Women in the U.S. who work full-time, year-round are paid only 80 cents for every dollar made by their male counterparts. That’s the “average” white woman. Black women make only 63 cents and Hispanic women make 54 cents of what their white, male counterparts make. Equal Pay Day for Latinas, the day women finally catch up to what a white man earned the year before, is November 2. The gap, in real terms, is an annual loss of $21,698 for Black women, $26,403 for Latinas, and $7,310 for Asian women.
There are already federal laws meant to eliminate this gap. In fact, the Equal Pay Act was passed 55 years ago. It has made a little progress – the gap has closed from 65 cents for every dollar in 1980. There are a lot of theories about why the gap hasn’t closed more, and that perhaps the pay disparity is related more to promotion and opportunity than anything else. For example, in 2015, only 21 of S&P 500 companies were run by women. That number is actually now down now from previous years, and just about the same as the number of male executives named John.
Oregon has tried to improve our 79 cent gap (which is a little lower than the national average) by passing the Oregon Equal Pay Act of 2017. It’s been called one of the broadest pay equity laws in the country, as it covers much more than gender. In fact, Oregon law prohibits pay discrimination on the basis of: race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability, or age. This means that when you set or audit the pay rate for each job candidate and employee, you have layers of protected classes to consider beyond gender.
It’s also broader than the title suggests, as the Act does not only address salary. In fact, the Act defines compensation as “wages, salary, bonuses, benefits, fringe benefits, and equity-based compensation.” For example, if someone is seeking an extra week of PTO in a salary negotiation, you should treat that as part of an employee’s compensation and make sure you’re not compensating existing employees differently for work of comparable character.
The Act, on its face, seems simple and straightforward. The Bureau of Labor and Industries (BOLI) does a great job of breaking down the components of the law on their technical assistance page. However, various ambiguities in the Act will present challenges for employers looking to comply. It will require companies to become more diligent and systematic about how they screen new applicants, negotiate pay and benefits, and track employee performance as it relates to compensation.
Three Important Dates
The Act was signed into law in June 2017, but the protections offered by the Act are being phased in gradually.
October 6, 2017
Employers can no longer ask candidates about their salary history.
January 1, 2019
Employers cannot discriminate against employees in a protected class by paying them lower wages for work of comparable character, which is defined as “substantially similar knowledge, skill, effort, responsibility, and working conditions in the performance of work, regardless job description or job title.” (Take note: relying on something like job title to distinguish between roles won’t work anymore.)
Employees asked about their salary history or alleging pay equity discrimination will now be able to pursue a private right of action through BOLI.
Employers may no longer determine compensation based on a candidate’s salary history, even if a candidate voluntarily reveals their salary history, which means there will likely not be much of a prior salary defense, like there is for the federal Equal Pay Act, for employers facing claims.
Employer must post a sign, provided on the BOLI website, detailing the requirements of this act in a conspicuous place.
January 1, 2024
Employees may now also bring a civil suit under the provision prohibiting employers from inquiring into prospective employees’ salary histories, and may also bring a suit on behalf of others who are similarly situated (i.e., a class action).
If an employee successfully brings a BOLI complaint or civil suit for pay equity discrimination, the employee could be awarded two years’ back pay at the employee’s regular rate of pay, compensatory and punitive damages, and attorneys’ fees (which can be substantial).
As a reminder, under the Lilly Ledbetter Fair Pay Act of 2009, each time an employee is paid constitutes a potential violation, making alleged pay disparity an ongoing unlawful employment practice with a continually renewing statute of limitations.
There is also class action exposure, as the law specifically provides for employees bringing claims for unpaid wages not only on their own behalf, but also on behalf of a class of similarly situated employees.
You might avoid having to pay compensatory or punitive damages if you’re able to show that you completed an equal pay analysis of your pay practices within the three years before the date the employee filed the action, and if you’ve also eliminated the compensation gap. And, according to current interpretation of the topic, any difference, even if it’s de minimus or pennies, is enough to give merit to a claim.
This means that now is the time to analyze your compensation structures and make any necessary changes.
To qualify under the safe harbor provided by the equal pay analysis, within three years before the date the employee filed a legal action, the employer:
- completed an equal pay analysis of its pay practices in good faith that was reasonable in detail and scope in light of the employer’s size (Stay tuned on if this will be more detailed in the future, unfortunately, BOLI doesn’t offer much guidance as to what is “reasonable” at this time.)
- and eliminated wage differentials for the plaintiff and made reasonable and substantial progress toward eliminating wage differentials for the protected class* asserted by the plaintiff. This will likely entail updating job descriptions and developing a compensation philosophy and structure, although you should consult an employment law expert for a customized analysis.
*A best practice would be to run this analysis for every single protected class separately, which, as you can imagine, might be pretty time and labor intensive.
When Pay Differentials Can Be Appropriate
Employers may pay employees for work of comparable character at different compensation levels if the entire difference in compensation levels is based on a bona fide factor related to the position and:
- A seniority system;
- A merit system;
- A system that measures earnings by quantity or quality of production, including piece-rate work;
- Workplace locations;
- Travel, if travel is necessary and regular for the employee;
- Experience; or
- Any combination of these factors, if the combination of factors accounts for the entire compensation differential. ORS 652.220(2)
These bona fide factors must be coherent, consistent, and verifiable. They cannot be post hoc. To rely on this protection in court, your compensation philosophy must be known, documented, and implemented. Basically, you need to get really concrete about why different employees are paid differently.
There is no “or other factors” language, so if an employer can’t explain the difference based on the enumerated factors, the difference will not be considered a bona fide factor and they’ll risk liability. Additionally, the enumerated factor must be related to the position.
The law does not define many of these terms or clarify whether an employer must account for the entire differential only when using a combination of factors, or also when using just one factor to explain the difference. Therefore, how employers might permissibly pay different wage rates is currently inexact. There are draft rules available from BOLI, and the administrative rules will eventually be posted. More clarity should come with time, but this would be a great time to consult with an employment law expert if you’re feeling unsure about your practices.
Finally here are some Do’s and Don’ts to make your business is complying with these new standards.
Oregon Equal Pay Act Compliance Checklist
- Update and post BOLI posters in a conspicuous location at your office.
- If you haven’t already, amend your internal application form to exclude any questions regarding salary. It is still acceptable to ask about desired salary or accepted salary ranges.
- Train your recruiters (including third-party agencies) and hiring managers not to seek information about salary history in interviews.
- Consider conducting an “equal pay analysis” – both to ensure legal compliance and to benefit from possible safe harbor defense to compensatory and punitive damages should an employee file suit.
- Don’t ask a candidate about their salary history, or ask their current or past employers to verify salary history, before an offer with salary amount has been made to the candidate and authorization has been obtained. (And at that point, why are you asking?)
- Don’t lower any employee’s existing salary to correct wage disparities. If you’re having trouble reaching parity, it’s OK to freeze an employee’s wages until employees doing work of comparable character have a chance to catch up.
- Don’t tell employees they cannot share salary information. This is likely a labor relations violation.
- Don’t inquire into protected statuses that are not self-evident or self-reported, which could give rise to additional claims and unintended consequences. Some employers have been giving anonymous surveys to collect this information, to determine if their pay practices are not compliant, but this would probably be a point to talk to an employment attorney about.
- Don’t discriminate against an employee because the employee has filed a complaint under the Oregon Equal Pay Act or because the employer believes the employee may testify in any investigation or proceedings related to this law.
- Don’t delay compliance! The majority of the Act goes into effect January 2019, and it’s going to take most organizations time to run an equal pay analysis and get into true compliance.