if signed by the Governor, will make it illegal for non-licensed stores to sell products with high levels of Delta-8. In particular, only licensed retailers could sell products that are less than one milligram per product. Moreover, the doses that are allowed would only be allowed to sell to those that are 21 and older.

The immediate impact would be prohibiting many current retailers from selling products containing Delta-8 that are currently on shelves because of mislabeling and because they would be over the legal limit. Finally, the same bill prohibits the retail sale of marijuana products that depict or are in the shape of a human, animal, or vehicle. The intent of this provision eliminates shapes that appeal to children.

Bottom Line: It’s Complicated
The bottom line is that while marijuana remains legal in Virginia, the regulatory environment is becoming increasingly complicated. Virginia businesses and those in industries impacted by the new marijuana laws will need to continue to closely monitor legislation for at least another year in order to learn what will and what will not ultimately be allowed.

DGRead 22.03.15

General Assembly Punts on Commercial Pot Sales; Rocket Docket Update; General Assembly Guts 2021 Overtime Wage Act; Happy St. Patrick’s Day

DGRead 22.03.01

The ADA: Impact of COVID-19; The Virginia House vs. Senate on the Sale of Marijuana: February Update; Virginia’s New Battle Over Minimum Wage