On March 20, 2021, Governor Ralph Northam signed the Virginia Overtime Wage Act into law. Beginning on July 1, 2021, the Virginia Overtime Wage Act (“VOWA”) will go into effect resulting in new overtime rules far broader than the federal Fair Labor Standards Act (“FLSA”). The VOWA contains provisions significantly different than the FLSA that require immediate attention of Virginian employers.
Most notably, the VOWA expands FLSA provisions by changing the regular rate calculations for workers, providing larger damages for misclassified workers, extending the statute of limitations for overtime claims, and expanding liquidated damages for overtime violations.
The VOWA defines 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. For salaried workers, the regular rate is one-fortieth of all wages paid for that workweek. With the change in calculation of regular rates, an employer’s potential liability for misclassified workers is vastly increased, such as misclassifying a salaried worker as exempt. With these ramifications in mind, employers must ensure strict compliance for non-exempt workers receiving a fixed salary or from utilizing a “fluctuating workweek” as allowed under FLSA. Under the VOWA, the employer would be liable for larger damages because the regular rate calculation is different and the overtime premium is much larger at one and one-half times the worker’s regular rate.
For example, if a salaried employee is misclassified as exempt, the unpaid overtime wages owed for a 60-hour work week under FLSA is:
$1200 ÷ 60 hours = $20 per hour regular rate
One half the $20 regular rate = $10 per hour
20 overtime hours x $10 per hour = $200 in overtime owed
The same calculation under VOWA results in a much larger liability:
$1200 ÷ 40 hours = $30 per hour regular rate
Time and a half of $30 regular rate = $45 per hours
20 overtime hours x $45 per hour = $900 in overtime owed
In addition to the changes in calculation of regular rates, the VOWA extends the unpaid wages statute of limitations to 3 years as compared to FLSA’s statute of limitations of 2 years (that is only extended to 3 years for willful violations). With the extended statute of limitations, employers in Virginia need to be aware that the liability for unpaid overtime wages is much larger under the VOWA than the FLSA. Moreover, the VOWA greatly increases the liability for overtime violations by making employers strictly liable for double damages, and employers may be liable for triple damages for employees where an employer had actual knowledge that it failed to pay the overtime wages due and acted in deliberate ignorance or reckless disregard as to whether it was paying all overtime wages owed.
If you have any questions regarding the issues raised in this client alert, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.