If you’re found liable for age discrimination, it’s going to cost you

By: Jonathan R. Mook and Colete Fontenot
DiMuroGinsberg, PC

The Equal Employment Opportunity Commission (EEOC) recently scored a win for older workers when the U.S. Supreme Court declined to review the U.S. 4th Circuit Court of Appeals’ decision in EEOC v. Baltimore County. As a result, employers can look forward to paying back wages without exception as a remedy for age discrimination.

Origins of the case
The EEOC’s case began when two older Baltimore County employees filed an age discrimination charge in which they claimed they were paying a higher percentage of their salary to the county’s retirement plan than their younger coworkers paid. The plan was structured so that the amount contributed by employees rose with their age. Thus, employees who enrolled when they were 20 paid 4.42 percent of their wages, those who joined at 40 paid 5.57 percent, and those who enrolled at 50 paid 7.23 percent.

After an investigation, the EEOC determined the county’s retirement contribution structure violated the federal Age Discrimination in Employment Act (ADEA) because employees’ age was the “but-for” cause of differential treatment in their contribution amounts. The county disputed that determination, however, so the EEOC filed suit.

County found liable for discrimination
The Maryland federal district court sided with the EEOC and concluded that the county’s contribution formula discriminated against employees on the basis of their age. Unhappy with that result, the county appealed to the 4th Circuit, which is based in Richmond, Virginia, and whose decisions apply to employers in Maryland, North and South Carolina, Virginia, and West Virginia.

The 4th Circuit upheld the lower court’s finding that the county’s retirement contribution structure violated the ADEA. The court of appeals then sent the case back to the district court to calculate damages. In the renewed district court proceedings, the EEOC sought retroactive back pay based on the older employees’ higher contributions to the retirement plan.

What does this decision mean for you?
Mandatory back pay as a remedy for age discrimination can be quite substantial, which is a compelling reason to make sure all your managers are clearly aware of the liability that age discrimination presents. Here are a few steps you can take to avoid a large back-pay award being rendered against your organization:

  • Encourage employees to report anything they consider to be age discrimination at the time it happens, and move quickly to resolve any complaints that have merit.
  • Review your personnel policies to ensure there’s no “systemic” age discrimination written into your guidelines, benefits, or compensation.
  • Finally, be sure to talk with your older employees and let them know they are valued members of your organization and should tell you if they feel they aren’t being treated fairly.

The best way to avoid age discrimination claims or any other type of workplace discrimination is to work with your employees to resolve any problems they identify. That way, there’s no need for anyone to file an EEOC charge or pursue a discrimination claim against you in court.

Is back pay mandatory?
The district court refused to award back pay to the county employees. Because the language of the ADEA itself doesn’t require an award of back pay, the district court believed it had the discretion to determine whether to grant such an award, and it exercised its discretion to deny the request for back pay. The EEOC appealed the denial of back pay to the 4th Circuit, and this time, the court of appeals reversed the district court.

The appeals court reasoned that even though the ADEA doesn’t require back pay, it still had to be awarded because the Act’s remedies incorporate the terms of the Fair Labor Standards Act (FLSA). The FLSA provides that employers “shall be liable” for the payment of lost wages. Accordingly, the 4th Circuit said that upon a finding of age
discrimination, lost wages in the form of back pay are mandatory remedies under the ADEA. Because the U.S. Supreme Court declined to review the 4th Circuit’s decision, back-pay awards for violations of the ADEA are now mandatory, at least for employers within the 4th Circuit.

Virginia to ratify Equal Rights Amendment

By: Jonathan R. Mook and Colete Fontenot
DiMuroGinsberg, PC

When the Virginia General Assembly convened in January, ratification of the Equal Rights Amendment (ERA) to the U.S. Constitution was at the top of the agenda. As stated in Section 1, the ERA guarantees: “Equality of rights under the law shall not be denied or abridged by the United States or by any state on account of sex.” Section 2 provides the enforcement mechanism by which “Congress shall have the power to enforce, by appropriate legislation, the provisions of this article.”

Since both the Virginia Senate and the House of Delegates now have a Democrat majority, there is little doubt the ERA will be ratified before the legislative session closes in March. At that point, Virginia will become not only the 38th state to ratify the ERA but also the final state to satisfy the required two-thirds majority needed to amend the U.S. Constitution.

