Virginia cracks down on worker misclassification

A recent study revealed that more than 200,000 Virginia workers have been misclassified as independent contractors, and this alone has cost the Commonwealth approximately $28 million in tax revenues each year. To curb the practice and to generate revenue for the state, in 2020 the Virginia legislature enacted a beefed-up Wage Payment Act, which took effect last year and has some real teeth.

Virginia’s new law

Under the new law, employers that improperly classify their employees as independent contractors are subject to criminal prosecution and a fine of up to $1,000 per misclassified worker for a first offense. Maximum fines increase to $2,500 for a second offense and up to $5,000 for a third or subsequent offense.

Employers violating the law a second time also may be prohibited from being awarded public contracts for up to one year and up to two years for a third offense. The legislation further requires the Virginia Department of Taxation to assist with enforcement by sharing information with Virginia’s attorney general.

Criminal actions to enforce the law