This article contains wrongful termination tips for Virginia employees. Our law firm represents individuals in Virginia and the greater Washington, D.C. area when they are terminated from their employment illegally. This is often referred to as wrongful termination. Many issues come into play when an employee is terminated. These employment issues are compounded by anxiety, fears and other strong emotions. It is very important for an employee to attempt to handle being terminated the right way because of issues that arise later. Here are some tips for an employee to consider if they are fired by their employer:
1. Handle Termination Day Professionally: This is by far the most important tip. As difficult as this may be, an individual should handle their termination without drama. This is usually one of the most difficult things for individuals to do. However, if an individual handles this poorly, it can cause major issues for them later on. Individuals who cannot hold their emotions in check often end up much worse than those that quietly gather their belongings, hold their head high and leave on their termination date. In the worst case, if an individual makes a scene when they are fired, the employer may exaggerate the issue and call the police. Furthermore, leaving in a pleasant manner makes it much easier to settle a wrongful termination case later should the individual consider taking that step. Doing so also reduces the possibility that an employer will challenge a former employee’s attempt to obtain unemployment compensation or cause a problem if the individual later applies for a security clearance or another position.
2. Don’t Leave with Employer Materials: Individuals should be very careful when leaving employment not to take proprietary employer materials, physical items, or other employer documents without permission. We commonly see this issue arise when an individual is wrongly terminated, but the employer later claims as a defense that the employee “took” or “stole” materials or proprietary data from an employer. Most of these types of allegations relate to an attempt by the employee to take digital materials with them on their last day, but there are many different types of potential scenarios.
3. Seek a Reference: When an employee is fired, the usual next step is for them to find new employment. Even if a prior supervisor will not serve as a reference due to the termination, an individual should see if former supervisors (perhaps those no longer with the former employer) or others still employed at the employer will serve as a reference. Having a reference for the period of time worked at the former employment will vastly improve one’s chances of obtaining a new position. Even if an individual has been fired, having someone available who can speak to the former employee’s work/performance ability can go a far way to mitigate the damage of the termination.
4. Don’t Sign Agreements While Being Terminated: In many cases, employers will try to limit their liability for wrongful termination by presenting potential agreements to employees they are firing. Such agreements might offer a short amount of pay (1-2 weeks) in exchange for extinguishing all of the employee’s rights. Before signing such an agreement it is important to have an attorney review it. Many former employees come to us after they have signed such agreements which makes it very difficult to take any action on their behalf later.
5. Consult with an Attorney if Wrongful Termination Issues Arise: Not every firing involves wrongful termination. Many situations do not call for the involvement of lawyers. However, if an employee believes that they were terminated wrongfully or illegally and are concerned with their rights they should seek legal advice and do so in a timely manner. Many employment rights are time sensitive so they should be evaluated immediately, if at all.
In the vast majority of employment termination cases that we see, individuals are able to rebuild their careers with good planning and preparation. Generally, most individuals come back to us a year or so after a termination case and tell us that they are in a better place of employment and are happier. The odds of doing so quickly increase when a termination is handled properly by the former employee.
Conclusion
We represent Virginia employees in their legal defense against employment wrongful termination. If you need legal assistance, please contact our office at (703) 668-0070 or at www.berrylegal.com to schedule a consultation. Please also visit and like us on Facebook at Berry and Berry PLLC Facebook Page.
Virginia did not have its own overtime laws until recent approval of the Virginia Overtime Wage Act (“VOWA”), in Virginia House Bill 2063, signed on March 30, 2021 by Governor Ralph Northam. Before VOWA, those that sought unpaid overtime compensation had to previously rely on federal law through the Fair Labor Standards Act, known as FLSA. While VOWA is similar to the FLSA, it increases costs and penalties (both civil and criminal) for Virginia employers that don’t pay required overtime to employees in a timely manner.
Similar to the FLSA, Virginia’s new overtime law requires payment of time and a half at an employee’s regular rate for hours worked in excess of 40 hours in a workweek. But while the VOWA largely is similar to the FLSA, significant differences are likely to result in new liabilities for Virginia employers and higher damages for overtime violations for employees in Virginia that have not received their overtime pay.
VOWA will result in a change in strategy for lawyers seeking unpaid overtime for employees. VOWA establishes a new formula for calculations for salaried employees in Virginia which will result in larger recoveries in overtime cases. VOWA will also yield larger recoveries for misclassified workers. While the FLSA has a 2-year statute of limitations to bring overtime claims, unless they are willful (intentional), VOWA extends this to 3 years. This will clearly bring greater liability to employers.
Finally, VOWA presumes an employees’ ability to obtain double damages for all overtime violations. FLSA permits employers to argue, as a defense, that they acted in good faith in response to such claims; VOWA takes this defense away. Under VOWA, all overtime wage violations are subject to double damages (in addition to pre-judgment interest of 8% per year). Finally, VOWA goes further and permits triple damages for employees where an employer had actual knowledge that it failed to pay the overtime wages due and acted in deliberate ignorance or reckless disregard as to whether it was paying all overtime wages owed.
VOWA also adds criminal provisions against employers. Employers can be now found guilty of a Class 1 misdemeanor if the value of the overtime wages earned and not paid is less than $10,000. If the amount unpaid is over $10,000, the employer can be found liable for a Class 6 Felony charge. A felony charge can also apply no matter the amount of wages at issue for a second conviction. There is a lot to sort out with the new VOWA overtime legislation in Virginia, but employees are going to have much stronger state claims for overtime in the future.
Contact Us
If you are in need of employment law legal representation or advice, please contact our office at 703-668-0070 or through our contact page to schedule a consultation. Please also visit and like us on Facebook or Twitter.
Some states are moving to not only legalize marijuana but to also bar drug screening in employment for its use. For example, Nevada is one of these states. Beginning next year, most employers in the State of Nevada will not be able to turn down a job applicant solely for failing a marijuana drug test. This is the result of new state law, Nevada Assembly Bill 132, which will become effective on January 1, 2020. There is some discussion that a similar law will also be coming to Colorado and a number of other jurisdictions soon. Other jurisdictions such as New York City, Maine and the District of Columbia have also enacted similar laws.
Nevada’s New Marijuana Drug Testing Law
The new marijuana-related employment law will not bar employers from testing job applicants for marijuana usage, and it will not stop them from refusing to hire applicants that test positive for other drugs. There are some exceptions to the new law.
It does not apply to physicians, emergency medical technicians, firefighters or those that have job requirements involving driving and in positions which could adversely affect the safety of others. A copy of the new law can be found here. It is likely to be the first of many similar laws that are enacted in states that have legalized marijuana usage.
Virginia Still Criminalizes Marijuana Use – Change is Slow
While Nevada and other states have moved forward with decriminalizing marijuana usage and beginning to bar employment-related drug screening, Virginia still criminalizes marijuana usage. Furthermore, there is not yet a medical marijuana usage law in place.
Virginia employers remain able to terminate employees for testing positive for or using marijuana. Attorney General Mark Herring recently suggested changing these laws, which could be the start of a long process in Virginia. The first step in Virginia will be to decriminalize marijuana and then changes to employment law will ultimately follow.
Federal Marijuana Law – Change is Even Slower
Individuals should keep in mind that even as these states legalize certain drugs, these state laws have no effect on federal criminal drug laws barring usage. Furthermore, federal employees and security clearance applicants/holders are still barred and can be fired for marijuana usage.
I strongly believe that the federal government will likely change these laws in the next 5-10 years. For federal security clearance holders, marijuana usage will likely be reduced to an abuse standard, like with alcohol, but at present federal employees and security clearance holders can lose their security clearances with even one-time use in a state or jurisdiction that has legalized marijuana.
Conclusion
If you are in need of employment law representation in Virginia, please contact our office at 703-668-0070 or through our contact page to schedule a consultation. Please also visit and like us on Facebook or Twitter.
Several Virginia employees have come to us to discuss the reasonable accommodation process when they develop a medical condition or disability that requires a change in their duties or other workplace adjustments in order for them to continue their employment. Our law firm represents private, federal, state, and county sector employees throughout the Commonwealth of Virginia in reasonable accommodation cases.
What are Reasonable Accommodations?
A reasonable accommodation is an employee’s request to change their employment conditions, assignments, hours, etc. in order to allow them to continue working in a position despite having a disability or serious medical condition. Of note, the reasonable accommodation process applies to both employees and job applicants in all states, including the Commonwealth of Virginia.
Under federal law, the Americans with Disabilities Act (ADA), which applies to most employees, encompasses and outlines reasonable accommodations. Federal employees are also covered under the Rehabilitation Act, which incorporates similar protections as the ADA for these types of employees. According to these laws, employers are required to engage in the reasonable accommodation process for qualified employees unless it would create an undue hardship for them.
In Virginia, many employees are also covered under the Virginians with Disabilities Act, which applies to most employers. Under both federal and state laws, the ultimate goal of the reasonable accommodation process is to enable employees with disabilities the opportunity to enjoy an equal opportunity in employment. The Equal Employment Opportunity Commission (EEOC) provides guidelines for reasonable accommodation requests.
How to Request a Reasonable Accommodation
The most usual type of reasonable accommodation involves an employee that has developed a medical condition or disability that requires some modifications or adjustments to their working arrangements. Typically, the employee will then ask for a reasonable accommodation by approaching their supervisor or HR department, depending on the employer, and asking for one. A request for reasonable accommodation can be either formal or informal. For instance, depending on the employer, some have created specific forms covering reasonable accommodation requests which must be completed; whereas, other employers simply allow informal verbal discussions between the employee and their immediate supervisor in an effort to resolve the issue.
Regardless of form, once requested, there is typically a discussion/meeting about the reasonable accommodation requested. The discussion between an employer and employee is referred to as the “interactive process,” which simply means that the employer must engage the employee in attempting to resolve the reasonable accommodation request. This process does not mean that an employer has to grant every accommodation sought (or even the specific one requested by the employee); rather, the employer is only required to make a good faith effort to accommodate a disabled employee.
How to Find Examples of Reasonable Accommodations
There are far too many examples of reasonable accommodations to list here as they significantly vary based on an employee’s specific disability and their particular needs. However, the Job Accommodation Network (JAN) provides examples of reasonable accommodations regarding specific medical conditions. For example, JAN provides specific examples of potential accommodations for those facing back impairments which can be found here or for depression that can be found here. In all, JAN provides reasonable accommodation ideas for approximately 96 types of disabilities and medical conditions.
Conclusion
When an employee in the Commonwealth of Virginia needs to request a reasonable accommodation due to a medical condition, it is important to obtain legal advice and/or legal representation. Our law firm is ready to advise and represent Commonwealth of Virginia employees in the reasonable accommodation process. Should you need assistance in this process, please contact us by telephone at 703-668-0070 or through our contact page. Please also visit and like us on our Facebook and Twitter pages.
We often meet with individuals that believe that they have been wrongfully terminated from their employer in Virginia. When dealing with these types of employment issues, it is important to seek out the advice of a Virginia employment lawyer knowledgeable in these areas of law. This article discusses the rights and issues associated with wrongful termination for Virginia employees.
There is nothing quite the same as being called into one’s supervisor’s office, or to an employer’s HR office (almost always on a Friday) only to be informed that their employment has been terminated. In most cases, the employee is unaware of the pending termination and there is little advance notice. As a result, it is a fairly big shock to the person being terminated. Once notice is given, the person is often quickly escorted out of the office and is faced with confusion and a sense of loss. Many employees are left bewildered, wondering about their rights.