Additional hurdles
Importantly, the General Assembly’s anticipated ratification of the ERA doesn’t necessarily mean we’ll have a new constitutional amendment this year. There are at least two key hurdles to overcome:

Deadline. When a super majority of Congress passed the ERA in 1972, the legislation included a seven-year deadline for two-thirds of the states to ratify the amendment. By 1977, however, only 35 of the necessary 38 states had endorsed ratification.

At that point, many observers thought the ERA was dead as a doornail. Yet, in 2017, 42 years after the last state ratified, Nevada became the 36th state to sign on to the amendment. In 2018, Illinois became teachers, nurses, support staff, and other jobs often held by women are just as valuable to an organization’s bottom line and should be paid in a comparable fashion to disproportionately male-held positions such as doctors, administrators, and other highly compensated professionals.

Bottom line
Section 3 of the ERA states: “This amendment shall take effect two years after the date of ratification.” The lead time will give you some breathing room to review your company’s policies and procedures to ensure all employees are treated equally. Your review should include not only employee pay but also nonmonetary benefits, perks, insurance, profit sharing, time off, disciplinary policies, and even peripheral issues like office size, dress code, and flexibility of hours worked.

As always, the best way to know how a new law affects your business is to consult with an experienced employment law attorney. It’s always a good idea to designate one person in your HR office to stay up to date on all changes affecting employment law, including the ERA. The individual also can be the point person to hear employee complaints if there is an incident of alleged discrimination. Have a workable procedure in place so you aren’t caught off guard and can handle all employee concerns or complaints in a prompt and thorough fashion.

Rescissions. The second obstacle arises because five states (Idaho, Kentucky, Nebraska, South Dakota, and Tennessee) that initially ratified the ERA have voted to rescind ratification. The issue of whether the rescissions have legal effect has yet to be determined.

Consequently, Virginia’s ratification of the ERA will not be the end of the story. Instead, ratification will likely spawn a host of lawsuits addressing those knotty constitutional issues, so stay tuned for further developments on the legal front.

What ERA means for you
What the ERA’s ratification means for employers not only in Virginia, but nationwide cannot be predicted with certainty. But, without question, an amendment to the U.S. Constitution guaranteeing women’s equal rights will be a watershed event with repercussions for years to come.

As a practical matter, regardless of whether the ERA actually makes it into the U.S. Constitution, the very vocal political movement supporting the amendment will certainly have an impact on a variety of efforts to ensure women’s equality, especially in the workplace. Proponents are focusing on the influence the amendment will have on pay equity legislation. That isn’t just about “equal pay for equal work” but also about pay differences between lower-paid jobs traditionally held by women versus jobs usually held by males, which have a higher pay level.

Consequently, we’re likely to hear more about ensuring the comparable worth of jobs traditionally performed by women versus male-dominated jobs. Thus, expect to see a public debate on whether the 37th. Even with Virginia bringing the number to 38, the question remains, “Is it too late?”

Trump’s Executive Order Creates New Uncertainty for Employers

By: Jarrad Wright

At the end of September, President Trump issued Executive Order 13950 innocuously titled “Combating Race and Sex Stereotyping,” which has ignited a storm of controversy among employers that do contracting with the federal government. Among other things, the Executive Order bars federal contractors and subcontractors from conducting certain types of racial sensitivity trainings.

EO Specifics

More specifically, the Executive Order states that federal contractors “shall not use any workplace training that inculcates in its employees any form of race or sex stereotyping or any form of race or sex scapegoating.”  This prohibition includes any training that “an individual, by virtue of his or her race or sex, is inherently racist, sexist, or oppressive, whether consciously or unconsciously.”  In addition, the Executive Order places similar restrictions on entities receiving federal funding and grants.

While the Executive Order took effect immediately, its requirements, with certain exceptions, apply only to contracts entered into after November 21, 2020.

OMB Guidance

Shortly after the Executive Order was issued, the Office of Management and Budget (“OMB”) issued a memorandum to provide guidance to federal agencies in implementing the order.  OMB’s memorandum directs federal agencies to identify all training programs related to diversity and inclusion conducted by the agency or by outside vendors and the costs of such programs.  The memorandum further requires agencies to review all government contractor workplace training programs to determine whether they comply with the Executive Order.  All statements of work and future government contracts also must comply with the Executive Order’s requirements.

