Employers Guide: Getting Ready for the Oregon Equal Pay Act

Beginning January 1, 2019, the major parts of the Oregon Equal Pay Act of 2017 kick into effect.

If you’re an Oregon employer, you’ve probably heard quite a bit about the Act. As a quick reminder:

  1. The Act has been called one of the broadest pay equity laws in the country. It covers: race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability, or age.
  2. It also covers more than pay – it defines compensation as “wages, salary, bonuses, benefits, fringe benefits, and equity-based compensation.”
  3. The law was signed in June 2017, but has been phased in slowly since then:

 

October 6, 2017

  • Employers can no longer ask candidates about their salary history.
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    January 1, 2019

  • Employers cannot discriminate against employees in a protected class by paying them lower wages for work of comparable character, which is defined as “substantially similar knowledge, skill, effort, responsibility, and working conditions in the performance of work, regardless job description or job title.” (Note: relying on something like job title to distinguish between roles won’t work anymore.)
  • Employees asked about their salary history or alleging pay equity discrimination will now be able to pursue a private right of action through BOLI.
  • Employers may no longer determine compensation based on a candidate’s salary history, even if a candidate voluntarily reveals their salary history, which means there will likely not be much of a prior salary defense, like there is for the federal Equal Pay Act, for employers facing claims.
  • Employers must post a sign, provided on the BOLI website, detailing the requirements of this act in a conspicuous place.
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    January 1, 2024

  • Employees may now also bring a civil suit under the provision prohibiting employers from inquiring into prospective employees’ salary histories, and may also bring a suit on behalf of others who are similarly situated (i.e., a class action).
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    Why It Matters
    The law applies to all employers with one or more employees. So, it really applies to all businesses.
    If an employee successfully brings a BOLI complaint or civil suit for pay equity discrimination, the employee could be awarded two years’ back pay at the employee’s regular rate of pay, compensatory and punitive damages, and attorneys’ fees (which can be substantial).

    As a reminder, under the Lilly Ledbetter Fair Pay Act of 2009, each time an employee is paid constitutes a potential violation, making alleged pay disparity an ongoing unlawful employment practice with a continually renewing statute of limitations.

    There is also class action exposure, as the law specifically provides for employees bringing claims for unpaid wages not only on their own behalf, but also on behalf of a class of similarly situated employees.
    Basically, violating this particular law can be extremely expensive and potentially damaging to your brand’s reputation.

    What You Can Do
    Comply with the law! Best practices suggest conducting an equal pay analysis. This is defined as an evaluation process to assess and correct wage disparities among employees who perform work of comparable character. (Note: Unfortunately, BOLI has withdrawn all guidance on conducting equal pay analysis, claiming it’s outside of their rulemaking authority!).

    Generally, you’ll be in good shape if employees who are doing comparable work are paid equally. According to current interpretation of the topic, any difference, even if it’s de minimus or pennies, is enough to give merit to a claim.

    However, employers may pay employees for work of comparable character at different compensation levels if the entire difference in compensation levels is based on a bona fide factor related to the position and:

  • A seniority system;
  • A merit system;
  • A system that measures earnings by quantity or quality of production, including piece-rate work;
  • Workplace locations;
  • Travel, if travel is necessary and regular for the employee;
  • Education;
  • Training;
  • Experience; or
  • Any combination of these factors, if the combination of factors accounts for the entire compensation differential. ORS 652.220(2)
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    These bona fide factors must be coherent, consistent, and verifiable. They cannot be after the fact. To rely on this protection in court, your compensation philosophy must be known, documented, and implemented. Basically, you need to get really concrete about why different employees are paid differently. This will likely entail updating job descriptions and developing or refining your compensation philosophy and structure.

    There is no “or other factors” language, so if an employer can’t explain the difference based on the enumerated factors, the difference will not be considered a bona fide factor and they’ll risk liability. Additionally, the enumerated factor must be related to the position.

    The law does not define many of these terms or clarify whether an employer must account for the entire differential only when using a combination of factors, or also when using just one factor to explain the difference. Therefore, how employers might permissibly pay different wage rates is currently inexact.

    However, there are deeper explanations of what constitutes a “seniority system” or what “experience” can be considered in the administrative rules that were published by BOLI in November 2018.

    More clarity will come with time (with lawsuits!), but this would be a great time to consult with an employment law expert if you’re feeling unsure about your practices or want help running an equal pay analysis.

    If you do run an equal pay analysis, you might avoid having to pay any compensatory or punitive damages. To qualify for this “safe harbor,” you should be able to show that you completed an analysis of your pay practices in good faith that was reasonable in detail and scope in light of your company’s size within the three years of the date the employee filed the action, and you’ve also eliminated any wage differentials.

    This means that now (heck, yesterday!) is a good time to analyze your compensation structure and make any necessary changes.
     

    To Comply You Should:

    1. Update and post BOLI posters in a conspicuous location at your office.
    2. If you haven’t already, amend your internal application form to exclude any questions regarding salary. It is still acceptable to ask about desired salary or accepted salary ranges.
    3. Train your recruiters (including third-party agencies) and hiring managers not to seek information about salary history in interviews, although an unsolicited disclosure does not constitute a violation.
    4. Consider conducting an “equal pay analysis” – both to ensure legal compliance and to benefit from possible safe harbor defense to compensatory and punitive damages should an employee file suit.

     

    And, Do NOT:

    1. Ask a candidate about their salary history, or ask their current or past employers to verify salary history, before an offer with salary amount has been made to the candidate and authorization has been obtained. (And at that point, why are you asking?)
    2. Lower any employee’s existing salary to correct wage disparities. If you’re having trouble reaching parity, it’s OK to freeze an employee’s wages until employees doing work of comparable character have a chance to catch up.
    3. Tell employees they cannot share salary information. This is likely a labor relations violation.
    4. Inquire into protected statuses that are not self-evident or self-reported, which could give rise to additional claims and unintended consequences. Some employers have been giving anonymous surveys to collect this information, to determine if their pay practices are not compliant, but this would probably be a point to talk to an employment attorney about.
    5. Discriminate against an employee because the employee has filed a complaint under the Oregon Equal Pay Act or because the employer believes the employee may testify in any investigation or proceedings related to this law.
    6. Delay compliance! The majority of the Act goes into effect January 2019 – if you haven’t started already, you need to get going!