Wrongful Termination Law in Virginia
Employee terminations in Virginia are considered “at will”, which generally leaves it to the discretion of an employer whether to terminate an employee for pretty much any reason unless illegal. However, if the employer has violated a state or federal law in terminating the employee, the termination can be considered “wrongful” and there may be potential avenues to challenge the termination. These can include, but are not limited to:
- Whistleblowing Reprisal;
- Discrimination (age, race, sex, national origin, etc.);
- Sexual Harassment;
- Hostile Work Environment: and
- Violation of Employment Contract.
The case law with respect to whistleblowing is changing, and moving towards favoring an employee when the case merits. For many years, that was not the case in Virginia. In Bowman v. State Bank of Keysville, the Virginia Supreme Court first recognized an exception to the employment at-will doctrine based upon an employer’s violation of public policy in the termination of an employee. I expect this to continue to be an evolving doctrine where more exceptions are found.
Additionally, there has, at least for the last 50 years or so, claims that an employee has been terminated for issues related to sex harassment, hostile work environment and workplace discrimination.
Employee Should Determine their Legal Options
The first step that a Virginia employee should take if they believe that they have been wrongfully terminated is to make an appointment with a Virginia employment attorney to determine whether or not the action falls into the category of a “wrongful termination.” It is also important to consult with an attorney to see what steps may be taken to minimize the career damage that has just occurred and whether the action taken may be appealable.
It is usually the case that employees have more options following a termination than are apparent to them initially. The employer may have broken (or bent) federal or Virginia laws with respect to the termination action. If so, then it may be possible to negotiate a resolution on behalf of the employee, with the employer, resolving the matter. A resolution generally occurs more often when the employee retains an attorney to contact the employer about the inappropriate or illegal nature of an employee’s termination. An attorney may also be able to tell an employee if their termination does not meet the criteria for wrongful termination and offer other strategies.
Conclusion
When facing wrongful termination issues in Virginia it is important to obtain the advice of and representation of a Virginia employment lawyer. Our law firm advises and represents individuals in wrongful termination matters in Virginia and other jurisdictions. We can be contacted at www.berrylegal.com or by telephone at (703) 668-0070. Please also visit and like us on our Facebook and Twitter pages.
Our law firm has represented both employees and employers in Virginia in connection with employment investigations involving employee alleged misconduct. This article talks about the issues involved when an employer conducts an investigation in the workplace.
Virginia employers (and employers in other states) usually conduct workplace investigations into employee complaints because they can face legal consequences (or more severe consequences) if they do not do so. As an example, if an individual alleges sex harassment / discrimination in the workplace and the claims are not investigated, an employer can be more readily held liable by employees affected by the conduct. The same type of investigation is necessary when dealing with claims of whistleblowing or other alleged inappropriate conduct at work.
The Steps in a Workplace Investigation
The beginning of the process starts with an employee complaint about misconduct in the workplace. This can happen where the employee reports it through a supervisor or other management personnel. Once reported, the misconduct complaint can lead to an investigation. Almost always, in most employment investigations, the employer will hire an outside law firm (or occasionally use internal attorneys) to conduct an employment investigation and will act as the investigator. Once the investigator is appointed, they will start their investigation. Keep in mind that the employer’s goal in these investigations is to minimize liability for the employer. The complaining employee may also be represented by legal counsel.
While an investigator may find an individual employee at fault, the investigator usually wants to conclude and document that there was no fault on the part of an employer. The following steps usually take place in an employer investigation:
- An employees files a workplace complaint;
- An investigator is usually hired or appointed to investigate the complaint;
- The investigator will review the complaint and plan for a thorough investigation;
- The investigator will review any documentation or emails or other evidence available to prepare for interviews;
- The investigator will interview the complainant or complainants about the conduct complained of;
- The investigator will interview the employees with knowledge of the issues in the complaint;
- The investigator interviews the accused employee or employees for their side of the story;
- The investigator conducts follow-up interviews of any witnesses as needed and ties up lose ends;
- The investigator issues a final report with recommendations to an employer; and
- The employer will take action based on the findings in the report, usually referred to as a Report of Investigation or ROI.
