VA overtime law and employer wage / hour obligations

the Virginia Overtime Wage Act (VOWA), Go. Code § 40.1-29.2, is effective July 1, 2021, and will significantly change the salary and time obligations of employers in Virginia. At first glance, the VOWA appears to follow federal law under the Fair Labor Standards Act (FLSA). On closer inspection, however, this new law contains important nuances that deviate from the FLSA, such as a new method of calculating the regular rate of pay, an extended statute of limitations, automatic damages, damages. – possible triple interests and the effective elimination of popular compensation plans.

Exemptions and regular rate calculations

Like the FLSA, the VOWA generally requires employers to pay non-exempt workers an overtime rate equal to one and a half times their regular rate for all hours worked in excess of 40 hours per work week. The VOWA (at Va. Code § 40.1-29.2 (A)) appears to incorporate most of the FLSA exemptions by excluding certain workers from the definition of “employees”. However, the VOWA, in Va. Code § 40.1-29.2 (D), later creates some ambiguity by apparently limiting the exemption defenses available to executive, administrative, professional and external sale exemptions, as well as more discreet exemptions related to transport. A narrow reading of the law could potentially preclude employers from invoking a defense that other traditionally exempt workers, such as computer workers (29 USC § 213 (a) (17)) – are not entitled to. at overtime.

For non-exempt hourly workers, the method of calculating the regular rate of pay in the VOWA (in Virginia Code § 40.1-29.2 (B) (1)) is in accordance with the FLSA: employers are advised to take the sum hourly wages of the worker. wages and any other wages other than overtime paid or allocated for that work week (excluding payments that may be excluded under the FLSA) and divide that number by the total number of hours worked. For example, if an employee works 50 hours at $ 15 an hour and receives a non-discretionary bonus of $ 200 at the end of the week, his regular and overtime rates would be calculated as follows:

Regular salary: $ 15 x 50 = $ 750

Salary + bonus: $ 750 + $ 200 = $ 950

Regular rate: $ 950/50 = $ 19 / hour

Overtime rate: $ 19 x 1.5 = $ 28.50 / hour

Another apparent ambiguity in VOWA is its description of the calculation of the regular rate for hourly workers. The law specifies: “[F]or employees paid by the hour, the regular price is hourly wage rate plus any other wages other than overtime paid or assigned for that work week, excluding any amount excluded from the regular rate by the Federal Fair Labor Standards Act, 29 USC § 201 et seq., and its regulations, divided by the total number of hours worked during that week of work. (Emphasis added.) Read literally, this approach would likely lower the regular rate of pay below minimum wage and appears to be a drafting error. For example, if a worker’s hourly rate of pay is $ 12.00 and he received no other pay for a week in which he worked 60 hours, then his regular rate of pay would be $ 0.20 and his overtime rate would only be $ 0.30. Virginia law makes it clear that courts cannot interpret statutory language in a way that leads to “absurd results” which, as in this case, would violate the FLSA.

Regarding the non-exempt employee workers, the VOWA diverges very clearly from the FLSA. Under VOWA, the normal rate of pay for a salaried worker is one-fortieth of all wages paid for a given week, regardless of the number of hours worked by the person. In contrast, under the FLSA, the regular rate of pay of a salaried worker is calculated by dividing the salary by every hour worked. In addition, VOWA requires compensation at time and a half overtime for employees all employees, regardless of the compensation plan, while the FLSA regulations only allow part-time payment for employees and other basic compensation plans. Under VOWA, a non-exempt salaried employee will owe significantly more for overtime, as demonstrated by this example which assumes a salary of $ 1,200 per week and a 50-hour work week:

FLSA calculation

Regular rate: $ 1,200 / 50 = $ 24 / hour

Overtime rate; $ 24 x 0.5 = $ 12 / hour

Overtime pay: $ 12 x 10 = $ 120

VOWA calculation

Regular rate: $ 1,200 / 40 = $ 30 / hour

Overtime rate: $ 30 x 1.5 = $ 45

Overtime compensation: $ 45 x 10 = $ 450

As a result of this change, and until the Virginia Department of Labor and Industry (DOLI) or state courts issue additional guidance, employers may consider dropping non-exempt salaried workers at a rate simple hourly and / or reduce overtime among non-exempt salaried labor. . For all non-exempt workers who remain employed, effective July 1, 2021, employers must update the method by which they calculate regular and overtime rates to comply with VOWA.

Weeks of work, piece rates and fluctuating daily rates

Since VOWA requires hour-and-a-half overtime pay for all employees, any plan that uses part-time pay to pay workers for overtime worked, including the fluctuating work week (FWW) , day rate, and piece rate pay programs – is now potentially illegal in Virginia. While this can be another unintended consequence resulting from ambiguous statutory language, employers may consider eliminating FWW plans altogether and re-evaluating piecework and per diem rates until DOLI issues guidelines and / or that state courts begin to interpret the law.

The FWW schemes do not appear to correspond to VOWA’s method of calculating the standard rate for salaried workers, as such schemes cannot be easily adjusted to comply with the new law (dividing the salary by 40 each week would go to l against the purpose of an FWW). Piece rates and day rates, on the other hand, could be adjusted to comply with the law, but VOWA requires that two basic requirements be met: (1) the regular rate of pay must be determined by taking “[1/40] of all wages paid in a work week ‘(rather than dividing by all hours worked) and (2) the worker should be paid half-time (rather than half-time) for all hours worked over 40 hours in a working week.

Extension of limitation period and available remedies for overtime violations

The consequences of violating VOWA are serious. The FLSA provides a two-year statute of limitations for overtime violations and allows a three-year statute of limitations only if a violation is “willful.” The VOWA (at Va. Code § 40.1-29.2 (G)), on the other hand, applies a three-year limitation period to all violations, regardless of whether a violation was intentional. In addition, the VOWA (in Code Va. § 40.1-29.2 (F)) makes damages automatic; under the RSA, an employer can defend itself against damages by showing that it acted in good faith, with reasonable grounds to believe that it acted in accordance with the RSA. In addition, under VOWA, “knowingly” failure to comply with the law can result in triple damages, which are not available under the FLSA. Finally, plaintiffs suing under the VOWA may also recover an 8% pre-judgment interest penalty and reasonable attorney fees and expenses, none of which are automatically available under the FLSA.

Key points to remember

Employers may consider evaluating how they compensate non-exempt employees in Virginia, especially with respect to non-exempt salaried workers and employees working under FWW agreements. Piece and daily rates may also need to be adjusted to accommodate regular rates and overtime requirements of VOWA. Ambiguities in the law will need to be resolved by the Virginia General Assembly, DOLI, and / or the courts, but in the meantime Virginia employers may want to consider a conservative approach to avoid high penalties, including damages- automatic interest, triple damages possible. , a mandatory pre-judgment interest charge of 8% and liability for plaintiffs’ attorney fees and costs.