Although the implementation of the Executive Order is ongoing and the situation is fluid, it has had an immediate impact.  The U.S. Office of Personnel Management reportedly has directed all federal agencies to submit to the OPM for review all training programs related to diversity and inclusion, even if such materials previously had been approved.  Likewise, the Department of Justice has postponed diversity and inclusion training programs, pending further review.

OFCCP Info Request

The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) also has published in the Federal Register a notice seeking “comments, information, and materials from the public relating to workplace trainings that involve race or sex stereotyping or scapegoating.”  Significantly, OFCCP defines “race and sex scapegoating” broadly as “assigning fault, blame, or bias to a race or sex, or to members of a race or sex because of their race or sex.”  “Scapegoating” encompasses the view “that, consciously or unconsciously, and by virtue of his or her race or sex, members or any race are inherently racist or are inherently inclined to oppress others, or that members of a sex are inherently sexist or inclined to oppress others.”

The OFCCP’s information request specifically seeks materials from federal contractors, federal subcontractors, and their employees, and encourages federal contractors and subcontractors to voluntarily submit materials for review.  In that instance, if a contractor corrects non-compliant materials, the OFCCP states it will “not take enforcement actions.”  The OFCCP, however, reserves the right to institute enforcement proceedings should non-compliant materials not be corrected.  Finally, the notice includes a public hotline and email address for the public to “confidentiality report to the Federal government the unlawful use of racist or sexist training materials.”

Political Implications

Needless to say, President Trump’s issuance of Executive Order 13950 is a politically charged issue, and its continued enforcement, effectiveness, and existence in all likelihood will depend on the outcome of the presidential election.  If former Vice President Joseph Biden is elected, the Executive Order is likely to be rescinded early in his administration.  If President Trump is re-elected, on the other hand, the Executive Order will remain in place and federal agencies will continue the process of providing clarifications and instructions on its requirements.  In any event, legal challenges to the effectiveness of the order and its implementation by federal agencies are likely to occur, as interested entities ranging from civil rights organizations to the U.S. Chamber of Commerce have raised questions and concerns about the Executive Order.

Bottom Line

At least for the time being, the Executive Order remains in place, and all government contractors and subcontractors need to consider its immediate impact upon their operations.  This may include temporarily postponing diversity training and programs until after the election or until further clarification is forthcoming from the federal government on the order.  What is clear is that before taking any action, it always is best to consult with counsel knowledgeable about the employment aspects of federal contracting law.

At this point, the longer-term impact of the President’s Executive Order is simply unknown.  That said, going forward, the order has the potential to significantly impact all companies that do business with the federal government.  Accordingly, we shall continue to keep you informed of further developments on the impact of the President’s race and sex stereotyping order.

Jarrad Wright is a partner at DiMuroGinsberg, P.C. and can be reached at mjwright@dimuro.com.

Virginia Law Targets Worker Misclassification

By:  Jayna Genti

Companies misclassifying their employees as independent continues to be a hot-button issue throughout the country, and Virginia is no exception. In the last year alone, legislation related to independent contractor misclassification was introduced at the federal level and in at least 20 states. New Jersey and California recently enacted employee misclassification laws, and other states including New York are considering similar legislation.

Virginia Acts to Prevent Misclassification

In 2019, Virginia Governor Northam issued an executive order calling for an inter-agency task force to make recommendations on how to address the issue.  The study results issued last November found that about 214,000 Virginia workers are misclassified as contractors, costing the Commonwealth some $28 million in tax revenues each year.

In response to the task force’s recommendations, the Virginia General Assembly passed legislation this term that seeks to prevent misclassification and to penalize those employers who misclassify their workers.  Governor Northam recently signed the legislation into law, which will take effect January 1, 2021.

Classification of Employees

Under the new law, the Virginia Department of Taxation will determine whether a worker is an employee or independent contractor by applying Internal Revenue Service guidelines.  The IRS guidelines involve a multi-factor analysis, with the most important being the level of control exercised by a company.  In making the requisite assessment, the presumption will be that a worker who performs a service for an employer for pay will be considered an employee unless the individual or his or her employer demonstrates that she is an independent contractor.