Results of Workplace Investigation
Once the employer’s investigation is over, the results and actions taken by the employer can vary. A formal report is usually prepared, along with recommendations on actions to be potentially taken. The investigation can result in the termination or other discipline for an accused employee. The investigation can also vindicate the accused employee. In either event, an employer must be careful in avoiding retaliation against a complaining employee, even when their complaint is found to not be justified. Each investigation is different, and different employers vary in how they handle workplace investigations. The proper handling of an employment investigation can protect employees in the workplace and also reduce employer liability.
Conclusion
If an employee or employer needs assistance with an employment investigation or other issue, please contact our office at 703-668-0070 or at www.berrylegal.com to schedule a consultation. Please also visit and like us on our Facebook page or connect with us on Twitter.
There are a number of states which serve as laboratories for new types of employment laws that eventually may make it to the Commonwealth of Virginia and other jurisdictions. As we go through 2018, there are a number of new employment laws and bills that have been proposed or enacted by different states to improve employment conditions for employees. It should be interesting to see which ones eventually get enacted by Virginia or other counties and municipalities. Many of these laws take a few years to develop and get introduced in some form in Virginia. This article discusses them.
The following is a sampling of 5 new types of state employment laws that are pending or have been enacted in recent months:
1. Parental Leave: The State of California has enacted a new law (SB 63) which requires businesses with at least 20 employees to provide 12 weeks of unpaid and job protected family leave for employees to bond with a new baby, an adoptee or for a foster care placement. The law would also prohibit an employer from refusing to pay for regular health care costs during the period of family leave.
2. Employer and Salary Information: California has also enacted (AB 168), a new law which would prohibits an employer from seeking the salary history information of an applicant or relying upon the applicant’s salary history information as a factor in hiring or in setting an appropriate salary. Connecticut has passed a similar law (PA 18-8)
3. Social Media Information Protection Law: Vermont has enacted a new social medial privacy law (21 V.S.A. § 4951) which prohibits employers from requesting or requiring an employee to turn over their social media account information or to allow employer access to their social media accounts. Virginia has been ahead of many states in these types of protections, enacting their own version of social media protection for employees (Virginia Code § 40.1-28.7:5). The new Vermont law has more enforcement mechanisms than the Virginia law should an employee be affected.
4. Ban the Box – Prior Criminal Conviction History: California has enacted a new law (AB 1008) which prohibits employers with more than 5 employees from asking applicants about criminal convictions on employment applications or at any time prior to receiving a conditional offer of employment. After an offer has been extended, the employer may deny employment based on prior convictions, but must provide the applicant due process before a final decision is made. The new law also prohibits employers from considering or disseminating information about prior arrests not leading to convictions when conducting background checks.
5. Sexual Harassment/Domestic Violence Leave: California (AB-2366), New York and a number of other states have put forth bills that would give or enhance the ability of victims of domestic violence, sexual assault or stalking to use leave or receive accommodations from employers without being subject to retaliation.
Conclusion
When facing employment issues it can be important to have the assistance and advice of counsel. If you need assistance with an employment issue, please contact our office at 703-668-0070 or at www.berrylegal.com to schedule a consultation. Please also visit and like or follow us on Facebook or Twitter.
Over the last several years in our employment law practice in Virginia, we have been advising employees on the proper use of social media in connection with their duties as an employee. Social media is one of the most unique and changing areas of employment law today. This article provides some basic tips for employees and a summary of their current rights in Virginia.
Social Media Tips – Tips for Employees to Avoid
Don’t Add Friends & Supervisors: Avoid (where possible) becoming friends or connected with supervisors (and sometimes co-workers). It has often been the case that we have had employees face discipline resulting from Tweets, Facebook or Instagram posts that even well-meaning individuals forward to the employer. For instance, we have seen posts ridiculing a supervisor eventually make it to the supervisor. It tends to create an atmosphere ripe for retaliation and discipline.
