Virginia Enacts Several New Employment Statutes

June 25, 2020

By: Stephen B. Stern

    The Commonwealth of Virginia has enacted several new statutes that are more protective of employees’ rights and, thus, businesses operating in Virginia should examine their policies for compliance with the new laws.

Prohibition on Certain Noncompete Agreements

    One of the new statutes prohibits businesses from imposing noncompete agreements on “low-wage employees.”  Va. Code § 40.1-28.7:7.  A noncompete agreement (the term used in the statute is “covenant not to compete”) is defined to include a contract or provision of an employment contract “that restrains, prohibits, or otherwise restricts an individual’s ability, following the termination of the individual’s employment, to compete with his [or her] former employer.”  The statute also limits the application of nonsolicitation provisions in certain respects, as the definition of “covenant not to compete” does “not restrict an employee from providing a service to a customer or a client of the employer if the employee does not initiate contact with or solicit the customer or client.”  A “low-wage employee” is defined by the statute as “an employee whose average weekly earnings, calculated by dividing the employee’s earnings during the 52 weeks immediately preceding the date of termination of employment by 52, or if an employee worked fewer than 52 weeks, by the number of weeks that the employee was actually paid during the 52-week period, are less than the average weekly wage of the Commonwealth” as calculated and published by the Virginia Employment Commission under subsection B of §65.2-500 of the Virginia Code.  The current estimated weekly wage is $1,204, which is approximately $62,608 per year.

    While noncompete and nonsolicitation agreements typically are considered components of a company’s trade secret protection program, the statute does not prohibit a company from entering into contracts that include nondisclosure provisions that are “intended to prohibit the taking, misappropriating, threatening to misappropriate, or sharing of certain information, including trade secrets . . . and proprietary or confidential information.”

    The statute expressly prohibits employers from entering, enforcing, or threatening to enforce a covenant not to compete with a low-wage employee.  If an employer violates this anti-enforcement/retaliation provision, it is subject to a civil penalty of $10,000 for each violation.  In addition, a low-wage employee may file a civil action against an employer “or other person” that attempts to enforce a covenant not to compete, and a court may issue injunctive relief, as well as award liquidated damages, lost compensation, other damages, and reasonable attorney fees and costs.  

    Companies are required to post a notice regarding the prohibitions set forth in the statute where they place other employee notices required by statute or federal law.

    The statute applies to covenants not to compete entered into on or after July 1, 2020.

New Anti-Discrimination Provisions

    Virginia enacted legislation that expands the definitions of race discrimination.  In this regard, discrimination “on the basis of race” now includes acts “on the basis of traits historically associated with race, including hair texture, hair type, and protective hairstyles such as braids, locks, and twists.”  Va. Code § 2.2-3901.  

    Virginia also enacted new protections for women.  In this regard, Virginia expanded the definition of discrimination “on the basis of sex or gender” or “because of sex or gender” to include lactation, which is defined as “a condition that may result in the feeding of a child directly from the breast or the expressing of milk from the breast.”  Va. Code § 2.2-3901.  An act of discrimination also now includes a refusal “to make reasonable accommodation to the known limitations of a person related to pregnancy, childbirth, or related medical conditions” (and related medical conditions includes lactation).  Va. Code § 2.2-3904.  The definition of reasonable accommodation also has been expanded to include “more frequent or longer bathroom breaks, breaks to express breast milk, access to a private location other than a bathroom for the expression of breast milk, acquisition or modification of equipment or access to or modification of employee seating, a temporary transfer to a less strenuous or hazardous position, assistance with manual labor, job restructuring, a modified work schedule, light duty assignments, and leave to recover from childbirth.”  As with a request for a reasonable accommodation from an employee with a disability, Virginia employers are required to engage in an interactive process to address requests for reasonable accommodation related to pregnancy, childbirth, and related medical conditions (including lactation).  Also of significance is the new requirement that Virginia employers are required “to post in a conspicuous location and include in any employee handbook information concerning (i) the prohibition against unlawful discrimination on the basis of pregnancy, childbirth, or related medical conditions [which now includes lactation], (ii) an employee’s rights to reasonable accommodation for known limitations related to pregnancy, childbirth, or related medical conditions.”  This information that must be posted and disclosed in an employee handbook also must be specifically directed at new employees upon commencement of employment and to any employee within 10 days of the employee providing notice to the employer that the employee is pregnant.  The new protections concerning pregnancy, childbirth, and related medical conditions now apply to employers with more than five employees.   

