Seven Things That Employers Need to Know About Virginia’s New Overtime Wage Act

Virginia recently amended its wage law in a very significant manner by enacting the Overtime Wage Act. The Act took effect on July 1, 2021.

Key takeaways from the amendment include the following:

  1. The Act has changed the manner in which the regular rate of pay is calculated for salaried, non exempt employees. Under Section 40.1-29.2(B)(2) of the Virginia Code, the regular rate of pay for salaried, non exempt is now one fortieth (1/40th) of all wages paid in a particular workweek.
  2. Consequences of the change in the calculation of the regular rate for salaried, non exempt employees. The practical effect of this change is that the so-called Fluctuating Work Week (FWW) method, which exists under the (federal) Fair Labor Standards Act (FLSA), whereby an employer may calculate overtime at one half of the regular rate (as opposed to time and a half as otherwise required under the FLSA), is not legal in Virginia.
  3. The Act permits employees to bring collective actions. Employees may bring overtime claims individually, as well as also jointly with other aggrieved employees, or on or behalf of similarly situated employees as a collective action consistent with the collective action procedures of the FLSA.
  4. Employers face increased damages and penalties. Importantly, employers that are found liable under the Act will be automatically subject to double damages because the Act appears to eliminates both the “good faith” and “half-time” misclassification defenses, which exist under the FLSA. The liquidated (or double) damages are in addition to an award of “reasonable attorneys’ fees and costs.”
  5. The possibility of even greater damages exists. The Act includes even greater possible penalties for employers; namely, treble (or triple) damages if the employer knowingly violated the Act. The Act defines knowingly to include “deliberate ignorance” as well as “reckless disregard” of the provisions of the Act. The treble damages are in addition to an award of “reasonable attorneys’ fees and costs.”
  6. The Act extends the time for filing overtime claims. The Act extends – from two years to three years – the time by which employees shall have to file claims for overtime pay.
  7. Virginia became a friendlier forum for employees and their counsel. Taken together, the elimination of the FWW methodology as a basis for reducing an employer’s overtime exposure; increases in damages and penalties; the apparent elimination of the good faith defense to claims for double damages; and the lengthening of the statute of limitations period are likely to make Virginia a more desirable place to bring compensation and, specifically, overtime claims.

In light of the Act, the need for employers to “return to basics” is paramount. These efforts include:

  1. Reviewing and, as the case may be, updating job descriptions;
  2. Determining whether job positions are properly characterized as exempt or non exempt;
  3. Reviewing and, as appropriate, updating compensation policies;
  4. Training managers on how to handle requests for overtime;
  5. Fully and timely investigating complaints of non payment of wages and, specifically, overtime; and
  6. Reviewing applicable insurance policies to determine the nature and extent of insurance coverage for wage and hour and, specifically, overtime claims.

Marc Engel and Josh Schmand are employment attorneys who work with businesses on managing employees and preventing employment claims. For more information, contact Marc at mrengel@lerchearly.com and Josh at jcschmand@lerchearly.com.