Oregon’s Bureau of Labor and Industries Publishes Final Rules in advance of the Oregon Equal Pay Act’s January 1, 2019 Effective Date

By Benjamin P. O'Glasser - Bullard Law

December 18, 2018

We previously have written about Oregon’s Equal Pay Act here.

The Oregon Bureau of Labor and Industries (BOLI) has issued final rules regarding implementation of the state’s new Equal Pay Act, the majority of which becomes effective on January 1, 2019.  The final rules followed a rulemaking process where the agency received a significant number of stakeholder comments.  In advance of implementation, employers should be planning an equal pay analysis to identify areas where they will need to make adjustments in order to manage risk moving forward. Additional recommendations are summarized at the end of this article.

Oregon’s Equal Pay Act mandates that employers pay equal compensation to all employees who are performing work of comparable character.  Unlike the federal equal pay act, Oregon’s law looks to whether payment is equal across all protected classes, not just between sexes.  BOLI’s final rules define protected classes extremely broadly, requiring that employers ensure that they can explain all pay differences between any Oregon employees who are performing work of comparable character.

The law’s framework requires that Oregon employers first determine which employees are performing work of comparable character.  BOLI’s final rules supply additional, instructive detail on the factors that may be considered in making this determination.  In general, a job is comparable to another if it requires “substantially similar knowledge, skill, effort, responsibility and working conditions in the performance of work, regardless of job description or job title.”  BOLI’s final rules further define each of the bases for differentiating jobs and allow employers to account for factors that may be difficult to quantify, such as employee accountability and autonomy.  The rules offer two helpful clarifications: first, that employers can appropriately distinguish temporary workers and permanent employees who are performing the same job; second, that employers need only look at Oregon employees in assessing job comparability.

Once an employer determines that multiple employees are performing work of comparable character, an employer must either pay those employees equally or articulate factors that justify a pay differential.  This is another area where Oregon law is more restrictive than federal law.  Many employers may be familiar with federal law that permits differentiation on the basis of “any other factor other than sex.”  In contrast, Oregon employers can only justify a pay differential on the basis of the eight factors enumerated in the law and rules.  These permissible factors include seniority, merit or production measurement systems; work location; travel requirements; education; training; and experience.  Under the final rules, for a “system” to be a permissible basis for a pay difference it must be transparent and comprehensible to employees.  For example, employees with more seniority can be paid more for the same work, but such pay premiums should be pursuant to identical criteria.  In this example, pay differences must be driven by the seniority system; it is not a seniority system if an employer merely cites seniority to justify past pay decisions where seniority played no prospective role.  Correspondingly, as is relates to merit systems, the law increases the importance of conducting regular and accurate performance evaluations based on published criteria.  Employers may justify pay differentials based on more than one factor, but the factors together must explain the entire difference.  If an impermissible pay difference exists between jobs of comparable character, employers can freeze an overcompensated employee’s wages, but cannot reduce any employee’s pay to achieve compliance.

BOLI’s final rules supply far more additional detail regarding whether a job is comparable than whether an employer can differentiate pay between employees who perform work of comparable character.  Accordingly, employers are better-served by thoroughly examining whether jobs are comparable in knowledge, skills, effort, responsibility, or title.  Employers should avoid the tendency to justify pay differentials by immediately delving into the permissible bases to differentiate pay: these latter factors only are relevant after one has reached the conclusion that jobs are comparable.  Furthermore, in managing a dynamic workforce it is more likely that employees are performing jobs that can appropriately be differentiated based on the scope of job duties.  The final rules emphasize that job titles and descriptions are not dispositive.

Employers may limit potential liability by performing an equal pay review and audit at least every three years.  The final rules did not offer any additional guidance on how employers should structure this effort.  The necessary scope of such an analysis will depend on the size of an employer.  At the very least, employers should incorporate the job comparability factors into their regular compensation review processes and document how and why employers define whether particular employees are performing work of comparable character.

Information about the rule will become part of employers’ required postings.  BOLI has issued a new poster, which is available here.

Summary of Recommendations:

1. Conduct a review to determine which employees are performing work of comparable character, focusing on the legally-permissible bases to differentiate employees based on their work.
2. When adjusting compensation, including filling positions with new employees, consider whether an adjustment under consideration will create an inequality with existing employee compensation.  Market forces alone cannot justify pay differences.
3. Conduct a review to determine how your company rewards and differentiates employees.  If you can’t explain a pay difference for work of comparable character, it may no longer be permissible.  If your policies overly rely on subjective criteria, they may not be a “system” that can be used to justify pay differences.
4. Train managers on the impact of the Equal Pay Act.  The Act increases the importance of accurately tracking employees’ job duties and evaluating performance.