Virginia Enacts New “Wage Theft Law,” Creating Private Right of Action for Unpaid Wages

On April 12, 2020, Virginia Gov. Ralph Northam signed a series of new employee protection laws related to employee unpaid wage complaints. Notably, the enactment of HB 123 and SB 838, known as the Wage Theft Law, for the first time creates a private right of action for Virginia employees to sue for allegedly unpaid wages. The Wage Theft Law also expands the relief available to prevailing plaintiffs and their attorneys, incentivizing state law wage and hour lawsuits against employers.

Moreover, HB 337 and SB 48 protect from retaliation those employees who report wage theft or file suit against their employer for unpaid wages. Finally, HB 336 and SB 49 greatly expand the Department of Labor and Industry’s right to investigate employee wage complaints to include suspected wage violations related to other employees of the same employer.

The newly enacted laws are expected to create a flood of new single-plaintiff and collective-action unpaid wage litigation in Virginia state courts.

Below is a summary of some of the new laws’ key provisions.

New Private Right of Action: The Wage Theft Law permits employees to sue their employers for unpaid wages, a private right of action not previously granted to Virginia employees. Previously, employees could not sue their employers under state law and were instead required to file an administrative claim with the Virginia Department of Labor and Industries. Thus, employers rarely faced wage and hour lawsuits in state court. Now, an employee may file suit individually, jointly with other aggrieved employees or on behalf of similarly situated employees as a collective action in Virginia state court.

This change is significant because of the very limited ability to obtain summary judgment under Virginia civil procedure. In federal court, many employers prevail on motions for summary judgment, thus avoiding the risks of a jury trial. Absent this procedural option in state court, Circuit Courts will likely see an influx of wage and hour claims and an increase in the number of wage and hour trials.

New Remedies: Previously, Virginia law permitted an employee to recover all wages due plus pre-judgment interest. The Wage Theft Law expands the remedies available to the employee. In addition to recovery of all wages owed plus 8 percent pre-judgment interest, the Wage Theft Law permits recovery of liquidated damages in an amount equal to the wages owed and reasonable attorney fees and costs. If the court finds that the employer “knowingly” failed to pay wages to the employee, the Wage Theft Law permits recovery of treble damages and the imposition of a civil penalty not to exceed $1,000 per violation payable to the Virginia State Treasurer. The amount of the civil penalty is determined based on the employer’s size and the gravity of the violation. Importantly, “knowingly” does not require proof of intent to defraud; actual knowledge, deliberate ignorance and reckless disregard are each sufficient to establish that the employer acted “knowingly.”

As it did previously, the Wage Theft Law also carries potential criminal penalties for violations made willfully and with the intent to defraud. If the amount of wages owed is less than $10,000, employers can be found guilty of a misdemeanor. If the amount owed is more than $10,000, or if an employer has similar previous offenses, that employer can be found guilty of a felony and subject to a corresponding prison sentence. However, the Wage Theft Law now excuses the employer from criminal liability if the employer’s failure to pay wages was due to a bona fide dispute between the employer and employee.

New Provisions Specific to Contractors: The Wage Theft Law imposes additional obligations on general contractors of large multiresidential or commercial construction contracts (i.e., greater than $500,000). In the event the general contractor knew or should have known a subcontractor was not paying its employees all wages due, the Wage Theft Law deems the general contractor an “employer” of its subcontractors’ employees for purposes of the statute. The subcontractor’s employees may recover their unpaid wages, an equal amount of liquidated damages, attorney’s fees and, if applicable, treble damages, jointly and severally against the general contractor and subcontractor.

New Anti-Retaliation Provisions: HB 337 and SB 48 protect employees who report wage theft or file suit against their employer for unpaid wages from retaliation. An employer may not discharge or in any other manner discriminate against an employee for filing a complaint, instituting a proceeding or testifying in a proceeding for nonpayment of wages. Unlike the Wage Theft Law, however, HB 337 and SB 48 do not create a private right of action; employees who believe they have been the subject of retaliation may file a complaint with the commissioner of the Department of Labor and Industry, who may institute proceedings on their behalf.

Expanded Investigatory Authority: HB 336 and SB 49 greatly expand the Department of Labor and Industry’s right to investigate employee wage complaints. If, during the course of an investigation into an employee’s complaint of an employer’s failure to pay wages, the Department of Labor and Industry obtains information that gives it a “reasonable belief” that the employer failed to pay wages to other employees in accordance with the law, the department may expand its investigation. The department may broaden its investigation to include additional employees (whether or not those employees have actually made a complaint of nonpayment of wages), and violations not previously asserted by the employee who filed a complaint. This significantly expands the department’s investigatory authority and inflates the risk to employers, as a single complaint could result in a sitewide or even statewide investigation with commensurate recovery and penalties.

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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