Penalties and Enforcement

The new Virginia misclassification law has some real teeth.  Businesses that improperly treat their employees as independent contractors will be subject to a fine of up to $1,000 per worker for a first offense.  Maximum fines will increase to $2,500 per misclassified individual for a second offense, and up to $5,000 per misclassified individual for a third or subsequent offense.

The new legislation also prohibits the awarding of public contracts to employers that misclassify workers.  Debarment will last for up to one year for a second offense and up to two years for a third offense.  The legislation further requires the Virginia Department of Taxation to share information to help with enforcement.

Further Efforts to Halt Misclassification

The new Virginia law imposing penalties for employee misclassification will not be the end of the story.  Further efforts are likely to be forthcoming to crack down on employers who misclassify their workers, and deny tax revenues to both states and the federal government.  The impetus for the Commonwealth to move quickly against employee misclassification has arisen as a result of the recent federal legislation extending unemployment insurance to gig workers and other independent contractors who do not traditionally receive unemployment when they cannot work.  Unemployment benefits are funded by specific payroll taxes on employee pay.  Companies, however, do not pay unemployment insurance for independent contractors, even though they will now be able to receive unemployment benefits courtesy of the federal government.

Thus, we can expect heightened scrutiny on companies that misclassify employees as independent contractors and, thereby, evade their obligation to pay unemployment taxes.  As it stands, misclassification already has reportedly denied the Commonwealth substantial revenue, and this concern will only be heightened by the current COVID-19 pandemic and the stay-at-home orders shuttering many businesses.

Bottom Line

Going forward, you can expect greater attention by Virginia enforcement and investigative agencies to claims of worker misclassification.  Those agencies are on high alert for violations of the law and undoubtedly will use the full spectrum of available enforcement mechanisms to crack down and penalize those employers that evade the law.  The stakes of losing at the agency level are high and can lead to fines, legal expenditures, and litigation.

Given the continuing evolution of these and other related employment law matters, you are well advised to undertake a thorough assessment of the appropriateness and defensibility of classifying any members of your workforce as independent contractors.  Such an evaluation should be undertaken under the direction of an employment law attorney who is well versed in these matters and can review your policies and present workforce classifications to ensure legal compliance.  Misclassification no longer will result in simply a slap on the wrist.  Real penalties will now be imposed.

Fourth Circuit Affirms Dismissal of Employee’s FMLA Claim

By:  Jarrad Wright

A recent Fourth Circuit opinion is a reminder for all employers to thoroughly document problems with employees before making firing decisions.  In a two to one decision, a Fourth Circuit panel on July 1, 2020 upheld the decision of a Virginia federal district court judge to disregard a jury verdict in favor of a former employee who had brought a wrongful termination claim pursuant to the Family Medical Leave Act (“FMLA”).

The case, Fry v. Rand Construction Corp., No. 18-2083 (4th Cir. 2020), involved Arlene Fry’s (“Fry”) suit against her former employer, Rand Construction Corporation (“Rand”), for several claims, including firing her for taking leave under the FMLA.  Among other protections, the FMLA provides covered employees with twelve weeks of leave during any twelve-month period for family related reasons or for an employee’s serious health condition.  After taking leave, employees are entitled to return to their prior position or an equivalent position.

The Trial

Fry had worked as an administrative assistant for Rand’s CEO for several years before tension in their relationship developed.  During the trial, Fry’s counsel argued that shortly after Fry had taken two weeks leave for a medical condition, the CEO complained that Fry had been on a cruise instead of medical leave.  Fry later filed with the company two complaints that her FMLA rights were violated, and she was fired the day after filing her second complaint.  Following the completion on Fry’s case-in-chief and before Rand presented its evidence, Rand moved for judgment as a matter of law, arguing that there was insufficient evidence to go forward with the trial.  While District Judge Anthony Trenga expressed reservations about the lack of evidence, the trial proceeded, and the District Court stated it would decide the motion after the trial verdict if necessary.

Rand’s case involved putting on extensive evidence of prior documented problems with Fry’s work that existed before Fry had taken FMLA leave or had notified her employer of her health problems.  The information submitted at trial included emails from the CEO to human resources personnel and the Chief Operating Officer complaining about Fry’s lack of diligence in keeping the CEO informed of changing appointments.  Rand also put on evidence of the conduct that occurred after the FMLA leave occurred.

