What Changes on January 1, 2027

Governor Spanberger signed HB 1 and SB 1 on April 9, 2026. The legislation, codified at Virginia Code § 40.1-28.10, sets a three-step schedule to adjust Virginia’s minimum wage. The rate is $12.77 per hour through December 31, 2026. It rises to $13.75 per hour for calendar year 2027, and to $15.00 per hour for calendar year 2028. In each case an employer’s obligation is to pay the greater of the Virginia rate or the federal minimum wage. With the federal rate stuck at $7.25 per hour, the Virginia minimum wage rate controls.

The increase from $12.77 to $13.75 is 7.7 percent -- considerably larger than the 2.9 percent adjustment that produced the 2026 minimum hourly wage. Employers that budgeted for another inflation-sized bump must now revisit those assumptions now, while there is still time to adjust 2027 labor budgets.

Do Not Wait for an Announcement from DOLI

This point causes real confusion, and it is worth stating plainly. For several years, Virginia's minimum wage moved through an indexing mechanism, with the Commissioner of Labor and Industry calculating an adjusted rate using the Consumer Price Index and publishing it in the fall for the following January. That is how the Commonwealth arrived at $12.41 for 2025 and $12.77 for 2026.

However, HB 1 and SB 1 suspended that mechanism for the next two years. Instead, the 2027 and 2028 rates are written into § 40.1-28.10 as fixed dollar amounts. Under the amended statute, the Commissioner's annual adjustment duty resumes by October 1, 2028, for a rate effective January 1, 2029, and annually thereafter, using the CPI-U for all items, all urban consumers. The statute provides that each annual adjustment shall not be less than zero, meaning that there can be no future reduction in the hourly minimum wage, without further action from the Virginia General Assembly.

The practical consequence is that Virginia employers should not wait for an autumn announcement confirming the 2027 figure. There will not be one. The rate is already law, and payroll changes can be scheduled today.

The Farm Labor Exemption Disappears the Same Day

Agricultural employers face a far larger change than a 98-cent increase in the minimum hourly wage rate for farm workers. HB 20 and SB 121, signed April 8, 2026, amend Virginia Code § 40.1-28.9 to eliminate the exemption for persons employed as farm laborers or farm employees. The amendment carries a delayed effective date of January 1, 2027 -- the same day the new rate takes effect. For agricultural employers who have been paying the federal minimum wage of $7.25 per hour in reliance on that exemption, the required floor under the new Virginia law moves to $13.75 per hour overnight. That is an increase of roughly 90 percent, with no phase-in, and it arrives a single year before the $15.00 rate.

Agricultural employers should not treat this as a payroll adjustment alone. Removing an exemption also brings a category of workers within the Virginia Minimum Wage Act for the first time. That carries recordkeeping consequences, affects piece-rate and day-rate compensation structures, and interacts with the housing and meal credits permitted under the statutory definition of wages. Employers using seasonal or temporary foreign labor should confirm with legal counsel how the amended § 40.1-28.9 treats their particular workforce, because the enrolled legislation reaches more than one category within that section.

Who Remains Exempt

The Virginia Minimum Wage Act still excludes a number of categories from the definition of "employee" under § 40.1-28.9. Among them are persons under 18 employed by a parent or legal guardian, persons under 16, golf course caddies, certain traveling or outside salespersons compensated on commission, taxicab drivers and operators, summer camp employees, babysitters working fewer than ten hours per week, au pairs in the Department of State Exchange Visitor Program, students in bona fide educational programs, full-time students working fewer than twenty hours per week, and persons confined in penal or corrective institutions.

Two cautions apply. First, these exemptions are narrow. An employer relying on one should be able to identify the specific statutory clause and show that the employee fits it. Second, a Virginia exemption is not a federal exemption. An employee outside the Virginia Minimum Wage Act may still be covered by the Fair Labor Standards Act, and a wage rate analysis should be run under both statutes.

What the Increase Means for Tipped Employees

Employers may continue to take a tip credit for employees who customarily and regularly receive more than $30 per month in tips. The cash wage floor remains the federal $2.13 per hour, but the combination of cash wages and tips must reach the Virginia minimum wage.

As the Virginia minimum wage rate rises, the math changes too. At $12.77, the maximum tip credit is $10.64 per hour. At $13.75, it becomes $11.62. Employers in hospitality and food service should confirm that their systems recalculate the credit automatically on January 1 and that tip-credit notices to employees reflect the new figures. Employers should also note the evidentiary provision in § 40.1-28.9: an employer may credit the amount of tips it reasonably estimates the employee received. The burden falls on the employee to prove by clear and convincing evidence that actual tips were lower. That provision favors employers, but only those whose records are good enough to support the tip estimate.

