Rent Control, Collective Bargaining, Class Action Lawsuits — Virginia’s Business Climate in The Crosshairs

The Democrats now running Virginia’s General Assembly are not just more progressive, but far more ambitious than their predecessors. To fully understand how ambitious you must compile the entire list of progressive bills advancing in the 2024 session and consider their total impact on the cost of living and the cost of doing business in the Commonwealth. Individual news stories here or there miss the big picture.

The push to radically regulate Virginia’s energy future discussed earlier is being mimicked with equally aggressive legislation throughout the rest of our economy. None of the ideas below are new, and most are already in law in places like California, New York, or other more liberal states. What has changed is that when proposed in the past, they usually were rejected in Virginia on a bipartisan basis. Democrats now march in lockstep.

The Assembly is still in its first phase and adjournment is set for early March. Which of the following will pass remains to be seen, and in many cases, amendments are already appearing. Most may also face gubernatorial veto or amendment, but that just underscores that Virginia is only one election of one official away from total transformation.

In the case of the bills to increase the minimum wage (here and here), Democrats are simply building upon what they did during their last period of control. But if they succeed in setting future wage increases to automatically grow with inflation, the impact just builds and builds.  Classes of employees reasonably exempted from the law currently, such as farm workers, may now be covered, as well.

Likewise, the previous Democratic majority also took the first steps toward collective bargaining for limited groups of local employees, but only after elected local officials gave a green light to negotiate a contract. This year’s bill expands the right to bargain to almost all local and now most state employees, with no vote needed by a school board or city council. It was revealed that the most recent version does conveniently exempt employees of the General Assembly, however.

A pair of bills create a local-option system of rent control (here and here), with fiscal penalties for landlords accused of rent gouging. The localities cannot allow rent hikes that exceed the rate of inflation but apparently can impose rent hike limits that are lower than the rate of inflation. Broad enforcement powers are granted, “liberally construed.”

The Democrats would also empower local governments to impose more restrictive building codes, mainly aimed at snuffing out the use of fossil fuels (here and here). The demonization of gasoline or diesel, already doomed in future cars and trucks, would now extend to the lowly leaf blower. Companion bills (here and here) allow localities to restrict them, ostensibly because of their noise but electric blowers are hardly silent. Will families and companies be forced to scrap existing machines? Wait and see.

Such bills are necessitated by Virginia being a Dillon Rule state, with local governments restricted to those powers granted by the Assembly and prevented from leaving the reservation. To fix that, this Assembly might start the process of just dumping the Dillon Rule entirely (here and here.)

It is a short path from “pilot program” to “statewide implementation” to “statewide mandate.” The process is fully visible this session with another idea, this one started by Republicans. A bill advancing now gives every locality the option to increase its local sales tax another penny. Acorns become oaks.

Watch that explosive growth happen with another progressive dream that may now become reality, a state-level mandate to pay employees who go out on family or medical leave. The paid family or medical leave could extend up to 12 weeks, financed by a new statewide payroll tax similar to how the Social Security system or unemployment benefits are financed. The initial payroll tax discussed in the fiscal impact statement is about 1%, up to $5 per week on both employer and employee.

That is the acorn price, ignoring the mighty bureaucratic oak this will become. The bills are here and here. Oh, and in case you miss this key point, payroll taxes are highly regressive – harming the poor the most.

There is already a legal mandate to provide paid sick leave of one hour for every 30 hours worked, but only for home health workers. In another acorn-to-oak play, a bill expands that to vast numbers of workers across the economy, even though many employers are already offering that or even better benefits. The real point of the bill, probably, is its new state enforcement powers, its major cash penalties, and even a new right for aggrieved employees to sue.

Oak trees will proliferate in the civil litigation forest under several pending bills. Virginia is now just one of two states that do not allow plaintiffs with a common claim to band together into a class action case in state courts. Several bills (here and here) would change that. Further expanding the incentive to sue, another pending bill also eliminates the long-standing cap on medical malpractice awards.

Consider those together, allowing class action lawsuits in state court and allowing unlimited medical malpractice awards. Once they start paying larger or more numerous settlements, do you think the hospitals, doctors, pharma companies, and their insurance carriers will just absorb that, and will your individual insurance rates rise? Just asking.

Most citizens also might not focus on the cost to them of proposed changes in Virginia’s procurement laws, greatly expanding the percentage of awards and subcontracts directed to small, woman-owned or minority businesses. The bill establishes different set-asides for different categories, up to 42% or even 50%. It also greatly expands the opportunity for awards without competitive bidding.

If these companies were offering the best price or best quality under the existing bid process, no such bill would be necessary. Locking out larger competitors will just allow prices paid to creep up, with the resulting impact on state and local tax expenditures. As with many of the bills discussed above, the financial impact is not yet officially calculated (and any official calculation would not be trustworthy anyway.)

Legislation that claims to change Virginia’s future bad weather or sea level is nonsense. That kind of climate is beyond human control. But the state’s strong business climate is very easy to ruin with legislation and regulation.

Steve Haner is a Senior Fellow for Environment and Energy Policy. He can be reached at [email protected].

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