Effective July 1, 2020, employers who utilize independent contractors (and potentially even staffing companies or sub-contractors) are looking at a completely new legal landscape in Virginia. Virginia Code Sec. 40.1-28.7:7, titled “Misclassification of Workers,” provides a new cause of action for any “individual who has not been properly classified as an employee.” Virginia also passed a related anti-retaliation law codified at Va. Code § 58.1-1901 that makes it unlawful to retaliate against a worker who reports a potential misclassification issue.
What does the new law do?
In short, it entitles any worker not properly classified as an employee with the ability to bring a lawsuit to recover the difference in any wages or salary they would have received had they been treated as an employee, employment benefits, including expenses incurred by the employee that would otherwise have been covered by insurance, and other compensation lost to the individual. What is more, it provides for the worker’s attorneys’ fees.
Crucially, it also provides a presumption that weighs heavily in favor of treating a worker as an employee. Simply, if a company pays a worker, the worker is presumed to be an employee under this law and entitled to the above remedies unless the employer can prove the worker truly was an independent contractor under the I.R.S.’s test.
Am I protected if I use staffing company or subcontractor arrangements?
Likely not. The cause of action, as written, does not limit the claim to those individuals hired directly by a company as independent contractors. Virginia employers using staffing companies or subcontractors should consider conducting an internal audit to evaluate their exposure. It is not difficult to imagine an entrepreneurial plaintiffs’ firm generating cases on these facts. Although there is no case law discussing this new law yet, of central importance will likely be the ability to control the worker’s job performance.
How does Virginia civil litigation procedure intersect with this new law?
It is extremely difficult to prevent a case from going to trial in Virginia state courts. Thus, the expense of litigation, including potentially paying opposing counsel’s fees, should necessarily also factor into an employer’s decision-making when contracting with a worker. Moreover, there is also no guarantee of an appeal for relief from an adverse judgment.
— If you have further questions or concerns or would like assistance evaluating your business’s potential exposure under this new law, please contact: