Executive Summary
On March 30, 2021, Governor Ralph Northam signed into law the Virginia Overtime Wage Act (“VOWA”), creating new wage and hour requirements for Virginia employers. Set to take effect July 1, 2021, the VOWA also includes numerous employee protections, by amending the Virginia Code to authorize collective actions and allowing for lengthier statute of limitations period and increased damages provisions.

Background
Until now, Virginia did not have its own overtime pay statute. Instead, Virginia employees relied on the federal Fair Labor Standards Act (“FLSA”) to govern their wage and hour requirements. The FLSA requires that most employees in the United Stated be paid at least the federal minimum wage for all hours worked and overtime pay at not less than time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.

Under the FLSA, an employee’s regular rate of pay is calculated as the sum of all remuneration for employment (barring statutory exclusions) divided by total hours worked in a workweek. Further, under the FLAA, overtime pay is determined by multiplying the employee’s straight time rate of pay by all overtime hours worked plus one-half of the employee’s hourly regular rate of pay times all over time hours worked. However, the FLSA excludes certain types of compensation from an employee’s rate pay, including gifts, discretionary and non-discretionary bonuses, severance bonuses, and referral bonuses, among other things.

The VOWA’s Overtime Requirements
The VOWA expands the FLSA’s overtime provisions by changing the calculation for the rate of pay for hourly and salaried employees. Specifically, the VOWA calculates the regular rate for hourly workers as “the hourly rate of pay plus any other non-overtime wages paid or allocated for that workweek,” excluding any applicable federal exclusions, divided by the total number of hours worked in that workweek.

Additionally, the VOWA calculates a salaried non-exempt employee’s rate of pay as on-fortieth of all wages paid for that workweek, including wages, commissions, and non-discretionary bonuses. Under the VOWA, overtime payment for salaried employees can be no less than 1.5 times an employee’s regular rate of pay. This regular rate of pay is calculated based on an employee’s wage compensation earned in that workweek, divided by 40 (arriving at the 1/40th rate), plus 1.5 times that calculated regular rate for all overtime hours worked by the employee, over 40 hours in that workweek.

Employer Considerations
Employers should be mindful that the VOWA significantly departs from the FLSA by changing the rate of pay calculation for employees, thus potentially providing larger damages for misclassified workers. The VOWA also authorizes employees to bring a private action in Virginia state court, either individually or collectively. Additionally, the VOWA omits certain good faith defense available under the FLSA, including the good faith defense which allows an employer to avid double damages by demonstrating it acted in good faith and had reasonable grounds for believing its acts did not violate the FLSA. In contrast, the VOWA automatically provides for double damages and permits an employee to recover treble damages if a court finds that the employer knowing failed to pay overtime in compliance with VOWA. 

In sum, Virginia employers face the possibility of defending overtime claims in a collective lawsuit covering workweeks up to a three-year period. The statute of limitations for unpaid over time claims under the VOWA is three years, unlike the FLSA’s two-year default statute of limitations. Accordingly, Virginia employers should review their wage-and-hour practices by July 1, 2021, to ensure compliance with VOWA and any federal requirements. If you have questions regarding the VOWA or Virginia’s wage and hour policies, please contact John G. Kruchko, partner in Tysons Corner office or Max Bernas an associate in our Washington, DC and Tysons Corner offices.

© 2020 FordHarrison LLP

John G. Kruchko is a partner with the Labor & Employment Law First of FordHarrison LLP in Tysons Corner, VA; Max Bernas is an associate in the firm’s Tysons Corner, VA and Washington, DC offices. Sami Asaad, a partner in the firm’s Hartford, Connecticut office and Erica Johnson, an associate in the firm’s Memphis, Tennessee office, prepared an original version of this article. For more information, please contact Mr. Kruchko or Mr. Bernas at (202)719-2048 or by email at jkruchko@fordharrison.com or kmbernas@fordharrison.com. This article is published for general information purposed and does not constitute legal advice.