Avoid Workplace Criticism on Social Media: Avoid mentioning problems or other issues that arise at work. We have usually found that even a well-meaning friend can pass on information to a supervisor or company official that can lead to discipline or, at minimum, a less comfortable work environment.
Don’t Discuss Company Clients or Projects on Social Media: Avoid mentioning clients or other work specific information from your employer in your social media posts. Sometimes these clients get word of the post, see it online, or it makes the news. As a result, the employer often then takes disciplinary action against the employee.
Avoid Social Media Usage During Work Hours: While this may or may not be feasible for everyone, it is a good idea to avoid social media posting while at work. We have seen employees written up for social media posting during work hours or when using employer computers. In some cases, employers have argued, where social media posts include the time and date posted, that they have not been working their duties while getting paid.
Virginia Employee Protections for Employees and Social Media
Some states have begun to legislate the first protections for social media accounts held by employees. This has been the case in the Commonwealth of Virginia. While the relatively new law in Virginia doesn’t protect an employee from the content that they post online through social media, it offers some protection for employees from employers who demand that an employee share it with them. Specifically, the new law bars employers from demanding or requiring access to an employee’s social media information as part of their employment.
Virginia Code § 40.1-28.7:5 protects employees from employers in:
(1) requesting their sign on information to media accounts; and
(2) requiring an employee to add a company manager or representative as a friend or contact on the social media account.
Furthermore, the Virginia law bars retaliation from employers that seek such information and are turned down by the employee. The Virginia law provides that:
“An employer shall not:
1. Take action against or threaten to discharge, discipline, or otherwise penalize a current employee for exercising his rights under this section; or
2. Fail or refuse to hire a prospective employee for exercising his rights under this section.”
It is likely that this is only the first step in legislative protections for this area given the significant of social media today. It is pretty clear that more protections for employees are needed and will come into place as states such as Virginia tackle the issue of how social media affects the workplace.
Conclusion
Keep in mind that not all companies take offense to social media posting and can have lax policies. The best idea is to find out company policy from the employer as early as possible. When facing employment issues it can be important to have the assistance and advice of counsel. If you need assistance with an employment issue, please contact our office at 703-668-0070 or at www.berrylegal.com to schedule a consultation. Please also visit and like us on our Facebook page.
Importance of Workplace Investigations
When serious allegations arise in the Virginia workplace, it is very important for an employer to retain a neutral and knowledgable investigator. This is especially so with respect to sexual harassment allegations, where such action can be required. Employers are faced with numerous legal risks if they do not conduct an investigation or otherwise fail to adequately investigate the behavior of their employees. For instance, in addition to sexual harassment and discrimination claims, other claims for negligent hiring and retention are being brought in larger numbers. As a result, employers conduct investigations far more regularly in Virginia than they have in the past.
Purpose of Workplace Investigations
The purpose of workplace investigations is for an employer to gather relevant evidence regarding the employee’s alleged misconduct and determine whether the misconduct warrants a disciplinary or an adverse action (e.g., termination or significant suspension) within the requirements established by law, policy, or regulation or with respect to the employer’s own liability.
Occasionally, these types of investigations can lead to a potential criminal investigation. Depending on whether the employer is federal, Virginia or involves a private employer, a supervisor or other designated investigator may be asked to conduct an investigation regarding the facts at issue. Employees may then be asked to provide verbal or written responses to questions regarding the alleged misconduct.
Hiring an Investigator
Once a workplace investigation is required, the next step is for the employer to identify who will conduct the investigation as the investigator. Government employers generally have their own investigators (e.g. Inspector General) and merely assign one or two investigators to a case to evaluate the conduct of employees. However, in the private sector (which covers the vast majority of employees) an investigator must be hired to conduct the investigation. This task is often completed by hiring a law firm and designating an attorney to conduct the administrative investigation. Many law firms conduct these types of investigations. Our firm typically represents employees that are under investigation and where the employer seeks to question them in conjunction with an investigation.
