Effective January 1, 2019, Oregon employers will be required to comply with a new state pay equity law. While there has been a federal Equal Pay Act in effect for many years, as well as a similar state law, Oregon’s updated Equal Pay Act (EPA) expands the scope of the law by including more protected classes and creating significant financial liability for employers who break the law.
So, how can Oregon employers prepare for this upcoming change?
Employers need to ensure that their pay practices are systemized, documented, and based only on the bona fide reasons allowed under the law. Many employers don’t have an established system, in which case they should work on developing one while auditing their pay scales in advance of January 1. Check out our recommendations below on how to do that.
The new law prohibits employers from providing differing wages or other compensation—including benefits like PTO, insurance, and company cars—to employees who are part of a particular protected class and those who are not, when they do work of “comparable character.”
To be clear, every individual is part of several protected class (race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability, age), so an employee does not need to be part of a minority group to have a valid claim under the law. Although it’s possible for an employer have two or more employees whose classes align perfectly, and therefore a pay discrepancy would not create a claim under this law, that’s an unlikely scenario.
And what exactly is work of comparable character? It’s work that requires substantially similar:
- Knowledge (education, certifications, licenses, experience, training);
- Skill (ability, agility, coordination, efficiency);
- Effort (exertion, sustained activity, complexity);
- Responsibility (accountability, significance of job tasks, autonomy, risks presented by employee’s work);
- Working conditions (environment, hours, scheduling, physical surroundings, exposures).
When an employer has employees doing work of comparable character, it must ensure that any pay differentials can be explained based on the bona fide reasons listed in the law, which are as follows:
- A seniority system;
- A merit system;
- A system measuring earnings by quantity or quality of production (including piece rate);
- Education, training, experience
- Workplace location;
- Travel (if necessary and regular);
- A combination of these factors, if they account for the entire pay discrepancy.
“System” is a key word in the law. Many employers offer pay increases based on merit, for instance, but if asked for a written explanation wouldn’t be able to say why “top performer” Jane got a 4% increase and “top performer” John got 5%. A system should either account for this difference or prevent it from happening.
Auditing Pay Scales
For larger employers who are likely to have more employees in jobs of comparable character, outside help may be necessary to do a truly effective audit. Also, if many—or significant—changes are necessary, it may be wise to consult an attorney before making those adjustments. Unexpected pay increases may tip employees off that something was unfair previously. All that said, these are the basic steps that employers should undertake in order to ensure they’re on track to comply with the EPA:
Step 1: Identify employees who do work of comparable character. This will likely involve some deep thought, review of job descriptions, and conversations with managers.
Step 2: Assuming not all employees who do work of comparable character are paid exactly the same, create a spreadsheet (or whatever visualization/information tracking system works for you) so you can compare employees’ total wages alongside the bona fide reasons they might be paid more or less.
Step 3: If you find differences that cannot be reasonably explained by the allowable factors, make changes. Keep in mind that just because someone has additional experience or education doesn’t necessarily mean they should be paid extra for it if it’s not being put to use in their position. Also, be aware that reducing someone’s pay to comply with the law is not allowed.
Step 4: Document the methods you’ve used to assess and set pay, and make sure you use them consistently in the future.
A Few Final Key Points
Remember that discriminatory intent is not required to violate the law. An employee doesn’t need to prove that she is paid less because she is a woman, or black, or a veteran; if the employer can’t explain the pay differential based solely on the allowable reasons listed above, the employee will likely win her case.
Also—and this is a tough one for employers to swallow—negotiation is not an acceptable basis for wage discrepancies. While the law doesn’t prohibit negotiation, an applicant’s power of persuasion or the demands of the market are not on the list of bona fide reasons.
Finally, don’t forget that it’s now illegal (since about a year ago) to ask an applicant about their past salary or to base your offer on that information even if they offer it freely.
The exempt versus non-exempt employee classification issue continues to be a common area of confusion among employers, and it’s important for you to know and follow the rules for paying workers.