Big Changes Coming For Virginia Dealerships Thanks To New State Wage Law

Fisher Phillips
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Fisher Phillips

The Virginia Overtime Wages Act (VOWA), which goes into effect on July 1, 2021, codifies Virginia’s first overtime law and brings sweeping changes to Virginia employers’ wage and hour obligations. But more than that, VOWA deviates from federal wage and hour law in a way that impacts many industries – especially automobile dealers. What do automobile dealers need to know about VOWA?

Impact on Automobile Dealers

VOWA appears to eliminate the Fair Labor Standards Act (FLSA’s) dealership exemptions for sales, parts, and mechanics under 29 U.S.C § 213(b)(10). For Virginia dealerships, absent further clarification from the Virginia Department of Labor and Industry, this means that positions such as sales, service advisors, parts counterpersons, and technicians may suddenly become eligible for overtime if they work more than 40 hours in a workweek.

Additionally, there is ambiguity as to the continued validity of the commission-paid exemption under 29 U.S.C § 207(i). While VOWA does not specifically include 29 U.S.C § 207(i) in its list of exemptions or exclude commission-paid employees under its definition of “employee,” it requires that overtime wages be paid “pursuant to 29 U.S.C. § 207” – presumably including § 207(i). Assuming this exemption continues to be available, Virginia dealerships may consider revising pay plans for commission-based employees such as salespersons and service advisors to maintain their overtime exempt status.

How to Calculate Regular Rate

The calculation of regular rate under VOWA depends on whether the employee is paid on a salaried or hourly basis. For salaried employees, the regular rate is one-fortieth of wages paid for the workweek. For hourly employees, the regular rate is the hourly rate in addition to other non-overtime wages (not including any amounts excluded by the FLSA) paid for the workweek, divided by the total number of hours worked in the workweek. These calculations are a departure from the simpler calculation of regular rate under the FLSA, which is to divide an employee’s compensation for the workweek by the hours worked during the same workweek.

Remedies for VOWA Violations

VOWA imposes a three-year statute of limitations on overtime claims regardless of whether the violations were willful, whereas the FLSA has a two-year statute of limitations (three years for willful violations). Additionally, VOWA imposes automatic liquidated damages in the amount of unpaid overtime wages and treble damages for employers who are “knowingly” non-compliant. Lastly, VOWA allows for recovery of 8% prejudgment interest and reasonable attorneys’ fees and costs.

Takeaway

Virginia dealerships should be re-evaluating pay plans for sales, service, and parts employees to ensure that they are compliant under Virginia’s new overtime law. VOWA creates significant changes and creates the potential for considerable liability. If your dealership hasn’t done so already, consider consulting with legal counsel to make sure that your pay plans are compliant with the law.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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