    In addition, Virginia now prohibits discrimination in employment (and in places of public accommodation) on the basis of sexual orientation and gender identity.  Va. Code. § 2.2-3900.  Gender identity shall refer to the “gender-related identity, appearance, or other gender-related characteristics of an individual, with or without regard to the individual’s designated sex at birth.”  And sexual orientation shall refer to a person’s “actual or perceived heterosexuality, bisexuality, or homosexuality.”  Va. Code. § 2.2-3901.

Expanded Anti-Retaliation Provisions

    Virginia has enacted legislation that expands the protections afforded to whistleblower.  For example, employers are now prohibited from taking adverse employment action against any employee because the employee:  (1) in good faith reported a violation of any federal or state law or regulation to a supervisor or any governmental body or law enforcement official; (2) is requested by a governmental body or law enforcement official to participate in an investigation, hearing, or inquiry; (3) refuses to engage in a criminal act that would subject the employee to criminal liability; (4) refuses an employer’s order to perform an act that violates any federal or state law or regulation and the employee informs the employer that he/she is refusing the order for that reason; or (5) provides information to or testifies before any governmental body or law enforcement official conducting an investigation, hearing, or inquiry into any alleged violation by the employer of any federal or state law or regulation.  Va. Code § 40.1-27.3.  The statute, however, does not permit an employee to disclose data, information, or confidential communication otherwise protected by law or any legal privilege and it does not permit disclosure.  In addition, the statute does not permit any employee to “make statements or disclosures knowing that they are false or that they are in reckless disregard of the truth.”

Efforts to Reduce Misclassifying Employees as Independent Contractors

    Virginia has enacted legislation that authorizes an individual who has not been properly classified as an employee (i.e., misclassified as an independent contractor) to file a civil action against the employer for failing to classify the individual as an employee “if the employer had knowledge of the individual’s misclassification.”  Va. Code § 40.1-28.7:7.  If a court finds that the employee was misclassified, the court may award wages, salary, employment benefits (including expenses incurred by the employee that would have been covered by insurance), or other compensation lost by the individual, as well as a reasonable attorney fee and costs incurred in connection with filing the lawsuit.  Notably, the statue creates a presumption of an employment relationship and places the burden on the alleged employer to prove an independent contractor relationship.  In this regard, the statute provides that “an individual who performs services for a person for remuneration shall be presumed to be an employee of the person that paid such remuneration, and the person that paid such remuneration shall be presumed to be the employer of the individual who was paid for performing the services, unless it is shown that the individual is an independent contractor as determined under the Internal Revenue Service guidelines.”

    Separately, Virginia also enacted legislation that makes it unlawful for employer to take adverse employment action against an employee or independent contractor because the employee/independent contractor (1) has reported or plans to report to an appropriate authority that an employer, or an officer or agent of the employer, has failed to properly classify an individual as an employee and failed to pay required benefits or other contributions, or (2) is requested or subpoenaed by an appropriate authority to participate in an investigation, hearing, inquiry, or court action.  Va. Code § 40.1-33.1.

What These New Laws Mean for Employers

    Virginia businesses should be mindful of these new protections of employees and update policies and practices accordingly, including training programs.  In addition, the statutes regarding misclassification of employees is an important reminder about the need for proper evaluation of each individual to determine whether he/she is classified properly as an employee or independent contractor.  As for the noncompete statute, it is significant because it limits one of the tools available to businesses to protect trade secrets and other confidential information, as well as certain customer relationships.  In addition, it poses a challenge for businesses because the average weekly earnings creates a moving target for companies to follow and, with Virginia being a relatively high wage earning jurisdiction (particularly in the Northern Virginia suburbs of DC), the restrictions set forth in this statute likely will apply to many employees.