Seismic session

With short legislative sessions and state elections looming in the fall, odd-numbered years have developed an often-unfair reputation for being a slack time for the General Assembly.

Observers of the Virginia legislature’s 2021 session, however, would hardly have come away with that impression. In the second year of Democratic control of the legislature, lawmakers passed landmark legislation abolishing the death penalty and legalizing marijuana, cementing the commonwealth’s new rep as the most liberal Southern state. Democrats also continued to write laws with major implications for state businesses, profoundly shifting the dynamic between the commonwealth’s employers and workers. Legislators opened the door for new multibillion-dollar industries, too.

“Thanks to the new House Democratic majority, Virginia is investing in workers,” says Del. Jeion Ward of Hampton, chair of the House Labor and Commerce Committee. “Through the labor committee and others, we have raised the minimum wage, improved workers’ compensation and created strong anti-discrimination laws in the workplace. On the labor front, we passed workplace safety for domestic workers, paid sick leave for certain health care workers and [assisted] unemployed Virginians with their interactions with the [Virginia Employment Commission].”

House Speaker Eileen Filler-Corn also touted the enactment of new labor laws, including measures increasing the state minimum wage to $9.50, allowing local public employees to collectively bargain and allowing public bodies to require bidders to enter into project labor agreements.

“Working women and men are the foundation of Virginia’s economy,” Filler-Corn says. “Every resident of our commonwealth is entitled to a fair wage and basic protections for an honest day’s work. This legislation is another step in our efforts to build an economy that works for all of us.”

Virginia also made national news for becoming the first Southern state to abolish capital punishment after more than 400 years and 1,300 executions. “Over our 400-year history, Virginia has executed more people than any other state,” Gov. Ralph Northam said in March. “The death penalty system is fundamentally flawed — it is inequitable, ineffective and it has no place in this commonwealth or this country. Virginia has come within days of executing innocent people, and Black defendants have been disproportionately sentenced to death. Abolishing this inhumane practice is the moral thing to do.”

Much of this legislation would be groundbreaking for Virginia in any year, but the General Assembly’s 2021 session was also overshadowed by the all-encompassing coronavirus pandemic, leading the House of Delegates to meet via video conferencing and the state Senate to hold a masked, socially distanced session at the Science Museum of Virginia.

During the 2021 session, lawmakers continued to work on pandemic-related relief measures, including a bill to help stabilize child care centers. James Dyke, senior advisor at McGuireWoods Consulting, credits the General Assembly for taking steps to “finally get in place a child care and early childhood education system that will provide quality care to every Virginia student potentially.”

A former Virginia secretary of education, Dyke says, “To me, that’s the most important investment we can make, not only from an educational but a business perspective. That’s when kids really form their minds. That’s the time you need to get them on the right track so that they’re able to perform at their top potential.”

Other bills were aimed at assisting the hard-hit leisure and hospitality industries. Virginia Sen. John J. Bell, D-Loudoun County, points to bills that allowed restaurants to serve to-go cocktails, as well as the creation of tourist improvement districts that authorizes localities to impose fees on businesses in specified areas to pay for tourism promotion and related capital improvements.

Additionally, the General Assembly invested in expanding rural broadband access, a perennial issue that became more urgent during the pandemic as the needs for remote work and schooling grew.

Bell says the legislation that came out of the 2021 session aims “to do things that can fundamentally change our economy for the long term in a positive way that have huge impacts.”

New labor laws

Employment is largely rebounding from the depths of the pandemic, hitting 4.7% in April, down from a high of 11.3% in April 2020. Many employers, however, are still struggling to rehire and are faced with labor shortages.

Republicans have blamed federally supplemented unemployment benefits they say have incentivized workers to stay home rather than rejoin the workforce.

“So many of our businesses are struggling to get employees, and nobody will even respond to [help wanted] ads because they’re able to get the elevated unemployment benefits and sit at home and not work,” says Sen. Ryan T. McDougle, R-Hanover County. “We should be doing everything possible to get people back to work.”

Senate Republican leaders have proposed shifting discretionary funds from the federal American Rescue Plan Act to distribute one-time $1,500 bonuses to workers currently receiving federal unemployment payments after they return to work for at least six weeks.

Virginia Democrats have taken a different approach to aiding workers. Democrats passed legislation in 2020 that saw Virginia’s statewide minimum wage increased to $9.50 an hour this May, with further scheduled and proposed bumps that could see minimum wages reach $15 an hour by 2026.

Observers say the mandatory pay hike won’t make much difference across much of Virginia. Due to the shortage of workers to fill a growing number of jobs, employers have already been pushing wages up.

“The fact is the market has already acted,” says Greg Habeeb, a partner at Gentry Locke Attorneys and chair of the firm’s government and regulatory affairs group in Richmond. “Huge employers in Virginia have already moved their minimum wage to $15 an hour. Among my employer clients, a vast majority talking about labor issues aren’t talking about minimum wage — they’re talking about not being able to find people.”