Notwithstanding this evidence, the jury entered a verdict in favor of Fry for the FMLA claim in the amount of $50,555, and rejected the remaining claims.  Thereafter, Judge Trenga granted Rand’s motion for judgment as a matter of law and set aside the verdict.  Applying the burden-shifting framework set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), the District Court found that Rand had established a legitimate nondiscrimatory reason for terminating Fry, namely her job performance, and held that Fry had “failed to introduce evidence from which a jury could reasonably find that Rand’s proffered reason was untrue or pretext.”

The Fourth Circuit Decision

In upholding District Court’s decision, the two Circuit Court Judges in the majority relied upon the documented instances in which the CEO and Rand had expressed unhappiness with Fry’s job performance, both before and after her taking FMLA leave.  Ultimately, the majority opinion held that the perception of the employer was the relevant issue, not Fry’s self-assessment, and concluded that Fry had not presented enough evidence to show that the documented reasons for the firing were mere pretext.

By contrast, Judge Motz in his dissent restated the evidence and reasoned that the CEO’s comments questioning the legitimacy of Fry’s FMLA leave combined with the timing of Fry’s termination, could have led a reasonable jury to find an FMLA violation.  Judge Motz, therefore, would have allowed the jury verdict in favor of Fry to stand.

The Upshot

While the legal determination in the Fry case is solidly rooted in its facts, a key takeaway consideration from the saga for both employers and employees, alike, is the need for documentation.  The District Court and Fourth Circuit relied upon the ongoing contemporaneous documentation of Fry’s perceived problems both before and after the FMLA issues arose.  This documentation included both emails and other more formal records of work performance problems.  Likewise, Rand’s prompt response in granting the FMLA leave was an important consideration for both courts in deciding that the FMLA had not been violated.

Given this evidence and a fully and properly documented personnel file, the employer was able to convince both the District Court and the Fourth Circuit that the jury verdict in favor of the employee should not be the end of the case, and in actuality, the employer had not violated the employee’s FMLA rights when it terminated her employment.

 

A New Right to Work: The Old Dominion Adopts New Restrictions on Restrictive Covenants

By: Billy B. Ruhling II

Virginia has always allowed employers to impose reasonable restrictions on their employees’ ability to compete after the termination of the employment relationship. While this right was not unfettered, employers could take steps to protect their business by preventing a former employee from taking client relationships with them upon their departure. Such agreements were permitted so long as the restrictions were for a reasonable time and scope. But all of that is about to change for certain employees!

Effective July 1, 2020, Virginia has adopted a new scheme to protect certain workers’ right to work – even when doing so in direct competition with their former employer. The new legislation prohibits an employer from entering into, enforcing, or threatening to enforce a covenant not to compete with any “low-wage employee.” While the new statute does not limit an employer’s ability to require workers to sign agreements prohibiting the taking, misappropriating, or sharing of trade secrets or other proprietary/confidential information, it does alter the landscape significantly.

The new legislation defines a “covenant not to compete” as any agreement, including a provision in an employment contract, between an employer and an employee that restrains, prohibits, or otherwise restricts an individual’s ability to compete with his former employer following the termination of the individual’s employment. It further provides that such a covenant “shall not restrict an employee from providing a service to a customer or client of the employer, if the employee does not initiate contact with or solicit the customer or client.”

As with all laws, the devil is in the details here. First, “low-wage” probably does not mean what most employers would think it means!  Covered employees are those whose average weekly earnings are less than the average weekly wage in the Commonwealth as determined pursuant to subsection B of Va. Code § 65.2-500 (As of December 2019, the average weekly earnings amount was $1,113 or roughly $50,000 per year). The law also protects independent contractors if they are paid at an hourly rate that is less than the median hourly wage for the Commonwealth for all occupations as reported for the preceding year by the Bureau of Labor Statistics of the U.S. Department of Labor. It excludes, though, sales persons who derive their earnings, “in whole or in predominant part, from sales commission, incentives, or bonuses….” Second, the law provides a private right of action for covered individuals to sue their former employer or any other person who attempts to enforce a prohibited covenant.

These changes are significant. Employers who have or seek to enforce restrictive covenants should review their existing agreements to ensure they comply with the new legislation. If you have questions or concerns about whether your agreements comply with the new standards, the attorneys at DiMuroGinsberg, P.C. stand ready to assist you!

Virginia Law Targets Worker Misclassification

By:  Jayna Genti

Companies misclassifying their employees as independent continues to be a hot-button issue throughout the country, and Virginia is no exception. In the last year alone, legislation related to independent contractor misclassification was introduced at the federal level and in at least 20 states. New Jersey and California recently enacted employee misclassification laws, and other states including New York are considering similar legislation.

Virginia Acts to Prevent Misclassification

In 2019, Virginia Governor Northam issued an executive order calling for an inter-agency task force to make recommendations on how to address the issue.  The study results issued last November found that about 214,000 Virginia workers are misclassified as contractors, costing the Commonwealth some $28 million in tax revenues each year.

In response to the task force’s recommendations, the Virginia General Assembly passed legislation this term that seeks to prevent misclassification and to penalize those employers who misclassify their workers.  Governor Northam recently signed the legislation into law, which will take effect January 1, 2021.

Classification of Employees

Under the new law, the Virginia Department of Taxation will determine whether a worker is an employee or independent contractor by applying Internal Revenue Service guidelines.  The IRS guidelines involve a multi-factor analysis, with the most important being the level of control exercised by a company.  In making the requisite assessment, the presumption will be that a worker who performs a service for an employer for pay will be considered an employee unless the individual or his or her employer demonstrates that she is an independent contractor.

Penalties and Enforcement

The new Virginia misclassification law has some real teeth.  Businesses that improperly treat their employees as independent contractors will be subject to a fine of up to $1,000 per worker for a first offense.  Maximum fines will increase to $2,500 per misclassified individual for a second offense, and up to $5,000 per misclassified individual for a third or subsequent offense.

The new legislation also prohibits the awarding of public contracts to employers that misclassify workers.  Debarment will last for up to one year for a second offense and up to two years for a third offense.  The legislation further requires the Virginia Department of Taxation to share information to help with enforcement.

Further Efforts to Halt Misclassification

The new Virginia law imposing penalties for employee misclassification will not be the end of the story.  Further efforts are likely to be forthcoming to crack down on employers who misclassify their workers, and deny tax revenues to both states and the federal government.  The impetus for the Commonwealth to move quickly against employee misclassification has arisen as a result of the recent federal legislation extending unemployment insurance to gig workers and other independent contractors who do not traditionally receive unemployment when they cannot work.  Unemployment benefits are funded by specific payroll taxes on employee pay.  Companies, however, do not pay unemployment insurance for independent contractors, even though they will now be able to receive unemployment benefits courtesy of the federal government.

Thus, we can expect heightened scrutiny on companies that misclassify employees as independent contractors and, thereby, evade their obligation to pay unemployment taxes.  As it stands, misclassification already has reportedly denied the Commonwealth substantial revenue, and this concern will only be heightened by the current COVID-19 pandemic and the stay-at-home orders shuttering many businesses.

Bottom Line

Going forward, you can expect greater attention by Virginia enforcement and investigative agencies to claims of worker misclassification.  Those agencies are on high alert for violations of the law and undoubtedly will use the full spectrum of available enforcement mechanisms to crack down and penalize those employers that evade the law.  The stakes of losing at the agency level are high and can lead to fines, legal expenditures, and litigation.

Given the continuing evolution of these and other related employment law matters, you are well advised to undertake a thorough assessment of the appropriateness and defensibility of classifying any members of your workforce as independent contractors.  Such an evaluation should be undertaken under the direction of an employment law attorney who is well versed in these matters and can review your policies and present workforce classifications to ensure legal compliance.  Misclassification no longer will result in simply a slap on the wrist.  Real penalties will now be imposed.

Virginia Hikes Minimum Wage

By:  Jonathan R. Mook and Colete Fontenot

The Virginia General Assembly for the first time in ten years has increased the state’s minimum wage and has established a mechanism to raise the minimum wage in the coming years.  Minimum wage workers in Virginia will now see a substantial raise next year, and in the years that follow – potentially more than doubling to $15 an hour by 2026.

What Are the Increases?

The new Virginia law is fairly complicated in terms of its provisions increasing the minimum wage over time.  Here’s the rundown:

Beginning May 1, 2021, employees paid at the current federal minimum wage of $7.25 would need to be paid $9.50 an hour – an increase of $2.25 per hour.  After that, the minimum wage will increase automatically on the first day of the year by $1.50 every year until 2023.  In 2023, the minimum wage will be increased by only $1.00; and in 2024, there will be no increase at all.

