Labor & Employment Newsletter July 2020: VA & MD Legislative Update
Date: July 13, 2020
VIRGINIA’S PROHIBITION ON NON-COMPETE COVENANTS FOR LOW-WAGE EMPLOYEES
By: Betsy Davis and Robert DrewryVirginia employers who have or are considering non-compete agreements with low-wage earners should take note. Effective July 1, 2020, Virginia employers are prohibited by statute from entering into, enforcing, or threatening to enforce a covenant not to compete with any low-wage employee. See Va. Code § 40.1-28.7:8(B).
According to the new law, a “covenant not to compete” is an agreement “between an employer and employee that restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete with his former employer.” Importantly, the law does not affect the enforceability of standard confidentiality agreements, such as those designed to prohibit sharing and misappropriation of trade secrets and proprietary or confidential information and only applies to covenants not to compete entered into on or after July 1, 2020.
The prohibition is limited to low-wage employees. Under the statute, a low-wage employee means an employee whose average weekly earnings are less than $1,137 per week, or $59,124 per year. See Va. Code § 40.1-28.7:8(A). Currently, the rate is based on a formula and is subject to change. Additionally, low-wage employees do not include employees paid in whole or predominate part from sales commissions, incentives, or bonuses.
As a result of this new law, employers who require all employees to agree to non-compete agreements may need to change their practice. The law prohibits retaliation as a result of an employee bringing a civil action to enforce their rights under this law. After July 1, requiring, enforcing, or threatening to enforce prohibited non-competes may expose the employer to substantial monetary liability.
The Commissioner of the Department of Labor and Industry may impose a civil penalty of $10,000 for each violation of the prohibition on low-wage worker covenants not to compete. Additionally, an employee now has a private right of action in the event an employer attempts to enforce a non-compete. The employee’s private right of action entitles the employee to an order voiding the covenant not to compete, as well as providing the employee “all appropriate relief,” which can include an injunction, liquidated damages, lost compensation, attorneys’ fees, and costs. Employers are required to post a copy of the law, or a summary approved by the Department of Labor and Industry in the same location where other workplace posters are posted.
To ensure compliance with this new statute, Virginia employers should evaluate their current practices and policies to ensure they are not requiring, enforcing, or threatening to enforce a covenant not to compete on their low-wage workers.
For assistance amending employer policies or more information on Virginia’s new labor and employment laws, contact Betsy Davis, Robert Drewry or any member of our Labor and Employment team.
THE VALUES ACT ADDS TEETH TO THE VIRGINIA HUMAN RIGHTS ACT
By: Betsy Davis and Robert DrewryEffective July 1, 2020, the Virginia Values Act amends and drastically rewrites the Virginia Human Rights Act (“VHRA”), adding substantial teeth to the statute. Among its key provisions, the Virginia Values Act expands the definition of covered employers, expands the causes of action available to aggrieved employees, increases the classes of employees who are protected, and expands the remedies available to employees who sue. With the substantial changes, it is anticipated that employers will see a flood of new litigation under the VHRA.
• Expanded employer coverage. Prior to the amendments, the VHRA covered only small employers with 6-14 employees. As amended, the VHRA now covers all private employers with 15 or more employees (smaller employers with at least 6 employees remain covered for claims of discriminatory discharge). Removing the employee limit means that all violations of federal anti-discrimination laws such as Title VII of the Civil Rights Act of 1964 (“Title VII”), the Americans with Disabilities Act (“ADA”), and the Age Discrimination in Employment Act (“ADEA”) now also likely violate the VHRA.
• Expanded cause of action. The VHRA was previously limited to claims of discriminatory discharge. The Amendment expands the right of action to include all forms of discrimination and retaliation, including federal discrimination laws such as Title VII, the ADA, and the ADEA.
• Expanded protected classes. In addition to the classes of race, color, religion, national origin, sex, pregnancy, childbirth or other related medical conditions, including lactation, the VHRA now also protects sexual orientation, gender identity, and veteran status.
