Both houses of the Virginia legislature passed the Virginia Values Act yesterday. Media coverage of the bill has focused on the fact that it will add sexual orientation and gender identity (transgender status) to state laws against discrimination in employment, housing, and public accommodations. As the media note, this is the first time a state legislature in the south has enacted such a ban.
But media coverage has virtually ignored how the bill will change other aspects of state law, in ways that are far more significant in economic terms. The bill will create major risks for business owners. It will also make the state’s business climate less inviting for companies considering whether to relocate to Virginia.
It will do this by changing the ground rules for discrimination lawsuits in general, not just for lawsuits alleging discrimination by LGBT people, who are expected to file only a small minority of the lawsuits brought due to this bill.
For example, the Virginia Values Act contains no protections against groundless or unreasonable lawsuits: It doesn’t allow employers to obtain their attorneys fees when such lawsuits are brought to shake down an employer over a meritless claim (unlike most anti-discrimination statutes, which contain such language either in their attorney-fee provisions, or in judicial interpretations of them, allowing the employer to obtain its fees when a worker brought a lawsuit proven to be groundless or unreasonable, as opposed to just unsuccessful).
The Virginia Values Act also authorizes the Virginia attorney general to sue public employers. That appears to pose a conflict of interest. Historically, it has been the attorney general’s job to represent state agencies, not to sue them. Allowing the state attorney general to sue state agencies means that a state agency may end up paying out lots of taxpayer money to a complainant whose case is very weak, because it can’t rely on its traditional representation by the state attorney general to fight the allegations of discrimination, making fighting the allegations much more difficult.
Another flaw of the Virginia Values Act is that it provides for unlimited punitive damages, “without limitation otherwise imposed by law.” This is troubling, because punitive damages are often imposed in a random, unpredictable, and arbitrary way, and limitations imposed by law are appropriate to constrain such abuses and provide greater consistency. Even putting aside this “without limitation otherwise imposed by law” language, unlimited punitive damages are something rejected in most conservative states and even many liberal states — such as Washington State, which doesn’t allow any punitive damages in discrimination lawsuits brought under state law (even though Washington State has a Democratic governor and Democratic legislature).
Punitive damages can result in lottery-size damage awards against businesses in discrimination cases, even when a worker hasn’t lost much money due to discrimination. For example, in Weeks v. Baker & McKenzie, an appeals court upheld a $3.5 million damage award against a law firm which failed to believe allegations of sexual harassment against a lawyer at the firm. The jury found that a legal secretary experienced $50,000 worth of damages for things like emotional distress, and awarded $7 million in punitive damages against the law firm, which was reduced by the courts to $3.5 million. Thus, the punitive damages under the state’s discrimination law were 70 times the amount of money needed to compensate the plaintiff. That decision was issued in California, whose law requires “clear and convincing” evidence of employer wrongdoing for punitive damages. Virginia law does not even require that safeguard when punitive damages are available under a law, so “clear and convincing” evidence won’t be required for punitive damages under the Virginia Values Act. So punitive damage awards will be imposed based on far weaker evidence.
The bill appears virtually certain to become law. There may be tiny differences between the House and Senate versions of the bill that need to be reconciled before it can be sent to the governor, who will almost certainly sign it. But the House and Senate versions (HB 1663 and SB 868) look essentially identical. The House voted for the Virginia Values Act by a margin of 59-to-35, largely along party lines, with Democrats voting for it, and most Republicans voting against it. The Senate voted for it by a margin of 30-to-9, after rejecting a series of Republican amendments to soften the bill, amendments that were rejected by votes of 21-to-19 or 23-to-17.
The Virginia Values Act is just one piece of anti-business legislation likely to pass the Virginia legislature soon, turning what once was a pro-business state into an anti-business state. Both houses of the legislature are likely to increase the state’s minimum wage from $7.25 to $15, which would cost 130,000 jobs according to research funded by the National Federation of Independent Business. Economists predict that similar legislation in Maryland will eventually cost that state 99,000 jobs. A committee in the state senate tried to soften the $15 minimum wage by allowing health benefits to count toward the $15, but that provision softening the bill was subsequently removed, and the increase is now expected to be approved by the full Senate.
The Virginia legislature may also repeal or weaken the state’s right-to-work law, which has been used to attract many businesses to Virginia. The repeal of that law would result in the loss of “thousands” of manufacturing and supply-chain jobs in Virginia, according to the Virginia Economic Development Partnership (VEDP) in a report cited in the fiscal impact statement for pending legislation to repeal the state’s right to work law. A recent study finds that workers also benefit from right-to-work laws.