Virginia Set to Increase Misclassification Penalties but Rejects Stricter Standard for Independent Contractors

February 28, 2020

A bill that would impose new penalties on employers who misclassify workers as independent contractors is heading to the desk of Virginia Governor Ralph Northam (D), who is expected to sign it.

The Virginia Department of Taxation would have the authority to investigate employers following a worker’s complaint.

The penalties would be: 

  • A fine of up to $1,000 per misclassified individual for the first offense, 
  • A fine of up to $2,500 per misclassified individual and a possible contract debarment of one year for the second offense, and 
  • A fine of up to $5,000 per misclassified individual and a possible contract debarment of three years for the third offense. 

Virginia retains traditional test for worker classification.  Earlier this year, the Virginia legislature considered a measure that would have the state adopt the “ABC” test, a much stricter test that was recently approved in California.  That measure has since been tabled. 

What’s ahead:  On the heels of California's implementation of the ABC test, this is just the latest in what is sure to be a continuing saga at the state and local level around the issue of worker classification.  Look for further developments at the state level.