Effective July 1, 2021, Virginia employers must ensure that their pay practices comply with a new stand-alone overtime law called the Virginia Overtime Wage Act (“VOWA”). VOWA largely tracks the federal Fair Labor Standards Act (“FLSA”) in that it incorporates most FLSA exemptions and requires employers to pay 1.5 times a nonexempt employee’s regular rate of pay for all hours worked in excess of 40 hours each workweek. However, VOWA and the FLSA differ in several ways, which we describe below.

Determining an Employee’s Regular Rate of Pay

VOWA’s most significant divergence from the FLSA is the statute’s formula for calculating a nonexempt employee’s regular rate of pay.

For nonexempt employees paid on an hourly basis, the regular rate is the employee’s hourly rate plus other non-overtime wages paid or allocated to that workweek (e.g., commissions or bonuses), minus any applicable federal exclusions (e.g., gifts, reimbursements for travel expenses, and holiday pay), divided by the total number of hours worked in that workweek.

For nonexempt employees paid on a salary or other regular basis, the regular rate of pay is “one-fortieth of all wages paid for that workweek,” which includes the employee’s regular salary plus other non-overtime wages paid or allocated to that week, such as non-discretionary bonuses or commissions.

This formula appears to preclude employers from paying nonexempt employees a fixed salary that covers straight-time wages for hours worked in excess of 40 hours in a workweek, or from using the FLSA’s “fluctuating workweek” method for calculating overtime. Under the fluctuating workweek method, overtime pay is based on the average hourly rate, produced by dividing the employee’s fixed salary and any non-excludable additional pay (e.g., commissions, bonuses, or hazard pay) by the number of hours actually worked in a specific workweek. Naturally, this means the average hourly rate may change from week to week depending on how many hours the employee actually worked.

VOWA’s new formula for calculating overtime will also result in higher overtime payments. For example, a nonexempt employee paid a fixed weekly salary of $600 with no bonus pay who works 50 hours in a workweek would earn the following overtime under each law:

FLSA Fluctuating Workweek:

($600 Salary + $0 Bonus) ÷ 50 = $12 regular rate

$12 regular rate x 0.5 = $6 half-time rate

$6 half-time rate x 10 overtime hours worked = $60 of overtime owed

$600 salary + $60 overtime = $660 total compensation owed for the week

VOWA:

($600 Salary + $0 Bonus) ÷ 40 hours = $15 regular rate

$15 regular rate x 1.5 = $22.50 per hour overtime rate

$22.50 overtime rate x 10 hours of overtime = $225 of overtime owed

$600 salary + $225 overtime = $825 total compensation owed for the week

Employers should note that VOWA’s formula will necessarily result in larger recoveries for misclassified workers, especially when the higher overtime rate is extrapolated over an entire limitations period or across multiple employees proceeding collectively—an option that is now available to Virginia employees pursuing wage claims thanks to last year’s amendments to the Virginia Wage Payment Act.

Overtime Exemptions Under VOWA

VOWA creates some ambiguity regarding whether Virginia employers may continue to rely on certain FLSA overtime exemptions. Although VOWA’s definition of “employee” appears to incorporate most FLSA overtime exemptions, a later section limits the available exemption defenses to only the executive, administrative, professional, and outside sales exemptions, and certain transportation-related exemptions (e.g., for local delivery drivers). See Va. Code § 40.1-29.2(A), (D). The latter would effectively eliminate the FLSA’s computer professional exemption, among others. Further, although the Virginia Department of Labor and Industry (“DOLI”) recently published frequently asked questions (see Question #3) that suggest the computer professional exemption is available under VOWA, the same guidance contradicts the statute by leaving out the transportation-related exemptions explicitly included in VOWA’s definition of “employee.”

Extended Statute of Limitations for Overtime Claims

VOWA provides a three-year statute of limitations for aggrieved employees to bring an overtime claim, regardless of the circumstances. In comparison, the FLSA provides a two-year statute of limitations for overtime violations, or three years if the violation was willful.

The extended statute of limitations will not have immediate practical effect, however, because DOLI has clarified that it cannot investigate claims brought before July 1, 2021.

Expansion of Available Damages and Remedies for Overtime Violations

The FLSA provides liquidated damages equal to the amount of unpaid overtime wages. An employer may avoid such “double damages” if it can show that it acted in “good faith” and that the employer had “reasonable grounds” for believing its actions complied with the requirements of the FLSA.

Under VOWA, however, all overtime wage violations are subject to double damages, plus pre-judgment interest of 8 percent per year. Further, VOWA does not offer a “good faith” defense, but instead permits treble damages, and the same pre-judgment interest and reasonable attorney fees and costs, where the employer (i) had actual knowledge that it failed to pay the overtime wages due or (ii) acted in deliberate ignorance or reckless disregard as to whether it was paying all overtime wages owed.

What Virginia Employers Should Do Now

The increased potential wage and hour liabilities mean that Virginia employers should review their overtime pay practices and exemption classifications. Specifically, Virginia employers should review their employee classifications and consider whether it makes practical sense to pay all nonexempt employees on an hourly, rather than salary basis. Epstein Becker Green will also continue to monitor DOLI for further guidance regarding the available exemptions under VOWA.

****

For more information about this Advisory, please contact:

Nathaniel M. Glasser
Washington, DC
202-861-1863
nglasser@ebglaw.com
Eric I. Emanuelson, Jr.
Washington D.C.
202-861-1884
eemanuelson@ebglaw.com
Jump to Page

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.