• Expanded remedies. The VHRA previously authorized only limited back pay and attorneys’ fee awards to prevailing plaintiffs. The amended VHRA repealed those limits, effectively authorizing unlimited compensatory damages, punitive damages, attorneys’ fees, costs, and injunctive relief. However, Virginia’s general cap limiting punitive damages to $350,000 will create a cap in VHRA cases.
The VHRA previously applied only to small employers, requiring employees of larger employers to bring discrimination claims only under the federal anti-discrimination laws and in federal courts. In federal court, employers regularly seek pretrial dismissal of the claims on summary judgment. Amended to apply to larger employers, employees may now sue under the VHRA in Virginia’s state courts, where employers are less likely to obtain summary judgment, because, unlike in federal court, the employer cannot use the employee’s deposition testimony to support a motion for summary judgment. Additionally, under the new VHRA, Virginia’s Attorney General may also commence a civil action against the employer.
Employers should review and revise their handbooks to incorporate the new protected classes of sexual orientation, gender identity, and veteran status into their policies. Employers should also train their managers and employees regarding the new protected classes applicable in Virginia.
For assistance with amended employer policies or more information on the Virginia Values Act, contact Betsy Davis, Robert Drewry or any member of our Labor and Employment team.
NEW WHISTLEBLOWER PROTECTION IN VIRGINIA
Virginia has a new whistleblower law with teeth that went into effect on July 1, 2020, called the Fraud and Abuse Whistleblower Protection Act. This law is the first of its kind in Virginia and creates protection for employees who report unlawful or questionable employer conduct, prohibiting retaliation against employees who engage in protected conduct. Under this new statute, employers may not retaliate against employees who:
- Make a good faith report of suspected violations of federal or state law to supervisors, governmental bodies or law enforcement officials;
- Are requested by a governmental body or law enforcement official to participate in an investigation, hearing or inquiry;
- Refuse to follow an employer’s order if that action would violate any federal or state law provided the employee informs the employer that the order is being refused for that reason;
- Refuses to engage in a criminal act that could subject the employee to criminal liability; or
- Provides information or testifies before any governmental body or law-enforcement official conducting an investigation, inquiry or hearing into an alleged violation by the employer of federal or state law or regulation.
There are some limitations to employee conduct in making a report including:
- The law does not authorize an employee to disclose data otherwise protected by law or nay legal privilege;
- The law does not permit an employee to make knowingly false statements or statements made in reckless disregard for their truth; and
- The law does not permit disclosures that violate federal or state law or diminish the rights of any person to a confidentiality protection provided at common law.
- Under this statute, an employee has an immediate right to file suit with no exhaustion of remedies requirement. Remedies available to successful plaintiffs include lost wages, lost benefits, and other remuneration with interest, injunctive relief, reinstatement, and attorneys’ fees. The statute of limitations for these claims is one year.
The scope of this new law is much broader than its federal counterparts, in terms of what conduct is protected. The statute is very brief with little explanation, which results in ambiguity as to the level of detail required to be reported by the employee and whether the reported conduct has to be an actual violation of law. Unlike other anti-retaliation provisions, there is no minimum number of employees an employer must have to be covered under this law. Moreover, this law protects internal complaints to supervisors. As a result, supervisors need to be trained on what constitutes a “complaint” under this law and how to respond. In addition, businesses need to review their policies and ensure you have a policy for reporting and investigating all complaints – not just complaints relating to harassment and discrimination.
TAKEAWAY: Supervisors need to be aware of this new law and trained on identifying and responding to complaints and avoiding retaliatory conduct. In addition, management should expect an increased need to conduct investigations into employee complaints and ensure that it has a written policy clearly defining the reporting and investigation procedures.
For assistance with employee trainings or to learn more about the requirements under this law, please contact Jennifer S. Jackman or another member of our Labor & Employment team.