Why the 2027 Increase Carries More Risk Than Earlier Increases

Every minimum wage increase creates some risk of underpayment. This one arrives against a substantially changed wage payment liability backdrop, and that is the point employers may not fully appreciate. HB 238, effective July 1, 2026, rewrote significant portions of Virginia's wage payment law, adding a definition of "wages" that expressly includes hourly wages, prevailing wages, piece-rate wages, day rates, salaries, overtime, commissions, tips, bonuses, and damages owed for misclassification. It also broadened the definition of "employer" across the minimum wage, wage payment, overtime, and misclassification statutes to include any person acting directly or indirectly in the interest of an employer -- language that reaches individuals, not only entities. This significantly expands who can potentially be held liable under Virginia’s wage payment law.

The remedies under Virginia Code § 40.1-29 were already substantial. An employee may sue individually or collectively without exhausting administrative remedies. The standard recovery is the wages owed plus an equal amount as liquidated damages, plus prejudgment interest at eight percent. Where the employer knowingly failed to pay, a court awards triple the wages due plus reasonable attorney fees and costs. The limitations period is three years, and willful nonpayment can support criminal charges, rising to a Class 6 felony at $10,000 or more.

HB 238 did add something helpful for Virginia employers. A good-faith defense is available in proceedings commenced on or after July 1, 2026. An employer that demonstrates good faith and reasonable grounds for believing its conduct was lawful, and that cures the violation by paying all wages due within fourteen days of notification, may avoid additional damages and penalties. That defense is worth understanding, but it is not a compliance strategy. An employer that simply failed to update its payroll system on January 1 will struggle to establish reasonable grounds.

What the Increase Does Not Change

A point of frequent confusion deserves mention here. Virginia has no state salary threshold for the white-collar exemptions from overtime eligibility. Therefore, the minimum salary level for the executive, administrative, and professional exemptions is a creature of federal regulation and remains $684 per week, or $35,568 annually. A Virginia minimum wage increase does not move that number.

It does, however, move how an employee’s regular rate of pay is calculated. Under the Virginia Overtime Wage Act, overtime is calculated on the employee's regular rate, and the floor under that rate rises with the minimum wage. Employers paying non-exempt employees at or near $12.77 will see both straight-time and overtime obligations increase. We have addressed related questions about which hours must be counted as compensable in our discussion of recent DOL guidance on commute and travel time.

What Virginia Employers Should Be Doing Now

October is the right time for Virginia employers to begin preparations for new wage rates and practices that will become effective on January 1, 2027. We recommend employers undertake a wage audit against the new $13.75 minimum wage, rather than the current rate, identifying every employee whose rate falls below the new floor, including part-time, seasonal, and temporary workers, and including any employee whose effective hourly rate falls below the floor after accounting for deductions, piece rates, or commission-only structures.

Next, consider addressing wage compression proactively. Raising the minimum wage floor without adjusting the wage rates just above it compresses differentials between newer employees and experienced staff, and between hourly employees and working supervisors. That can inadvertently create an employee retention problem and, where the compressed groups differ demographically, pay-equity concerns. Employers publishing wage or salary ranges under Virginia's new pay transparency law should coordinate the two exercises, because compensation ranges are now visible in ways they were not before.

Also confirm the mechanics with payroll well before the holidays. Verify the effective date in the system, confirm that tip-credit calculations update automatically, and check that any pay period spanning December 2026 and January 2027 applies the correct rate to hours worked in each year. Employers using a professional employer organization or outsourced payroll provider should obtain written confirmation rather than assuming the vendor will handle it.

Agricultural employers should treat the new law as a restructuring exercise rather than a rate change. Model the cost at $13.75 and again at $15.00, review piece-rate and day-rate arrangements against the amended statute, confirm the treatment of housing and meals under the statutory definition of wages, and establish recordkeeping practices for a workforce that has not previously been covered.

Finally, review fixed-price contracts, bids, and proposals extending into 2027 and 2028 that were priced on current labor costs. Employers holding public contracts should separately confirm any applicable contractual or statutory wage floors, which may exceed the state minimum.

If you have questions about Virginia's 2027 minimum wage increase, the removal of the farm labor exemption, or other wage-and-hour or workforce compliance issues in Virginia, Maryland, or the District of Columbia, please contact Doug Taylor at (703) 526-5586 or rdougtaylor@beankinney.com, or your current Bean Kinney attorney.

This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the author and are not necessarily the views of any client.