Final Rules Issued on Oregon’s Equal Pay Act

By Lindsay Reynolds

On November 19, 2018, the Oregon Bureau of Labor and Industries ("BOLI") issued permanent administrative rules for Oregon's Equal Pay Act. The rules will be effective January 1, 2019. The new rules are summarized below.

Unlawful Employment Practice to Seek Salary History of an Applicant or Employee

The OEPA prohibits employers or prospective employers to "seek the salary history of an applicant or employee from the applicant or employee or a current or former employer of the applicant or employee." The rules provide, however, that if an applicant or employee makes an "unsolicited disclosure" of their salary history, such disclosure does not constitute a violation of the OEPA, provided the employer did not consider the salary information in making a hiring decision. An employer may also request from a prospective employee "a written authorization to confirm prior compensation after the employer makes an offer of employment to the prospective employee that includes an amount of compensation."

Expanding the Classes of Employees Covered

Oregon's equal pay laws previously covered pay differences based solely on sex. The OEPA expands the current law's scope to prohibit discrimination against employees on the basis of any "protected class," which is defined as " a group of persons distinguished by race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age" in the payment of compensation (wages, salary, bonuses, benefits, fringe benefits, and equity-based compensation) for work of comparable character.

Work of Comparable Character

The rules define "work of comparable character" to include "substantially similar knowledge, skill, effort, responsibility and working conditions" and includes further definitions for each criterion. Although the original draft rules disallowed pay differences based on "minor differences" in these factors, the final rule eliminated this distinction, which should avoid disputes over what constitutes a "minor" versus a "material" difference.

Bona Fide Factors for Pay Disparities for Employees Performing Work of Comparable Character

Employees may receive different levels of compensation for work of comparable character "if the entire compensation differential is based on one or more bona fide factors related to the position in question." The rules provide a list of bona fide factors that employers may consider, which are:

• A seniority system that recognizes and compensates employees based on length of service with the employer.
• A merit system that provides for variations on pay based on employee performance as measure through job-related criteria. The rule provides an example of a written performance evaluation plan or policy that measures employee performance using a set numerical or other established rating scale, such as from "unsatisfactory" to "exceeds expectations," and takes employees' ratings into account in determining employee pay rates.
• A system that measures earnings by quantity or quality of production, including piece rate work.
• Work place locations.
• Necessary and regular travel.
• Education.
• Training considerations.
• Experience considerations.

 
The rules define "system," as used in the above list, to mean: "a devised coherent, consistent, verifiable and reasonable method that was in use at the time of the alleged violations to identify, measure and apply appropriate variables in an orderly, logical and effective manner."

Benefits as Compensation

Employers may provide different benefits as part of compensation to employees performing work of comparable character if the same benefit options are offered to all employees performing work of comparable character. In addition, if an employee declines a company-provided benefit, the cost of providing the benefit that would have been incurred by the employer to provide the employee with the benefit offered may be included as part of the employee's total compensation rate for purposes of calculating the employee's total compensation under the OEPA.

Employers May Not Reduce Compensation Level to Comply with the OEPA

The rules clarify that employers may not reduce the compensation of employees in a favored group to comply with the OEPA. Instead, employers must raise the pay of disadvantaged groups. However, freezing or otherwise holding an employee's compensation constant as other employees come into alignment is not considered an impermissible reduction under the law.

Posting Notice Requirements

BOLI will provide a template that meets the required notice provisions under the OEPA, which employers must display in every establishment where employees work. If displaying the poster is not feasible, employers may give written notice to employees in the following forms:

• Mailing the written notice to each employee personally, or by including it with a paycheck;
• Incorporating the written notice into the employee handbook made available to employees, whether in print or electronic format; or
• Posting the written notice in a conspicuous and accessible location in each workplace of the employer or via electronic format that is reasonable conspicuous and accessible.

 
Next Steps

Employers should continue to ensure that their job applications do not seek salary information from applicants, and interviewers should be trained not to ask any question that may elicit such information. Employers should also complete an equal-pay analysis of its pay practices and take advantage of the OEPA's safe harbor provision, which allows employers to avoid having to pay compensatory or punitive damages if the employer can demonstrate that the equal-pay analysis was performed within three years before the date the employee filed the action, and if it eliminated the wage differentials for that employee. The final regulations do not further clarify this safe harbor, which we discussed in a prior Tonkon Tip.

This update is prepared for the general information of our clients and friends. It should not be regarded as legal advice. If you have any questions regarding this update, or for more information about this topic, please contact an attorney in our Labor & Employment Practice Group, or the attorney with whom you normally consult.