Employee Duties to Cooperate
During an investigation, an investigator (i.e. the law firm) will be hired to conduct a workplace investigation. They will review documents (e.g. complaints, emails, documents) related to the investigation and/or interview witnesses, depending on the breadth of the investigation. Employees, depending on their particular employer, may have a duty to fully cooperate with an assigned investigator or can decline to participate in the investigation unless they are ordered to do so.
For example, federal employees may decline to participate in an administrative investigation if it is voluntary. Refusing to cooperate with an investigation or providing false statements or answers during an investigation can be grounds for disciplinary action. Providing false statements, if made to a federal or other law enforcement investigator, can also subject an employee to potential criminal penalties. For private sector employees in Virginia, not cooperating in an employment investigation can lead to disciplinary action or termination in some cases.
Employer Risks in Not Conducting Investigations
Internal or administrative investigations can also involve risks for the employer. If claims are made by employees, inadequate workplace investigations may raise questions regarding the accuracy of the results or whether the employee was treated fairly. In addition, the employer may not like what the investigation uncovers and will have an obligation to resolve or address issues, such as a systemic problem or legal impropriety. Additionally, as mentioned above, if an investigation is not undertaken an employer can be potentially liable for their negligence of complicity in not addressing the workplace issues.
Consider Legal Advice if Serious
Prior to providing information to an employer, depending on the severity of the issues under investigation, it can be important for an employee to discuss with an attorney the issues associated with the information being sought by the employer and the employee’s role in the matter being investigated. An attorney familiar with administrative or internal investigations can provide legal advice to assist an employee in preparation for responding to questions about his or her actions in the matter being investigated. In addition, an attorney, in many circumstances, can often accompany the employee during any investigative interviews.
Conclusion
An interesting question that has arisen recently is whether Virginia employers can use non-compete agreements with independent contractors. The answer is not entirely clear. There are many potential pitfalls for both the independent contractors that sign such agreements and the employers that attempt to enforce them. An employer may discover that its fully executed non-compete agreement with an independent contractor is unenforceable, but also subject itself to significant liability for misclassifying an employee.
The Difficulties with Non-Compete Agreements for Independent Contractors
One of the main problems with requiring independent contractors to sign non-compete agreements is that independent contractors are different types of workers. An independent contractor is essentially its own business. Generally, an employer cannot compel an independent contractor, which is a separate business, to forfeit his or her business simply because it gave the independent contractor business. Independent contractors may appear similar to employees (and many employers cross the line in terms of who they think they can classify as an independent contractor), but there are different loyalties and duties. For the most part, the more that an individual becomes a part of an employer’s business or organization, through signing such non-compete agreements and assuming duties of loyalty and the like, the more likely that the individual can be considered an employee.
Suppose that an independent contractor is paid and taxed as an independent contractor, and then the employer has the independent contractor sign a non-compete agreement. The very existence of such an agreement likely initiated a shift of the contractor’s status from that of an independent contractor to a misclassified employee who owes a duty of loyalty to the employer. If the independent contractor has been misclassified by the employer, then the employer may risk having an unenforceable non-compete agreement, and also potentially subjects itself to serious tax, overtime, and government fine issues as a result of not paying the worker properly.
The legal issues and determinations associated with non-compete agreements for independent contractors in Virginia are in the very early stages and cannot be fully predicted. Given the large amount of government contractors in Northern Virginia alone, it appears that this issue will be fully litigated. Despite the relative uncertainty, an employer can easily run afoul of Department of Labor (DOL) and Internal Revenue Service (IRS) guidelines regarding misclassification, and end up owing significant sums to the government as well as the misclassified employee through enforcement efforts related to a non-compete agreement.
