As noted in the most recent posting in our Employment Law News, the Virginia General Assembly passed many new laws that go into effect on July 1, 2020. Here are some additional laws of interest to Virginia employers.
Additional Information Required on Paystubs
As of July 1, 2020, employers (except those engaged in agricultural employment) must provide the number of hours worked during the pay period on paystubs and whether the employee is paid on an hourly or salary basis. The paystubs must also include the employee’s rate of pay, the gross wages earned by the employee during the pay period, and the amount and purpose of any deductions the employer has taken.
Further, if the employee is paid on a salary basis that is in an amount less than the amount required by the US Department of Labor Regulations under the Fair Labor Standards Act (FLSA), currently $684 per week, the employer must state the basis for the exemption from the FLSA’s overtime pay requirements. Salaried employees paid less than $684 must have their weekly hours reported on their paystubs. Paystubs may be provided, or an employer may use an online system. In either case, the employer must provide the employee with sufficient information to enable an employee to determine how his/her gross and net pay were calculated. See Va. Code Ann. §40.1-29C. A link to the statute is provided below:
Employers May Not Prohibit Employees from Sharing Wage Information
Effective July 1, 2020, Virginia employers may not discharge or take other retaliatory action against an employee “because the employee (i) inquired about or discussed with, or disclosed to, another employee any information about either the employee's own wages or other compensation or about any other employee's wages or other compensation or (ii) filed a complaint with the [DOLI] alleging a violation of [40.1-28:7:9]. However, employees, who have access to compensation information as part of their essential job functions are not entitled to the protection of the statute.
There is no private right of action for a violation of this statute. Employers are subject to civil penalties and the Department of Labor and Industry may file a petition against an employer in Circuit Court seeking injunctive relief to enforce the provisions.
Employers are, of course, aware that the National Labor Relations Act already makes it illegal for an employer to prohibit employees from engaging in collective action, which would include discussions of employee compensation, even if the employer is not a union shop. Employers should make sure that agreements with employees do not prohibit disclosure of compensation unless the employee’s essential function includes dealing with compensation or the employee is in a management position. Likewise handbooks should not contain policies that have blanket prohibitions against discussions of wages, benefits and working conditions.
A link to the statute is provided below:
Employer Misclassification of Independent Contractor Liability
While employer liability for misclassifying a worker as an independent contractor has always existed for unpaid employment taxes and overtime pay, effective July 1, 2020, Va. Code Ann. §40.1-28.7:7, provides a Virginia worker, who believes he has been improperly classified as an independent contractor, to sue the employer for unpaid wages, overtime, benefits (including out of pocket expenses incurred due to lack of insurance) and other perquisites appurtenant to employment. Beyond the incentive of attractive damages and attorney’s fees recovery for the plaintiff, the law creates a presumption that a worker who performs services for compensation is an employee, rather than a contractor. Thus, the putative employer has the burden of proving that the worker is properly classified as a contractor. The statute specifically incorporates the Internal Revenue Service guidelines as the basis for the determination. Employers may not discriminate or retaliate against employees for the exercise of rights under the statute.
The IRS follows the common law test. The factors set forth below are used to determine if a worker is an independent contractor or an employee.
1) Behavior/Right to Control Test. The putative employer has the right to determine and control the results and the means and methods by which the worker’s result is to be accomplished. The employer does not have to exercise the right, it simply has to have reserved the right to do so. However, the fact that the putative employer specified the result desired alone will not create an independent contractor relationship. For example, telling a doctor that you want him to render services in accordance with recognized protocols is not enough control to make the worker an employee. Accordingly, retaining the right to direct the work and control the means and methods as to how work is performed will likely result in a finding that the worker is an employee.
2) Financial Test. Does the putative employer provide all equipment and supplies worker uses? Does the worker have the ability to make a profit on the job or take on other opportunities? Does the putative employer reimburse all expenses such that worker has no risk of a loss or substantial profit? Is this the worker’s only job? Answering these questions in the affirmative means that the worker is an employee not an independent contractor. If the employer furnishes the worker with all of the tools needed to perform the job, this factor leans toward worker being an employee. The furnishing of the place to work may also be a factor that leans toward worker being an employee but not so much as the tools as some work can only be performed in a specific location.
3) Type of Relationship. Is there a written contract between worker and putative employer? Does the employer offer employee type benefits (i.e. pension plan, insurance, vacation pay, etc.) to the worker? Will the relationship continue over a period of months or years? Is the work performed a key aspect of the putative employer’s business? Can the relationship be terminated without notice and without cause? Answering these questions in the affirmative means that the worker is an employee not an independent contractor.
In addition, effective January 1, 2021, the Virginia Department of Taxation will be empowered to investigate and impose civil penalties against employers, who misclassify workers as independent contractors. The civil penalty may be up to $1,000 per misclassified individual for the first offense, up to $2,500 per misclassified individual for the second offense and up to $5,000 per misclassified individual for subsequent offenses. The Virginia Department of Taxation may also impose debarment – prohibition from bidding on state government contracts - for multiple violations. The law prohibits putative employers from asking an employee to enter into an agreement or sign a document that misclassifies the employee as an independent contractor. Thus, employers should not require a worker to sign an agreement that specifies the worker is an independent contractor unless the employer is certain that the worker is properly classified as such. This law also includes a prohibition against retaliation or discrimination against workers that exercise rights protected under the statute.
The Department of Taxation is directed to work with and share the information it discovers with various Virginia agencies, including the Department of Labor and Industry and the Workers Compensation Commission. Likewise, those agencies are to notify the Department of Taxation of any findings of misclassification.
Employers/businesses should review independent contractor relationships and determine if the relationship will withstand scrutiny under these new laws.
If you have any questions about these new Virginia employment laws or employment law in general, please reach out to Susan Salen at firstname.lastname@example.org or call at 703-790-6240.