Employers need to be concerned with a new state law — the Virginia Overtime Wage Act, which takes effect July 1. This law was enacted by Virginia lawmakers during this year’s General Assembly.
While overtime pay has been a staple of federal law for decades, Virginia’s new law expands the coverage of overtime rights to employees by eliminating a pay formula employers have in calculating overtime pay for salaried workers, by increasing the statute of limitations, by increasing damages and by providing for collective actions under Virginia law.
The overtime law applies to all employers, regardless of size.
Under current federal law (and now Virginia law), employers must pay an overtime premium to all non-exempt employees at a rate not less than one and one-half times the employee’s regular rate of pay for all hours worked over 40 in a workweek.
A workweek is defined as seven consecutive 24-hours and must be set by the employer, and it cannot change week to week.
To properly calculate overtime, employers must first determine the regular rate of pay. This seems simple, but it isn’t.
For employees paid hourly, the Virginia law provides that the “regular rate” shall include the hourly rate of pay plus any other non-overtime wages paid or allocated for that workweek, excluding any amounts that are excluded from the regular rate by the FLSA, divided by the total number of hours worked in that workweek. This appears to generally be consistent with federal law, although defined differently.
The big concern is with salaried non-exempt employees.
Because the law requires that pay be calculated based on a 40-hour workweek and not all hours worked (as it is under federal law), the rate of pay will likely be higher, in some cases substantially.
Moreover, Virginia has taken away a pay methodology that many employers use.
Under federal law, the “fluctuating workweek” method of calculation can apply for non-exempt employees paid on a salary basis where their hours fluctuate week to week. When those employees work more than 40 hours in a workweek, they are paid half time and not time and a half for overtime.
The fluctuating workweek calculation appears to be non-existent under the new Virginia law.
Virginia law also expands the statute of limitations from two years under the FLSA (with a three-year statute of limitations only for willful violations) to three years.
Violations include civil or criminal penalties.
Employees can bring individual or collective actions.
Employers can be liable for wages owed, as well as liquidated damages (two times what is owed), interest, attorney’s fees and costs. Under federal law, employers can argue that it acted in good faith to avoid the liquidated damages. This is not an option under Virginia law.
For willful violations, the law states, “If the court finds that the employer knowingly failed to pay wages to an employee in accordance with this section, the court shall award the employee an amount equal to triple the amount of wages due and reasonable attorney fees and costs.”
Employers need to immediately review their pay practices, and make sure that all exempt employees are properly classified. Paying a salary isn’t enough. It depends on a duties test outlined under the FLSA.
For non-exempt employees, employers must align their pay practices with these new provisions.
Information for this article came from a Richmond Times Dispatch column provided by Karen Michael, an attorney based in Richmond with KarenMichael PLC.
