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Virginia Minimum Wage Increase & Overtime Wage Act

Virginia Minimum Wage Increases to $9.50

Effective May 1, 2021, the minimum wage in Virginia increased from $7.25 to $9.50.

The maximum tip credit increases from $5.12 to $7.37.

Virginia Overtime Wage Act

Beginning July 1, 2021, Virginia employers will be subject to new state overtime pay requirements. Virginia Governor Ralph Northam signed into law the Virginia Overtime Wage Act on March 31, 2021. Previously, Virginia had relied on the overtime pay requirements of the federal Fair Labor Standards Act (FLSA).

While they differ in certain respects, as with the FLSA, the Virginia Overtime Wage Act obligates employers to pay one and one-half times an employee’s regular rate of pay for hours worked in excess of 40 in a workweek. Departures from the federal law include how the regular rate of pay is calculated, a longer statute of limitations to bring potential claims, and the possible damages available.

Rate Calculations

Under the FLSA, an employee’s regular rate of pay is the sum of all remuneration for employment (barring certain statutory exclusions) divided by total hours worked in a workweek.

The state law employs a different calculation that depends on whether the employee is paid on an hourly or a salary basis. For hourly employees, the regular rate of pay is the hourly rate plus any other non-overtime wages paid or allocated for the workweek, not counting the same items that would be excluded from the FLSA calculation, and then divided by the total number of hours worked in the workweek. For employees who are salaried or paid on some other regular basis, the regular rate of pay is one-fortieth (0.025) of all wages paid for the workweek.

For example, imagine an employee who is paid $700 a week and who worked 50 hours in a workweek. If that employee were misclassified as exempt under the FLSA, the unpaid overtime wages owed to the employee would be calculated in the following manner:

  • $700 ÷ 50 hours = $14 per hour regular rate
  • One half the $14 regular rate = $7 per hour.
  • 10 overtime hours x $7 per hour = $70 in overtime owed.

That same employee’s overtime under the Virginia Overtime Wage Act, however, would be calculated as follows:

  • $700 ÷ 40 hours = $17.50 per hour regular rate
  • Time and a half the $17.50 regular rate = $26.25 per hour.
  • 10 overtime hours x $26.25 per hour = $262.50 in overtime owed.

The impact of this difference (resulting in overtime liability that is 3.75 times greater) becomes even more pronounced when it is extrapolated over an entire limitations period or across multiple employees proceeding collectively, an option that is now available to Virginia employees pursuing wage claims thanks to last year’s amendments to the Virginia Wage Payment Act.

Significantly, the new standard for salaried and other regularly paid employees appears to preclude employers from paying traditionally non-exempt employees a fixed salary to cover wages for hours more than 40 in a workweek (including on a fluctuating workweek basis), requiring instead an hourly rate calculation for overtime pay for even these employees in most circumstances.

Employers also may face greater liability for misclassifying employees as exempt under the new law. Under federal law, employers commonly argue that a misclassified employee’s salary already covers the employee’s straight-time wages for all hours worked and, therefore, only the additional “half-time” amount is owed for hours more than 40. The Virginia Overtime Wage Act eliminates this argument, providing instead that all salaried employees are entitled to one and one-half times their regular rate for any hours worked over 40. In addition to the overtime premium under the FLSA, Virginia employers will need to account for time-and-a-half pay under the new law.

Statute of Limitations

The new law provides that an employee’s overtime claim may include workweeks in a total span of up to three years. It imposes a three-year statute of limitations on overtime claims, rather than the FLSA’s default two-year limitations period (three years for willful violations).

Liquidated Damages

While the FLSA provides for liquidated damages equal to the amount of unpaid overtime wages, an employer may defend against a damage claim on the basis that it acted in good faith, with reasonable grounds for believing it acted in compliance with the FLSA’s requirements. This defense is unavailable under the new law, providing instead that all overtime wage violations are subject to double damages, plus pre-judgment interest at eight percent a year. In addition, the law provides for treble damages for “knowing” violations.

Collective Actions

Virginia law typically does not authorize class or collective actions. There are exceptions, and the Virginia Overtime Wage Act is now one of them. Thus, Virginia employers face the possibility of defending overtime claims of multiple employees in a collective lawsuit covering workweeks up to a three-year period.

HR Works, headquartered in Upstate New York, is a human resource management outsourcing and consulting firm serving clients throughout the United States for over thirty years. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.