By Ithi Joshi and Philip Schwartz

Joshi is an associate with Dunlap Bennett & Ludwig, and Schwartz is a partner, both practicing out of Vienna, VA

 

[May 18, 2020]   The Virginia General Assembly recently passed new legislation on employee misclassification that is set to go into effect on July 1, 2020. 

To prevent employee misclassification and to keep employers accountable, the following bills were passed:

  1. House Bill 984 (“Bill 984”) creates a private cause of action where a wrongly classified worker may sue an employer for damages if the employer had knowledge of the worker’s misclassification. The deadline for filing in Virginia state court is two years. Damages sought may include any lost wages, salary, employment benefits, and litigation costs resulting from the misclassification. Note that Bill 984 assumes that an employee-employer relationship already exists unless the employer can demonstrate that the worker is an independent contractor as defined by the IRS.
  2. House Bill 1199 (“Bill 1199”) prohibits employers from retaliating against individuals who, in good faith, report misclassification or participate in investigations or proceedings related to reports of misclassification. Specifically, Bill 1199 prohibits employers from discharging, disciplining, discriminating against, or retaliating in any way against an individual’s pay or work terms. Employers who are found in violation of this new law will be subject to a penalty not to exceed the total amount of lost wages of the employee. 
  3. House Bill 1407 (“Bill 1407”) provides enforcement authority to the Virginia Department of Taxation to investigate any violations of Bill 984 and 1199, where an employer knowingly misclassifies an employee. First-time offenses will be fined up to $1,000 per worker. Bill 1407 also prohibits employers from requiring workers to enter into misclassification agreements meant to force such workers to forgo employee status.

DC and Maryland also have similar laws to curb employee misclassification. For example, the Maryland Workplace Fraud Act protects against the misclassification of employees in the construction and landscape industries. Maryland law also presumes that an individual is an employee unless properly classified as an independent contractor by the employer. Employers in Maryland are subject to a maximum civil penalty of $5,000 per employee for knowingly misclassifying their employees. The DC Workplace Fraud Amendment Act also creates a presumption of an employment relationship in the construction industry when work is performed by an individual in exchange for renumeration from an employer. 

All Virginia (and DC and Maryland) employers that engage independent contractors should carefully assess their employment practices and determine if all workers are properly classified. Employers should also review any existing employment agreements to ensure compliance with the new laws. Please contact DBL for more information on ways to stay compliant with the state requirements.

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Posted in: Employment Law