Beginning on July 1, 2021, Virginia employers will be subject to a new state overtime law that provides more stringent overtime requirements than those contained in the federal Fair Labor Standards Act (FLSA).
Nonexempt hourly workers, the method for calculating the regular rate of pay in the VOWA (at Va. Code § 40.1-29.2(B)(1)) is consistent with the FLSA: employers are instructed to take the sum of the worker’s hourly wages and any other non-overtime wages paid or allocated for that workweek including commissions & non-discretionary bonuses (excluding payments that may be excluded under the FLSA) and divide that number by the total number of hours worked.
For example, if an employee works 50 hours at $15 per hour, and receives a $200 nondiscretionary bonus at the end of the week, his or her regular and overtime rates would be calculated as follows:
Regular Wages: $15 x 50 = $750 + $200 nondiscretionary bonus = $950
New Regular Rate: $19 ($950/50)
New Weighted Overtime Rate: $24.50 (New Reg $19 x 0.5 = 9.5 -- Original Reg $15 + 9.5)
Total Earnings = $1,045
- $15 RR x 40 ST hours = $600
- $24.50 OT x 10 OT hours = $245
- $200 Bonus x 1 hours = $200
OT Plan name = Virginia OT Plan
Avionte does not support salaried payouts which include commission or non-discretionary bonus transaction types
A salaried non-exempt worker’s regular rate is defined by statute as one-fortieth of all wages paid for that workweek (again, to include wages, commissions, and non-discretionary bonuses). The statute provides that the overtime payment can be no less than 1.5 times that regular rate of pay. In order to calculate possible overtime payments for a salaried non-exempt worker, each workweek, the employer must take all of the employee’s wage compensation earned in that workweek, divide it by 40 (arriving at the 1/40th rate), and then, for any hours worked by the employee over 40 in that workweek, pay 1.5 times that calculated regular rate for all overtime hours.
Under the VOWA, a salaried nonexempt employee will be owed substantially more for overtime hours, as demonstrated by this example that assumes a salary of $1,200 per week and a 50-hour workweek:
Regular Rate: $1,000/50 = $20/hour
Overtime Rate; $20 x 1.5 = $30/hour
Overtime Pay: $30 x 10 = $300
Regular Rate: $1,200/40 = $25/hour
Overtime Rate: $25 x 1.5 = $37.50
Overtime Pay: $37.50 x 10 = $375
As a result of this change, and until the Virginia Department of Labor and Industry (DOLI) or state courts issue further guidance, employers may want to consider transitioning salaried nonexempt workers to a simple hourly rate and/or reducing overtime work among salaried nonexempt workforces. For any nonexempt workers who remain salaried, beginning July 1, 2021, employers must update the method by which they calculate regular and overtime rates to comply with the VOWA.
Because the hours worked in a week are critical to a proper overtime calculation, employers should ensure that all non-exempt employees, whether hourly or salaried, clock in and out of work (including time worked for the benefit of the employer but off employer premises), if they had not previously done so. With accurate time-keeping records, employers will be in a better position to defend themselves against wage and hour and employee misclassification lawsuits.
Manual salaried set-up w/ overtime (commission or non-discretionary bonus not included or supported)
1. Ensure salaried non-exempt worker located within Virginia has a Reg & OT rate active on their assignment if paid using a fixed Salary transaction / does not complete a weekly timecard. Reg rate should be 1/40 of the salary amount based on pay frequency & set to the Virginia OT Plan.
Example below shows the Reg rate of $25.00 w/ corresponding Salary of $1000.00 on a Weekly basis:
2. Enter the Salary Unit & amount of OT hours worked by employee.
Example below shows 1 Unit of Salary at $1,000 w/ 10 hours of OT:
3. Process payroll & the system will automatically take into account the Reg rate at 1.5X / apply the OT rate in addition to the Salary.
- $1,000 weekly salary.
- Take 1/40 of that salary which is $25.
- Worked 50 hours in the workweek (1 Salary Unit & 10 OT Hours)
- Overtime rate is $37.50 (1.5 x $25).
- Overtime pay is $375 (10 OT hours x $37.50).
- Total weekly pay is $1,375 ($1,000 + $375).