NEW MARYLAND EMPLOYMENT LAWS THAT TOOK EFFECT JULY 1, 2020
By: Kevin McCormickAnti-Harassment Reporting due July 1, 2020
On October 1, 2018, HB 1596, “Disclosing Sexual Harassment in the Workplace Act of 2018”, became effective. The legislation was designed to prevent employers from asking employees to waive their future right to report sexual harassment. The legislation also requires employers with 50 or more employees to disclose how many settlements of sexual harassment allegations they have agreed to, how many times they have settled allegations of sexual harassment involving the same employee and the number of settlements that included non-disclosure provisions. The first reporting period ends on July 1, 2020.
Since October 1, 2018, Maryland employers with 50 or more employees have been prohibited from taking adverse action against employees because they fail or refuse to enter into agreements that contain a waiver of sexual harassment claims, including provisions requiring them to resolve future sexual harassment and retaliation claims through arbitration.
Another aspect of this legislation that deserves attention is the requirement that on or before July 1, 2020 and on or before July 1, 2022, covered employers must complete a survey (“Disclosure Survey”) for the Maryland Commission on Civil Rights (MCCR) that discloses the following information:
• The number of settlements entered into by or on behalf of the employer after an employee made an allegation of sexual harassment;
• The number of times the employer paid a settlement to resolve a sexual harassment allegation against the same employee over the past ten (10) years; and
• The number of settlements after an allegation of sexual harassment that included a provision requiring both parties to keep the terms of the settlement confidential.
Employers must submit the survey to the MCCR electronically on the MCCR’s website. In appropriate cases, the employer will have to report whether it took any personnel action against the employee who was the subject of the settlement disclosed in the survey. Although the legislation provides that the self-reporting is mandatory, the law does not contain any specific penalties or other enforcement mechanisms in the event a covered employer fails to complete the required report.
The MCCR will then publish and make accessible on its website the aggregate number of responses from employers for each of the three (3) categories of information described above. Upon request, the MCCR may disclose the response from a specific employer regarding the number of times it has paid a settlement to resolve a sexual harassment allegation against the same employee over the past ten (10) years of employment.
Increased Cap of the Amount of Back Wages Subject to Commissioner of Labor and Industry’s Jurisdiction to Issue Wage Order
Under prior law, an employee claiming unpaid wages under $3,000, could pursue that claim with the Commissioner of Labor and Industry, using and expedited procedure allowing the Commissioner to investigate the claim and, if warranted, could order the employer to pay the claim, subject to judicial challenge. Beginning July 1, 2020, the $3,000 threshold has been increased to $5,000. Prior law required that such claims be brought in court, where it typically takes two years for these court actions to be resolved. The increase to $5,000, should result in a more expedient resolution since once the Commissioner makes a determination on the claim, most are paid. If no appeal is taken, the Commissioner’s Order would then be referred to the Central Collection unit within 120 days for collection.
Minimum Wage Hike in Montgomery County
As most Maryland employers already know, working in Montgomery County can be challenging as it has a tendency to go its own way on many employment issues. Setting its own minimum wage, different from the state is one such example. Beginning July 1, 2020, the minimum wage for employers with more than 50 employees is $14.00 per hour. For employers with at least 10 employees but less than 50, the minimum wage is $13.25 per hour and for employers with less than 10 employees, the minimum wage is $13.00 per hour. For employees under the age of 18 who work less than 20 hours per week, their minimum wage is $11.00 per hour.
As of July 1, 2020, Barbershops and Beauty Parlors in Anne Arundel County are Allowed to Serve Alcohol to Customers
Under the terms of SB361, as of July 1, 2020, barbershops and beauty parlors in Anne Arundel County may provide beer (12 ounces), and/or wine (5 ounces) to their customers while performing activities generally related to beauty salons or barbershops or while the customer is attending a fund-raising event at the barbershop or beauty salon. The new law does not specify whether the service of the beer or wine is limited to one, two or more servings, whether the customer can “mix and match” the drinks or exactly how long a patron may remain in the shop while imbibing, or getting a haircut or other hair salon service other than last call is 9:00 pm.
