Virginia Business Law Update : Virginia Business Lawyers & Attorneys : PCT Law Group : Litigation Defenses, Contract Disputes, Business Formation : Northern Virginia, Arlington, Fairfax, Alexandria

Although employers with less than 15 employees are generally not subject to federal discrimination statutes such as Title VII and the Americans with Disabilities Act, Virginia small businesses may still find themselves subject to Virginia’s discrimination laws even if they have fewer than 15 employees.

The Virginia Human Rights Act, which applies to Virginia businesses with more than 5 but less than 15 employees, makes it unlawful for a Virginia employer to discharge an employee on the “basis of race, color, religion, national origin, sex, pregnancy, childbirth or related medical conditions,” or age (if the employee is over 40). An employee may file a lawsuit against an employer for an alleged violation of the Virginia Human Rights Act in either a general district court or a circuit court, provided the employee files the action within 300 days from the date of termination. (If the employee files a complaint with a human rights agency or commission within 300 days of the termination date, then the employee may bring a court action within 90 days from the date the commission or agency has rendered a final ruling on the complaint.) Employers who are found to have violated the Virginia Human Rights Act may be liable for the employee’s attorneys’ fees and up to 12 months of back pay with interest.

Under the Virginians with Disabilities Act, it is unlawful for employers of all sizes to “discriminate in employment or promotion practices against an otherwise qualified person with a disability solely because of such disability.” To comply with the Virginians with Disabilities Act, an employer must make a “reasonable accommodation to the known physical and mental impairments of an otherwise qualified person with a disability, if necessary to assist such person in performing a particular job, unless the employer can demonstrate that the accommodation would impose an undue burden on the employer.” Under Virginia disability law, whether an accommodation would impose an undue burden on an employer depends on a variety of factors such as potential hardship on the employer, the size of the facility where the employment occurs, the nature and cost of the accommodation, and safety and health considerations. (For Virginia employers with less than 50 employees, any accommodation that would exceed $500 is presumed to impose an undue burden.) Employers who are found to have violated the Virginians with Disabilities Act may be subject to an injunction (to enjoin the violation) or ordered to pay the employee compensatory damages and attorneys’ fees.

Virginia business owners should visit the Virginia Human Rights Council’s website for more information regarding the Virginia Human Rights Act and the Virginia Department of Rehabilitative Services' website for additional information pertaining to the Virginians with Disabilities Act.

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Small businesses with Federal contracts have to be especially mindful of ensuring compliance with equal employment opportunity (EEO) requirements. The failure to comply with the EEO guidelines set forth in Executive Order 11246 (which prohibits employment discrimination by Federal contractors and subcontractors as well as federally-assisted construction contractors and subcontractors) may very well result in the cancellation of a contract, termination, suspension (in whole or in part), or the debarment of the contractor. As the Office of Federal Contract Compliance Programs (OFCCP) requires contractors to engage in their own internal EEO compliance analysis, small businesses often run afoul of satisfying their obligations under Executive Order 11246.

To ensure compliance with the basic EEO requirements imposed by Executive Order 11246 -- and to avoid the wrath of the OFCCP – contractors should adhere to the following OFCCP guidelines:

Don’t Discriminate! Contractors must refrain from engaging in workplace employment discrimination on the basis of race, color, religion, sex, or national origin. Although most people think of intentional discriminatory acts, employment discrimination can also arise when a neutral policy or practice has an adverse impact on the members of any race, sex, or ethnic group.

Post an EEO Poster. Federal contractors must post OFCCP’s EEO poster in a location that is easily seen (e.g., a lunchroom, break room, or locker room).

Include an EEO Tag Line in Employment Advertising. Contractors should include a sentence in all solicitations and advertisements for employment stating that “all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin.”

Keep Records. Contractors must maintain their personnel records and employment records including job descriptions, job postings, job offers, applications and resumes, interview notes, tests and test results, written employment policies and procedures, personnel files, and time-keeping records.

Develop and Maintain an Affirmative Action Program. Contractors with 50 or more employees and a contract of $50,000 or more must develop and maintain a compliant affirmative action program (AAP).

Small businesses with Federal contracts should regularly review their EEO policies and procedures to ensure that they are compliant with Executive Order 11246. Certainly, given the potential penalties, it is better to be safe than sorry!

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As a lawyer with a small business clientele in Virginia, I am frequently asked about Buy-Sell Agreements. Although most small business owners are generally familiar with the concept of a Buy-Sell Agreement, I find that most do not truly understand the purpose of a Buy-Sell Agreement or the form in which these contracts typically exist. Accordingly, here is a brief primer on Buy-Sell Agreements in Virginia.

What is a Buy-Sell Agreement?
A Buy-Sell Agreement is a contractual arrangement between the owners of a business (e.g., a corporation, limited liability company, or partnership) that sets forth the process by which an ownership interest can be sold upon the occurrence of certain triggering events (e.g., retirement, divorce, bankruptcy, disability, death, or a third-party offer) as well as the price or formula for such sale.

Is a Buy-Sell Agreement a stand-alone contract?
Not necessarily. A Buy-Sell Agreement can either be a stand-alone contract or a series of provisions that are incorporated into the governing documents of a business (e.g., By-Laws for a corporation or the Operating Agreement for a limited liability company).

What are the advantages of having a Buy-Sell Agreement?
By having a Buy-Sell Agreement in place, the owners of a company can completely control the disposition of an ownership interest in the business as well as control the composition of the ownership group. In a closely-held company (such as a small, family-owned business), the ability to restrict the transfer or sale of an owner’s interest in the company is an extremely important consideration as it keeps outsiders from assuming a share of the business.

What are the types of Buy-Sell Agreements?
There are three types of Buy-Sell Agreements:

1. Redemption Agreement: The selling owner must either sell his ownership interest to the company or provide the company with a right of first refusal. In essence, the company is “redeeming” the shares of the owner.
2. Cross-Purchase Agreement: The selling owner must either sell his ownership interest to the remaining owners or provide the remaining owners with a right of first refusal.
3. “Hybrid” Agreement: A Hybrid Agreement is simply a blend of a Redemption Agreement and a Cross-Purchase Agreement.

How is a purchase funded under a Buy-Sell Agreement?
Many small businesses do not have the capital reserves to fund the purchase of an ownership interest. As such, a common approach (utilized by businesses and individuals alike) is to purchase and maintain an insurance policy from which the proceeds (upon the disability, death, or retirement of an owner) are used to purchase the available ownership interest. Other funding options include installment plans and loan arrangements.

For one reason or another, every small business is eventually confronted with the loss of an owner. As such, whether you have a startup company or an existing small business, it is of critical importance that you have a well-drafted Buy-Sell Agreement in place to maintain business continuity and to proactively limit any issues relating to the departure of an owner.

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