To date, there are a few interesting Virginia cases on the topic, including Reading & Language Learning Ctr. v. Sturgill, 94 Va. Cir. 94, Case No. CL-2015-10699 (Fairfax County Aug. 4, 2016) case. The Reading case involved an individual (Sturgill) who was training to be a speech therapist, but needed a clinical fellowship to obtain certification. Sturgill signed an agreement with Reading to work as an independent contractor for one year to obtain her license. In the agreement, Sturgill agreed “not to employ any contracted employee or contract with any current client of the other for a period of two years.” The language of the agreement was found to be confusing by the court.
Sturgill obtained her certification and left for full-time employment with a local charter school as a speech therapist. The local charter school had used Reading for some subcontracting work in the past. Reading then sued Sturgill in Fairfax County, claiming that she had breached her non-compete agreement by accepting employment at the charter school. Sturgill prevailed in her case on several grounds.
Interestingly, because Sturgill was still pending licensing, she was directly supervised by Reading personnel (since it had approved her schedule), and her supervisors had provided final approval on many issues associated with her work. As a result, the Reading court found that Sturgill was not an independent contractor and had been misclassified. The court determined that Sturgill was really an employee and, as a result, the non-compete agreement violated public policy. Specifically, the court found that because Sturgill was misclassified, Reading had not complied with Virginia and federal laws regarding employment taxation. In other words, the employer should probably never have brought suit as it subjected itself to other legal and tax issues. The case does not appear to have been appealed, so it is likely that the employer realized the mounting issues and decidedly walked away.
The Misclassified Employee Can Seek Damages
If an individual makes a claim that he or she was a misclassified employee, the individual can seek losses related to taxes and overtime. The DOL and other organizations can then seek fines and other penalties regarding the misclassification. The DOL has issued guidance on misclassification, at least as it relates to independent contractor entitlement to overtime. There are several different tests by DOL and the IRS on these issues (and they differ a bit). However, here is the test provided by the DOL in their Fair Labor Standards Act guidance:
“The Supreme Court has said that there is no definition that solves all problems relating to the employer-employee relationship under the Fair Labor Standards Act (FLSA). The Court has also said that determination of the relation cannot be based on isolated factors or upon a single characteristic, but depends upon the circumstances of the whole activity. The goal of the analysis is to determine the underlying economic reality of the situation and whether the individual is economically dependent on the supposed employer. In general, an employee, as distinguished from an independent contractor who is engaged in a business of his own, is one who “follows the usual path of an employee” and is dependent on the business that he serves. The factors that the Supreme Court has considered significant, although no single one is regarded as controlling are:
(1) the extent to which the worker’s services are an integral part of the employer’s business (examples: Does the worker play an integral role in the business by performing the primary type of work that the employer performs for his customers or clients? Does the worker perform a discrete job that is one part of the business’ overall process of production? Does the worker supervise any of the company’s employees?);
(2) the permanency of the relationship (example: How long has the worker worked for the same company?);
(3) the amount of the worker’s investment in facilities and equipment (examples: Is the worker reimbursed for any purchases or materials, supplies, etc.? Does the worker use his or her own tools or equipment?);
(4) the nature and degree of control by the principal (examples: Who decides on what hours to be worked? Who is responsible for quality control? Does the worker work for any other company(s)? Who sets the pay rate?);
(5) the worker’s opportunities for profit and loss (examples: Did the worker make any investments such as insurance or bonding? Can the worker earn a profit by performing the job more efficiently or exercising managerial skill or suffer a loss of capital investment?); and
(6) the level of skill required in performing the job and the amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent enterprise (examples: Does the worker perform routine tasks requiring little training? Does the worker advertise independently via yellow pages, business cards, etc.? Does the worker have a separate business site?).”
See DOL Guidance.
As indicated above, if the individual was a misclassified employee, then the employer might very well be liable for multiple tax issues and payments, in addition to other potential overtime payments and damages.
Conclusion
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