No doubt, this new legislation should lead to increased business for the Shopkeepers and an increase in clean-cut and well-coiffed residents of the Anne Arundel County.
To learn more about these laws or how they apply to you and your business, please contact our Labor & Employment team.
NEW VIRGINIA LAWS ON WORKER MISCLASSIFICATION: EMPLOYEE VS. INDEPENDENT CONTRACTOR
By: Katelyn P. BradyDuring the 2020 General Assembly, Virginia passed several laws devoted to the issue of employers misclassifying workers as independent contractors. These laws present an uphill battle for employers who wish to classify workers as independent contractors by creating a presumption of employee status, as well as providing a private right of action for workers who are misclassified as independent contractors, rather than employees.
The key provisions of these laws are as follows:
- Presumption: All workers are presumed to be employees, unless the company can prove that the individual is an independent contractor under the IRS guidelines. These guidelines, which can be found here, are complicated and do not contain bright line rules. Rather, they focus on the level of control the business exercise over the individual.
- Private Right of Action: If a worker is “knowing[ly]” misclassified as an independent contractor, the worker has the right to sue the employer for wages, salary, employee benefits (including expenses that would have been covered by insurance), and other compensation the worker would have received as an employee. Additionally, the employee may also recover attorneys’ fees and costs incurred in bringing the lawsuit.
- Civil Penalties and Disbarment: If a company is found to knowingly misclassify a worker as an independent contractor, the company may be subject to civil penalties and debarment from public contracts. The law provides that upon two or more misclassification violations, the employer and “any firm, corporation, or partnership in which the employer has interest” will be disbarred for one year (or two years for a third or subsequent violations) from public contracts with the Commonwealth.
- Anti-Retaliation: Employers are prohibited from retaliating against a worker because the worker “reported or plans to report” that the employer has failed to properly classify an individual. The law also prohibits such actions against a worker who is requested or subpoenaed by an appropriate authority to participate in an investigation, hearing, or inquiry by an appropriate authority or in a court action. Additionally, the law authorizes the Commissioner of Labor and Industry to enforce this provision and seek remedies such as lose wages, reinstatement, and a civil penalty equal to lost wages.
With these new laws in place, employers should review all classifications to ensure each worker is properly classified. For more information on these laws or assistance with classifying workers in your workforce, please contact any member of our Labor & Employment Team.
AMENDED VIRGINIA WAGE PAYMENT ACT
By: Betsy Davis and Wesley R. Morgan*On March 10, 2020, Governor Ralph Northam signed into law an amendment to the Virginia Wage Payment Act (“WPA”) passed by the Virginia General Assembly, which will go into effect on July 1, 2020.
The current WPA requires employers to pay salaried employees at least once a month and to pay hourly employees at least once every two weeks or twice a month. The WPA also prohibits employers from withholding any employee’s wages or salary except for payroll, wage, or withholding taxes. On each regular pay day, the employer must provide each employee a written statement (either a paystub or online accounting) that shows the:
- Name and address of the employer;
- Number of hours worked during the pay period;
- Rate of pay;
- Gross wages earned by the employee during the pay period; and
- Amount and purpose of any deductions.
- Provide the number of hours worked during the pay period in the written statement if the employee is paid on the basis of hours worked or paid on the basis of a salary less than the standard salary level that exempts overtime premium payment requirements according to US Department of Labor regulations; and
- Provide in the written statement sufficient information for an employee to determine how the gross and net pay were calculated.
- Liquidated damages (double damages for all violations and treble damages for knowing violations);
- Prejudgment interest; and
- Reasonable attorneys’ fees and costs.
For more information or questions regarding the amended Virginia Wage Payment Act, please contact Betsy Davis or a member of our Labor & Employment Practice.
*Summer Associate, 2020
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.