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The New Virginia Overtime Wage Act: Big Changes are Coming for Many Virginia Employers
The New Virginia Overtime Wage Act: Big Changes are Coming for Many Virginia Employers

In our blog posts last year, we chronicled the sea change in employment laws that has been underway in Virginia, in areas such as misclassifying employees as independent contractors and workplace discrimination. Virginia has had a well-earned reputation as a state with workplace rules and regulations typically favoring businesses over employees. However, the Commonwealth has been pulled in the other direction in recent legislative sessions, with some now considering the state to be more aligned with progressive jurisdictions like California and Massachusetts, with more than a dozen employee-friendly pieces of legislation going into effect in 2020.  

The trend in Virginia toward employee-centric workplace laws has carried over into 2021. Effective July 1, 2021, the Virginia Overtime Wage Act (VOWA) will change the state’s wage-hour laws, and necessitate significant changes in the pay practices that are likely to disproportionately impact businesses in certain industries (more detail to come in subsequence blog posts). While VOWA leaves more or less unchanged federal wage-hour practices under the Fair Labor Standards Act (FLSA) for non-exempt employees paid on an hourly basis, it fundamentally alters pay requirements for non-exempt salaried employees and appears to eliminate a number of exemptions to overtime that have previously been available under the FLSA.

What pay practices will remain the same for Virginia employers as of July 1, 2021?

VOWA, like the FLSA, requires that most non-exempt employees be paid at least the federal minimum wage for all hours worked and overtime pay at not less than one-and-a-half times the regular rate of pay for all hours worked over 40 in a workweek. For non-exempt employees who are paid on an hourly basis, calculating the employee’s regular rate of pay and overtime due will remain basically unchanged under VOWA. Consider the example of a non-exempt employee with an hourly wage rate of $10.00 who works 50 hours and also earns a non-discretionary bonus of $100.00 for the workweek. Under both VOWA and the FLSA, the employee’s regular rate of pay and overtime would be determined as follows:

                Regular wages + bonus: 50 hours x $10.00 = $500.00 + $100.00 = $600.00

Regular rate of pay:  $600.00 / 50 = $12.00

Overtime rate of pay: $12.00 x 1.5 = $18.00

Overtime pay: $18.00 x 10 hours = $180.00

Total wages due: $600 + $180 = $780.00

What changes in pay practices will be needed under VOWA?

VOWA differs from the FLSA and will impact the current pay practices of many Virginia employers on two fronts, as follows:

  • VOWA changes the FLSA’s overtime calculation for non-exempt salaried employees

For non-exempt employees paid on a salary or other regular basis, VOWA alters the way in which the regular rate of pay is determined, which will result in more overtime being due under the new law than under the FLSA. Currently, the regular rate of pay for non-exempt salaried employees is calculated under the FLSA by dividing all wages paid for a particular week by all hours worked by the employee during that workweek. However, VOWA changes that calculation, requiring employers to calculate the regular rate of pay for non-exempt workers paid on a salary or other regular basis by dividing all compensation due the employee for the workweek by 40 (yielding a higher regular rate of pay for any employee working more than 40 hours in a workweek). In addition, while the FLSA mandates payment of only a one-half time overtime premium for non-exempt salaried workers, VOWA requires employers to pay an overtime premium of one-and-a-half times the regular rate of pay for such employees. Therefore, under VOWA, Virginia employers will owe non-exempt salaried employees significantly more in overtime than would have been due under the FLSA. 

Consider a hypothetical of a non-exempt salaried employee who is paid $1,000/week and puts in a 50-hour workweek:

 

Under the FLSA

Under VOWA

Regular rate of pay

$20 ($1,000/50)

$25 ($1,000/40)

Overtime rate of pay

$10 ($20 x .5)

$37.50 ($25 x 1.5)

Total overtime pay

$100 ($10 x 10 hrs.)

$375 ($37.50 x 10 hrs.)

     
  • VOWA eliminates most FLSA exemptions to overtime

Another potential downside of VOWA for some Virginia employers is that Section 40.1-29.2(D) appears to limit available FLSA overtime exemptions to executive, administrative, professional, outside sales, and certain transportation and local delivery employees. We note, however, that there is an inconsistency between this section and VOWA’s definition of “employees,” which seems to incorporate most FLSA overtime exemptions into the new law. We anticipate that the potentially significant consequences of 40.1-29.2(D) for some Virginia employers will cause it to be brought up for debate and potential amendment during the next legislative session. However, unless and until that happens, many of the FLSA overtime exemptions that have previously been available (e.g., for commission-based retail and service employees under Section 207(i), for automobile sales and services under Section 213(a)(10), and for computer-related occupations under Section 213(a)(17)), will no longer be available to Virginia employers as of July 1, 2021.

What should Virginia employers do to prepare for VOWA?

In light of the many changes in wage and hour practices attendant to VOWA, Virginia employers should carefully review their wage and overtime pay practices and employee classifications and consider whether to make changes in such practices to ensure compliance with the new law. If you have questions about your policies and practices to ensure compliance with the new legal requirements, the employment law attorneys at Bean, Kinney & Korman can assist in evaluating your company’s specific questions and in crafting effective solutions. 

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 authors and are not necessarily the views of any client.

  

  • Maureen E. Carr
    Shareholder

    Maureen E. Carr is a shareholder of Bean, Kinney & Korman. She focuses her practice on employment law and commercial litigation and is known for her legal acumen, responsiveness, and collaborative approach.

    Employment Law

  • R. Douglas  Taylor, Jr.
    Shareholder

    Douglas Taylor is a shareholder of Bean, Kinney & Korman. For nearly 30 years, Doug has provided timely and practical legal advice and representation to businesses, business owners, and executives on a wide range of federal, state ...