Virginia Assembly Advances Family & Medical Leave Program

March 26, 2026

Virginia lawmakers have advanced SB 2/HB 1207, creating a statewide Paid Family and Medical Leave Insurance Program that is poised to significantly affect employers across many industries, including automobile dealerships. The program will be administered by the Virginia Employment Commission and is scheduled to begin paying benefits on January 1, 2029, with employer and  employee payroll contributions beginning July 1, 2028.

Under the new system, benefits will be funded through payroll premiums assessed to both employers and employees. The exact contribution rate will be determined no later than October 1, 2027, based on an actuarial analysis of the program’s anticipated costs. Employees will be eligible to receive 80 percent of their average weekly wage, up to a cap set at the statewide average weekly wage, for a maximum of 12 weeks of paid leave in a given application year. Employers with ten or more employees will share the cost of premiums with their workforce, while smaller employers will remit only the employee share. Self-employed Virginians may opt into the program as well.

For auto dealers, the financial and operational effects could be substantial. Dealerships operate with diverse compensation structures—commissioned salespeople, hourly technicians, and salaried managers—making payroll changes more complex than in many other industries. The added payroll premium represents a new fixed cost that dealers must absorb or offset. Industry analyses warn that statewide mandates like this one can influence wages, pricing structures, and hiring decisions, especially in businesses with already tight operating margins. In addition to the financial obligation, dealers may also face increased administrative responsibilities, including tracking eligibility, maintaining health insurance coverage during an employee’s leave, and handling the necessary paperwork to ensure compliance. Dealers choosing to operate a private plan in lieu of the state program will need to meet strict equivalency standards and may have to furnish a surety bond.

Operationally, dealerships may experience challenges when key personnel take extended leave. Auto retail is highly dependent on consistent staffing in both sales and service operations. A technician on leave, for example, can slow repair throughput and extend service backlogs. A top-performing salesperson’s absence may affect monthly revenue targets. These disruptions can be particularly difficult for smaller, rural, or family-run dealerships that lack deep staffing benches.

Despite these challenges, the new paid leave program may also provide benefits in terms of employee recruitment and retention. The auto industry has long struggled to attract younger workers, many of whom place a high value on family-friendly benefits. A statewide paid leave guarantee may help dealerships compete with other sectors that traditionally offer more predictable schedules or more robust benefit packages. For positions with high turnover—such as entry-level service roles—this added benefit could serve as a useful differentiator.

SB 2/HB 1207 marks a major shift in Virginia’s approach to workplace benefits. While it will introduce new costs and administrative burdens for auto dealers, it also offers an opportunity to bolster competitiveness in a changing labor market. With several years before implementation, dealers should begin evaluating staffing plans, payroll systems, and whether participation in the state program or a private plan will be the most cost effective strategy moving forward.