Under the measure as passed, the minimum wage also will not increase in 2025 and 2026 unless there is a new vote in the General Assembly to authorize the increases, which would be at the rate of $1.50 per hour.  If the legislature does not enact authorization for a wage increase, however, that does not mean the minimum wage will not rise.  Instead, beginning in 2027, a yearly adjusted minimum wage will be imposed, with increases based on the yearly increase in the Consumer Price Index (CPI). Even if the CPI falls, the adjustment cannot be less than zero.

Who Is Covered?

At the present time, if you have four or more employees, you must pay the state minimum wage.  Importantly, the new legislation also removes any limitation on the number of employees you must have in order to comply.  One is enough.  The only exclusions are for farm workers, work study students, and students under the age of 18 who work less than 20 hours per week.

For Now, No Regional Differentials

Many Virginia legislators fought hard for regional differentials, which would have allowed for variations of the minimum wage based on the economics of the particular area.   Members in rural areas, where the cost of living is lower than the more populous parts of the state, expressed concerns about imposing what they termed a “Northern Virginia rate” on the rest of the Commonwealth.  In the end, the new legislation does not include any regional distinctions.

Starting in 2022, however, the Virginia Department of Housing and Community Development, the Economic Development Partnership Authority, and the Employment Commission will “conduct a joint review of the feasibility and potential impact of instituting a regional minimum wage in the Commonwealth.”  A working group formed by these agencies will study and evaluate influential factors, including linking the minimum wage to the cost of living in the area served, the impact on employers and the fringe benefits they offer, the impact on workers with a focus on income inequality, and the experience of other states with a regional wage.  Approving a regional variation in the minimum wage will require another vote in the General Assembly before July 1, 2024.

Getting Ready for the Increase

The General Assembly’s increase in the minimum wage moves Virginia from having one of the lowest state minimum wages to one of the highest.  Undoubtedly this increase will have an impact on virtually all businesses in the Commonwealth – even those that now pay their employees more than the minimum wage.  That’s because minimum wage increases usually have the real world effect of boosting the wages of all hourly employees.

What should you be doing to prepare for the increase that kicks in on May 1, 2021?  Here are some suggestions:

  • Make sure your payroll department or payroll service is aware of the minimum wage increase and is prepared and stays in compliance with the new law.
  • Check and double check your cash flow to make sure you will have funds available for the increased wages you will be paying to your minimum wage employees.
  • If you are planning to hire minimum wage workers, create a hiring plan you can afford given the upcoming wage increase. In some cases, you may find that hiring temporary workers, as needed, is less expensive than taking on full-time regular employees.

Finally, in four years if not before, the General Assembly will be addressing the minimum wage again.  Get involved in the legislative process and let your state representatives know about the real world impact the increase in the minimum wage is having on your business operations.  Are you needing to lay off employees or having to reduce hiring as a result of the minimum wage increase?  This is critical information that you and only you can provide to those legislators who will be making the decisions about the economic future of your business.

Jonathan Mook is a partner in the office of DiMuroGinsberg, P.C.  He can be reached at jmook@dimuro.com.  Colete Fontenot is a legal assistant who provided much valued research assistance in preparing this article.

The Old Dominion Adopts Restrictions on Non-Competes

By: Billy Ruhling

Virginia has always allowed you to impose reasonable restrictions on your employees’ ability to compete after the termination of the employment relationship.  While this right was not unfettered, you could take steps to protect your business by preventing a former employee from taking customers or clients with them upon their departure.  Such agreements were permitted so long as the restrictions were for a reasonable time and scope.  But all of that [is about to change or has changed] for certain of your employees!

The New Law

Effective July 1, 2020, Virginia has adopted a new scheme to protect the right to work of certain workers – even when doing so in direct competition with your business.  The new legislation now prohibits you from entering into or enforcing a non-compete with any “low-wage employee.”  Further, you may not prevent such an employee “from providing a service to a customer or client of the employer if the employee does not initiate contact with or solicit the customer or client.”

The “Details”

As with all laws, the devil is in the details here.  First, “low-wage” probably does not mean what you may think it means!  Covered employees are those whose average weekly earnings are less than the average weekly wage in the Commonwealth.  As of December, 2019, the average weekly earnings was $1,113 or roughly $50,000 per year.

