Amended statute gets retroactive application

An employee’s claim has survived demurrer after the trial judge held that Virginia’s wage claim statute would apply retroactively where the employee claimed he was owed wages from both before and after the statute was amended in 2020.

Judge Kevin M. Duffan of the Virginia Beach Circuit Court noted that no decisions from Virginia’s appellate courts have analyzed this issue since the new statute was enacted, but he found instructive two federal cases.

“The amendment to the statute provided employees with the standing they had previously lacked,” Judge Kevin M. Duffan of the Virginia Beach Circuit Court wrote. “Essentially, it did not create a whole new cause of action, it instead created a right to pursue an already existing cause of action. This is a distinction that matters, as it appears to be a matter of procedure, not of substance.”

The opinion is McKinnon v. Croatan Investments, LLC, et al. (VLW 023-8-017).

Wage claim

William McKinnon worked for Croatan Investments, Paul Van and Eric Smith from before July 2020 until he was terminated in January 2021.

McKinnon later sued his employers for several causes of action, including a claim for unpaid wages under Virginia Code § 40.1-29. Effective July 1, 2020, an amendment to § 40.1-29(J) provided employees with standing to bring a private suit for unpaid wages.

The defendants filed a demurrer, arguing that McKinnon couldn’t rely on § 40.1-29 retroactively for wages owed prior to the amendment.

As Virginia’s appellate courts haven’t addressed the retroactive application of § 40.1-29, the parties relied on federal case law.

A change in statute is typically considered prospective unless the statute “contains ‘explicit terms’ demonstrating its retroactive effect,” or the amended terms impact “‘remedial’ or ‘procedural’ rights” rather than vested or substantive rights, the judge wrote.

“There is no explicit language in § 40.1-29 addressing retroactive applicability of the statute so this Court must analyze whether the amended terms of the statute affect the procedural rights or substantive rights of the Plaintiff in this case,” Duffan wrote.

Conflicting opinions

Two recent opinions from the Eastern District of Virginia — Sandoux v. BMC Software, Inc. and Mehrag v. York Operations, LLC — offered some guidance on the retroactivity issue, but the opinions appeared to be in conflict.

In the March 2022 Sandoux ruling, the court said § 40.1-29 wouldn’t apply retroactively to provide a claim for wages earned and owned well before the statute was amended.

But November 2022’s Mehrag decision found that the “‘procedure outlined in subsection J of § 40.1-29 applies retroactively because it does not affect substantive rights, only procedure and remedy.’”

Duffan said the Mehrag court recognized that the amendment to § 40.1-29 didn’t create a new cause of action, but created a right to pursue an already existing cause of action.

“Admittedly, it is difficult to reconcile the somewhat conflicting analyses provided by the courts in Sandoux and Mehrag,” the judge noted. “The issue of the retroactivity of §40.1-29(J) after the July 1, 2020 amendment seems to depend on the factual scenario presented.”

If McKinnon’s claims are based on a cause of action that fully accrued prior to the statute’s amendment, the Sandoux analysis would be most persuasive.

But Duffan pointed out that the only post-amendment activity in Sandoux was the plaintiff’s request for commissions.

“The fact that the plaintiff made a post-amendment demand for pre-amendment compensation did not bootstrap the retroactivity of § 40.1-29(J),” he said.

Here, Duffan found McKinnon’s claims under § 40.1-29(J) were distinguishable.

“Unlike in Sandoux, here McKinnon was working for the Defendants before and after July 1, 2020 and was not terminated until January 2021,” the judge wrote. “This makes McKinnon’s claim more analogous to the factual situation in Mehrag, where his claims are not based upon an entirely new cause of action, but rather a private right of action that came into existence for conduct committed both before and after the statutory change.”

Thus, Duffan held that “McKinnon has plead sufficient facts to form a basis under which the Mehrag analysis could apply, and § 40.1-29(J) would provide a basis for his recovery.”

Further empowered

Kevin Martingayle, who represented McKinnon, told Virginia Lawyers Weekly that his client “clearly already had existing rights but was forced to go through the government to enforce them until the General Assembly gave a procedural way to enforce them directly.”

The amendment further empowered employees to protect their rights and their interests, the Virginia Beach litigator added.

“It’s been a long time that employees have had all these rights,” he said. “I don’t claim this is the final word on the retroactivity of this statute, but I think the Supreme Court of Virginia would uphold this ruling.”

David Burton of Williams Mullen represented the defendants. He expressed confidence that an appeal won’t be necessary “but Croatan believes it has a strong basis to appeal the decision, if needed.”