West Virginia Employment Update: The Mountain State Is Becoming Much More Attractive To Employers

For the past several decades, West Virginia has not fared particularly well when employers were faced with tough decisions regarding whether to close or open new facilities in the state. One of the factors that undoubtedly played a role in West Virginia faring so poorly was the state's legal climate. West Virginia employers faced a much higher litigation risk than employers in neighboring and other states.

Recognizing the disproportionate risk facing employers, the West Virginia Legislature and Governor took dramatic steps during the 2015 legislative session to improve the business climate and to correct some of the more glaring issues for employers. The significant legislative changes made during the 2015 regular session that impact West Virginia employers are detailed below.

Unmitigated Back and Front Pay - No Longer the Law

Until recently, a judicially-created loophole known as the "malice exception" allowed plaintiffs in West Virginia in almost all employment-related litigation to be awarded not only punitive damages, but unmitigated back and front pay damages as well. Practically speaking, this unusual West Virginia rule allowed plaintiffs asserting employment claims to in effect recover double punitive damages. An example readily illustrates the impact such a rule had on employment litigation in West Virginia. In the past, if a jury in West Virginia concluded an employer acted maliciously in firing a 20-year-old who made $10 an hour, it could award such individual not only hundreds of thousands of dollars in punitive damages, but could also award unmitigated back and front pay for 47 years, which equates to more than an additional $900,000. The fact that plaintiffs in run-of-the-mill employment litigation could often readily blackboard damages exceeding a million dollars created an untenable dynamic that dramatically distorted the "value" of employment cases in West Virginia.

Fortunately for employers, as a result of legislation enacted as of June 8, 2015, the "malice exception" is no longer the law in West Virginia.1 Indeed, when West Virginia Code §§ 55‐7E‐1, 2 and 3 went into effect, a plaintiff in West Virginia has, as do plaintiffs in all other jurisdictions in the United States, "an affirmative duty to mitigate past and future lost wages, regardless of whether the plaintiff can prove the defendant employer acted with malice or malicious intent, or in willful disregard of the plaintiff's rights." Succinctly, this new legislation codifies a plaintiff's duty to mitigate, and abolishes the previously recognized malice exception.

The new law requires that in the event front pay is sought as a remedy, the trial judge must make a preliminary finding as to whether front pay - versus reinstatement - is appropriate. If the trial judge concludes front pay is an appropriate remedy, it is for the trial judge, not the jury, to decide the amount of such award.

Legislature Adopts Punitive Damages Cap

Following years of West Virginia being ranked as one of the top three "judicial hellholes" in the United States, the West Virginia Legislature recently joined a growing number of states taking steps to rebalance the scales of justice by establishing limits on the punitive damages recoverable in civil litigation. With such statutory limits ranging from states abolishing punitive damages altogether (New Hampshire) to merely articulating the burden of proof that must be met by plaintiffs seeking punitive damages (e.g., Kentucky), West Virginia has codified the burden of proof to be met by plaintiffs seeking punitive damages. The West Virginia legislature also imposed limits on the amount of punitive damages that can be awarded in civil matters.

Specifically, the new West Virginia statute requires that plaintiffs establish by clear and convincing evidence that the damages allegedly suffered were the result of conduct carried out by the defendant with "actual malice" towards plaintiff, or a "conscious, reckless and outrageous indifference to the health, safety and welfare of others." W. Va. Code §55-7-27 (2015). In addition, the new statute provides defendants with the option of bifurcating the issue of punitive damages from that of liability. The statute also vests courts with the authority to determine whether the evidence presented in the first stage of the bifurcated trial is sufficient to warrant proceeding to a second stage that addresses the issue of punitive damages. Finally, the new statute caps the amount of punitive damages that may be awarded in civil cases to four times the amount of compensatory damages awarded or $500,000, whichever is greater, and mandates a judicial reduction in any punitive damages award exceeding such formula. The new statute was passed on February 24, 2015, and will apply to cases filed on or after June 8, 2015.

Wage Payment & Collection Act - Final Wages No Longer Must Be Paid in Hours

For years, employers in West Virginia dramatically altered their payroll practices in an effort to comply with the West Virginia Wage Payment and Collection Act ("WPCA") and its requirement that discharged employees be paid all wages owed...