Virginia Employer Alert
Drastic Changes to Virginia Wage Payment Act Allow Employees to Recover Double to Triple Their Improperly Withheld Compensation, Attorneys’ Fees and Costs
Effective July 1, 2020, employees in Virginia will gain a potent legal weapon against employers who fail—deliberately or otherwise—to promptly pay earned wages. Through the Commonwealth’s amendments to the Virginia Wage Payment Act (VA Code § 40.1-29), aggrieved employees may now take advantage of a statutory cause of action against employers who violate the Act. Although similar to laws in neighboring Maryland and D.C., the revised Wage Payment Act is a notable departure from Virginia’s traditionally business-friendly employment laws.
Currently, Virginia courts and arbitrators typically resolve wage disputes between employees and businesses through a traditional breach of contract analysis, while any corresponding violations of the Wage Payment Act are pursued exclusively by the Virginia Department of Labor and Industry. However, although employees have long had recourse to recover unpaid wages, obtaining these wages proved prohibitively expensive or too time-consuming to pursue in many situations. Under the American Rule, a litigant who prevails in court is not entitled to reimbursement of attorney’s fees and costs absent language providing for recovery of those expenses in a written contract or statute. As a result, depending on the amount of compensation at issue, workers may be dissuaded from pursuing their unpaid wages wherein the expected cost of litigation could exceed the value of the compensation at stake.
The 2020 Wage Payment Act amendments largely serve to resolve this issue by imposing draconian penalties on employers that a worker may recover upon prevailing on a wage claim. These newly available damages include an employee’s recovery of reasonable attorney’s fees and costs, statutory penalties of double the value of the withheld wages even where a business acts in good faith or only negligently, and treble damages where an employer’s violation of the Wage Payment Act was knowing or reckless.
This new paradigm presents substantial risks to Virginia companies involved in wage disputes, since even a negligible claim for compensation may cost an employer tens of thousands of dollars to resolve when accounting for the Wage Payment Act’s new fee-shifting and exemplary damage provisions. Importantly, businesses are subject to these penalties for underpaying many types of wages in addition to an employee’s base salary or hourly rate, including performance bonuses and commissions, which are often prone to competing calculations or interpretations.
In light of this impending change in law, Virginia employers should proceed with caution when calculating employee compensation and should evaluate any challenge to such carefully in conjunction with legal counsel. Moreover, even when a business is confident about its position in a wage dispute, the newly available remedies under the Wage Payment Act may convince aggrieved workers to pursue litigation even when their claims are more tenuous in nature.
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