The law, however, differs from the FLSA in several ways that have the potential to increase liability for Virginia employers facing overtime lawsuits.
Many states across the country have enacted laws that provide greater wage-and-hour protections to employees than those offered by the Fair Labor Standards Act (FLSA), the federal law governing the payment of overtime wages. Up until recently, Virginia was not one of them, and Virginia employees’ only recourse for unpaid overtime or minimum wage was under the FLSA.
That changed on March 30, 2021, when Virginia Governor Ralph Northam signed into law the Virginia Overtime Wage Act (VOWA), which goes into effect on July 1, 2021.
Like the FLSA, VOWA requires employers to pay their employees overtime at time-and-a-half their regular rate of pay for hours worked over 40 in a workweek. The law, however, differs from the FLSA in several ways that have the potential to increase liability for Virginia employers facing overtime lawsuits.
Under the FLSA, prevailing plaintiffs can recover liquidated damages equal to the amount of unpaid overtime, in effect doubling a plaintiff’s damages recovery. However, employers can avoid these double damages by demonstrating that they acted in good faith and had reasonable grounds for believing that their acts did not violate the FLSA. Not only does VOWA automatically provide for double damages (eliminating the “good faith” defense), a prevailing plaintiff may recovery treble damages under the law if a court finds that the employer “knowingly” failed to pay overtime in compliance with VOWA.
Longer Statute of Limitations
The statute of limitations for unpaid overtime claims under VOWA is three years, in contrast to the FLSA’s two-year default statute of limitations. The statutory period under the FLSA can be extended to three years only if the employee shows the employer committed a “willful” violation of the law (i.e., that the employer either knew or showed reckless disregard for whether its payment practices violated the law).
VOWA also expressly authorizes an employee to bring a lawsuit “on behalf of similarly situated employees as a collective action consistent with the collective action procedures of the Fair Labor Standards Act, 29 U.S.C. § 216(b),” and as such is one of relatively few Virginia laws that authorizes class or collective actions.
Under the FLSA’s collective action procedures, plaintiffs seeking to bring a representative action on behalf of similarly situated employees typically benefit from a lenient standard for “conditional certification” that, if granted, results in notice of the lawsuit being provided to the putative class. Defeating conditional certification is an uphill battle for employers, and VOWA’s extension of collective action procedures to state overtime lawsuits makes Virginia a more attractive jurisdiction for plaintiffs’ lawyers to bring representative actions.
Regular Rate Calculations
VOWA’s method for calculating a salaried, nonexempt employee’s regular rate of pay also differs from the FLSA in a way that increases the potential exposure to employers for unpaid overtime.
In general, an employee’s regular rate of pay determines the amount of overtime pay an employer owes that employee for hours worked over 40 hours per workweek. If an employer uses the incorrect regular rate to calculate the employee’s overtime earnings, the employee may sue for the difference and seek additional damages available under applicable law.
Under the FLSA, the regular rate for a salaried nonexempt employee may be determined by dividing the employee’s total weekly compensation by the number of hours actually worked in the particular workweek.
VOWA, however, provides that the regular rate for nonexempt employees paid on a salary or other regular basis “is one-fortieth of all wages paid for that workweek.” This prescribed formula appears to preclude Virginia employers from paying nonexempt employees a fixed salary to cover wages for all hours worked in a workweek, including pursuant to the FLSA’s fluctuating workweek (FWW) method.
Another consequence of the formula is that the law is likely to expand an employer’s liability for misclassifying employees as exempt from VOWA’s overtime requirements. In cases brought under the FLSA, courts often permit the use of a “half time” multiplier to calculate overtime damages in misclassification cases if the evidence shows that the employer intended the employee’s salary to compensate the employee for all straight time hours worked (similar to the theory underlying the FWW method). VOWA appears to preclude that damages calculation, and instead likely permits employees to recover the full “time and a half” the (higher) regular rate for all unpaid overtime hours.
What This Means for Employers
Virginia employers should review their wage-and-hour practices to ensure compliance with VOWA. In particular, prior to the July 1, 2021, effective date, Virginia employers must implement the law’s method of calculating the regular rate of pay for nonexempt employees paid on a salary or other regular basis. Given the potential for greater liability for misclassifying employees as exempt under VOWA, Virginia employers should take the opportunity to review their exempt classifications, consider the likelihood that a court may determine it misclassified employees as exempt and, as appropriate, make changes in consultation with experienced wage-and-hour counsel.
For More Information
If you have any questions about this Alert, please contact Christopher D. Durham, Natalie F. (Hrubos) Bare, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group, or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.