Second, the law protects more than just employees.  Independent contractors whom you pay at an hourly rate that is less than the median hourly wage in the Commonwealth for all occupations also are generally covered.  That amount is presently $20 per hour.  There is an exclusion to this requirement for your independent contractors, however.  That exclusion is or sales persons who derive their earnings, “in whole or in predominant part, from sales commission, incentives, or bonuses . . . .”

Third, the new statute does provide some protections for your business.  You still have the right to require your employees, even “low-wage” workers, to sign agreements prohibiting them from taking, misappropriating, or sharing your trade secrets or other proprietary/confidential information.

Bottom Line

These changes to Virginia’s general approach to non-competes are significant for all Virginia employers.  If you are planning to have your new employees sign non-compete agreements, you need to make certain that they do not fall into the category of being “low-wage.”  If you are seeking to enforce any existing agreements, you also need to ensure they comply with the new legislation.  You don’t want to run afoul of the new statutory limitations.  That’s because the law allows persons protected by the statute to sue you or any other person who attempts to enforce a prohibited covenant.

To avoid being the subject of a lawsuit, you should consult with experienced employment counsel to review your existing agreements and answer any questions or concerns about whether they comply with the new standards.

Virginia Becomes First Southern State to Ban Hair Discrimination

By:  Jayna Genti

During the 2020 legislative session, Virginia became the first southern state not only to ban LGBTQ discrimination, but also bar hair discrimination across the Commonwealth. This makes Virginia the fourth state behind California, New York, and New Jersey to do so.  As reported in the March issue of the Mid-Atlantic Employment Law Letter, Montgomery County, Maryland (but not the state itself) also has prohibited discrimination based on a person’s hairstyle.

The New Law

The new Virginia law specifically expands the Virginia Human Rights Act (VHRA) to prohibit discrimination based on characteristics historically associated with someone’s race and/or culture.  Under the new law, discrimination “because of race” or “on the basis of race” will now encompass bias that stems from “traits historically associated with race, including hair texture, hair type, and protective hairstyles such as braids, locks, and twists.”

The reason for the law is simple according to Delegate Delores McQuinn, who sponsored the legislation, “A person’s hair is a core part of their identity. “Nobody deserves to be discriminated against simply due to the hair type they were born with, or the way in which they choose to wear it. The acceptance of one’s self is the key to accepting others.”

In signing the legislation into law, Virginia Governor Ralph Northam echoed Ms. Quinn’s remarks: “It’s pretty simple—if we send children home from school because their hair looks a certain way, or otherwise ban certain hairstyles associated with a particular race—that is discrimination.”  The Governor added: “This is not only unacceptable and wrong, it is not what we stand for in Virginia. This bill will make our Commonwealth more equitable and welcoming for all.”

Who’s Covered and When

Like other laws passed in the 2020 General Assembly session, the ban on hair discrimination will take effect on July 1.  Although the VHRA currently applies only to employers with six to14 employees, that limitation also will change as of July 1, 2020.  Under the Virginia Values Act, also passed by the Virginia General Assembly this term, the reach of the VHRA now will cover all employers with six or more employees.

Ensuring Compliance

To make sure you are in compliance with the new law banning hair discrimination, you should act now to assess your workplace grooming and dress standards.  You still continue to enforce non-discriminatory appearance and grooming policies, but make sure those policies don’t prohibit certain types of hairstyles, such as braids, locks and twists.  If you do, you could be charged with using those policies as a proxy for, or to facilitate, discriminatory practices, such as gender or racial discrimination.

An exception may arise if restrictions on hairstyle choices are necessary for certain specific safety reasons.  But, even if you need to maintain certain grooming standards for safety reasons, be careful in the wording of the standard. For example, if long hair poses a safety hazard in the workplace, avoid listing specific types of hairstyles that pose a risk.  Instead, simply state that hair must be shorter than a certain length or secured at all times.

Determining whether you have crossed the line in imposing certain grooming and appearance standards can be tricky to determine.  When in doubt, it always is a good idea to consult with experienced employment counsel to assist you in charting this new and uncertain area of the law.

Jayna Genti is an associate in the office of DiMuroGinsberg, P.C.  She can be reached at jgenti@dimuro.com.