By Chrys A. Martin, Jenna L. Mooney and Christie S. Totten, Davis Wright Tremaine LLP
Oregon’s Pay Equity Law went into effect January 1, 2019. The Oregon Bureau of Labor and Industries (BOLI) has just issued administrative regulations giving more detail to the law and defining key terms. OAR 839-008-0000.
Oregon’s pay equity law makes it illegal to discriminate in compensation on the basis of any protected class of employees performing comparable work, absent proof that disparities in compensation are based on one of eight “bona fide” factors. The regulations arguably bring clarity and definitions that may help employers to better navigate this complex new law.
Some key definitions:
“Employee” only includes Oregon-based employees. The law does not apply to an Oregon employer’s employees who exclusively work out-of-state – such as in an out-of-state branch office, retail store or manufacturing location.
“Compensation” includes hourly wages, base salary, bonuses, fringe benefits, equity grants, hiring bonuses – essentially every benefit that has monetary value to an employee. Nothing of value is excluded.
“Protected Class” means race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age. Most employees do not want to voluntarily disclose this information so employers do not know or collect such information, creating a challenge to compliance with the law.
“Work of a comparable character” is work requiring “substantially similar knowledge, skill, effort, responsibility, and working conditions regardless of job title.” Employers must evaluate job positions for “similarity” using these considerations and cannot just compare wages of those in the same job title to see if differences exist. There are further definitions for each of these considerations that employers should use in determining whether work is comparable. OAR 839 008-0010. For example “knowledge” includes “certifications, licenses, education, experience or training,” and so forth for each of the other listed criteria.
“Bona Fide Factors” is arguably the most important part of the new law and the regulations. Wage differentials are legal if they are based on one or more of the following eight bona fide factors: seniority system, merit system, quality or quantity of production, workplace location, travel, education, training and experience. Each of those factors is defined in more detail in the new regulations. OAR 839-008-0015.
It is important to underscore that the “seniority” and “merit” factors are qualified by the word “system.” Consequently, it is insufficient to simply say this male earns more than the female in the same job because he is more senior or is a better performer. The employer must have an actual “system” for measuring performance and for valuing seniority.
“System” is separately defined as a “coherent, consistent, verifiable and reasonable method” for merit or seniority. For example, it would include an annual written performance review process with rating scales by category (needs improvement, meets or exceeds expectations) or numerical scoring that can be objectively used to explain performance based differences in pay. A written seniority system could result in an employer giving certain raises based on months or years of service at the company or offer a higher starting salary in a promotional position due to seniority.
Another key provision in the law creates an affirmative defense to compensatory and punitive damages if the employer has done a pay equity analysis in the last three years and eliminated any wage differentials that aren’t based on the statutory “bona fide factors.”
First, employers should reevaluate their compensation programs and consider implementing a “seniority system” and a “merit system” that meet the requirements of the regulations, if not already in place. Those two factors are usually the most critical to employers in setting compensation so should be well defined and thoughtfully implemented. Second, employers must also attempt to collect, preserve and determine how to value information on the other relevant factors to support wage differentials.
Finally, employers should consult with an attorney to see how to properly complete a qualifying pay equity analysis. These pay equity studies should be performed under the attorney-client and/or work product privileges to help protect the studies from discovery by BOLI or in litigation.