The new wage law also includes bans on noncompete clauses for low-wage employees and outlaws company policies that would prevent employees from discussing pay with each other.

Democratic lawmakers also passed a law expanding time-and-a-half overtime pay to a larger category of workers. The new law, which goes into effect July 1, generally requires employers to pay nonexempt workers one-and-a-half times the regular pay rate if the employee works more than 40 hours per week. It also offers workers more recourse in making overtime claims, including lengthening the statute of limitations for claims from two to three years and making employers subject to paying double or treble damages for violations.

Perils of ignorance

With so much attention being placed in traditional media and social media on national politics, it’s understandable that many business leaders might gloss over legislative changes happening at the state level. But they would take a significant risk in doing so.

“Any business owner too busy to keep up with the rapidly changing employment laws in Virginia is setting himself or herself up for serious financial and employment risk,” says Karen Michael, president of KarenMichael PLC, a Richmond-based workplace law and human resources consulting firm. “The past two years of legislation in Virginia has fundamentally changed Virginia’s posture that supported business.”

Included in that are new worker protections. These include prohibiting businesses from discriminating against employees over hairstyles that are “historically associated with race, including hair texture, hair type  and protective hairstyles such as braids, locks and twists.” Virginia lawmakers also passed a new law to protect whistleblowers against retaliation for a series of protected actions, with penalties including payment of lost wages, benefits and attorneys’ fees, and reinstatement of the employee to their old job.

Additionally, the Assembly made changes to laws around how employees are classified, including significant new protections for workers who had previously been misclass-ified as independent contractors. The new law presumes workers are employees if they perform services for payment, unless the employer can specifically prove the worker is an “independent contractor” under federal regulations.

These new laws also have teeth in the form of avenues for workers to challenge noncompliant employers in court.

“The legal landscape for Virginia employers after these last two years is a shell of itself,” Michael says. “Virginia is not for business anymore; it is for litigation.”

Chris Saxman, executive director of Virginia Free, a nonpartisan organization providing political information for businesses, says the minimum wage increase and other labor laws came as a result of a larger shift in Virginia’s politics.

“Virginia’s politics have become nationalized,” Saxman says. “That’s just the reality. There’s a national push to pass some of these bills. … When people are running against [elected officials] in primaries, it’s real pressure.”

Multibillion-dollar opportunities

Meanwhile, new laws passed by the Democratic majority in 2020 — such as the Virginia Clean Economy Act, which dictates that Virginia utilities must shift to 100% renewable energy by 2050 — are continuing to unfold.

“The Clean Economy Act is a total restructuring of the energy system in Virginia over a 30-year period,” observes Habeeb with Gentry Locke.

The General Assembly built on the act this year with legislation targeting vehicle emissions beginning in 2025. The law will require manufacturers to produce vehicles with steadily shrinking levels of harmful emissions, while also making available a wider variety of electric cars and vehicles.

Complementary legislation added a program to offer $2,500 rebates for purchasers of electric vehicles beginning in 2022, with an additional $2,000 rebate for lower-income buyers. Initially, the law’s advocates hoped to pay for the program with a tax on dyed diesel fuel, but that was stripped out and replaced with a grant program to be backfilled by as-yet-unidentified revenue sources.

Lawmakers also eliminated tax credits to support coal production and coal use in Southwest Virginia. A state study found the credits resulted in Virginia’s economy losing 35 jobs, $21 million in gross domestic product and even $5 million in personal income, while saving coal operators and electricity generators nearly $300 million in income taxes.

Then there’s the legislature’s ongoing support for casinos and gaming as well as this year’s legalization of commercial and recreational marijuana. Beginning July 1, simple possession of recreational marijuana will be decriminalized. And the state legislature further began a process to allow retail sales of marijuana to adults in Virginia as soon as 2024.

“It’s rare in your life when you get to be at the beginning of a multibillion-dollar opportunity,” Habeeb says. “This is our third. Two years ago, we had the Clean Economy Act. Last year, casinos and online sports books. This year, it’s marijuana.”

All these initiatives came to fruition because “we were responding to the will of the people,” Bell says. “Those are all things people wanted. Making sure we do these things will lay groundwork for the future.”

With elections scheduled in November for Virginia’s governor, lieutenant governor, attorney general and all 100 seats in the House of Delegates, Democrats and Republicans are spotlighting their philosophical and policy differences. They even began the 2021 General Assembly with a partisan fight over how long the session should extend. That was before they started debating more contentious issues such as abolishing the death penalty and legalizing marijuana.

But Dyke at McGuireWoods says to keep Virginia moving forward, state lawmakers should instead be seeking opportunities to collaborate.

“We cannot have in Virginia what we’re seeing at the national level,” Dyke says. “We need to be focused on Virginia solutions for Virginia problems. That means working across the aisle.”

Businesses can play a crucial role in bridging the gap, he maintains.

“The business community is well-positioned to advocate that those people for governor and the General Assembly commit to working for the ends of people in Virginia,” Dyke says. “People need to focus on that and not get themselves in partisan corners.”