The Oregon Equal Pay Act - Preparing for Compliance in 2019

As summer begins to wind down, HR professionals need to move a vital task to the top of their to-do lists: making certain that their employers are compliant with Oregon’s Equal Pay Act of 2017. Most of the act’s provisions take effect January 1, so now is the time to review its key points and address any shortcomings.

Oregon’s law echoes equal-pay measures enacted in several other states, including California and Massachusetts, in that it bars employers from basing new hires’ salaries on their prior pay, requires workers be paid the same for doing “work of comparable character”—unless they have different experience, education, training or other admissible factors—and extends equal-pay protections beyond just “the sexes” to “protected classes” that include sexual orientation, national origin and marital status.

The act, signed into law on June 1, 2017, by Governor Kate Brown, applies to businesses of all sizes. It will be enforced by the state’s Bureau of Labor and Industries, which can require employers to award back pay and damages.

Beginning on January 1, 2024, employees will be permitted to sue for alleged violations and collect punitive damages as well. But the law provides a protection to businesses if they can show they’ve made serious efforts to close pay gaps. Courts may nix damages awards if employers demonstrate they have conducted a pay-equity analysis and used the findings to eliminate or make “reasonable and substantial progress” toward resolving disparities.

Few C-level executives believe their companies aren’t already in full compliance with the Oregon Equal Pay Act. However, the only way to be certain is to conduct a thorough pay analysis. Nike Inc. did just that this year. After the Beaverton-based fitness gear maker reviewed salaries and bonuses, it announced plans to raise the pay of about 10 percent of its 70,000 workers around the world and revisit how it determines bonuses.

If your firm’s pay-equity analysis unearths biases that cannot be explained by differences in education, seniority, experience or other bona fides under the law, you must close those gaps. The law requires you to do so only by raising underpaid workers’ wages; you cannot lower anyone’s salary to achieve equity.

The Oregon Equal Pay Act covers more than just current employees. It also prohibits businesses from asking job candidates for their salary history. (This provision took effect October 6, 2017, but the state will begin enforcing the measure starting January 1.) Review your job applications to be sure they do not request this information and educate hiring managers to avoid this question. If your company uses recruiters or third-party contractors, such as staffing services or temp-to-perm agencies, be sure that they can ensure compliance as well.

When hiring, carefully document the rationale for the salary offer. State law permits discrepancies in pay between employees who do “work of comparable character” if those pay differences are based on at least one of eight factors: a seniority system, a merit system, a system that measures earnings by quantity or quality of production, location, travel, education, training or experience. Thorough, clear documentation that explains how a salary was set will be invaluable if your company ever faces a pay-equity lawsuit.

Workers who feel they are paid fairly and treated well are less likely to leave, which translates into a lower turnover rate and less time and money needed for recruiting, hiring and onboarding. Employers spend about 20 percent of a worker’s annual salary to find and train a replacement, and the more skilled the employee, the higher the replacement cost, according to an analysis by the Center for American Progress. Fairly paid employees are happier workers, and that contentment benefits your bottom line.