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Oregon鈥檚 new minimum wage law, which will affect thousands of jobs (including construction) statewide, will become effective on July 1. The current minimum wage of $9.25 per hour applies to any job site in Oregon, no matter if it鈥檚 in Grants Pass, Hillsboro, Imnaha or Burns. Under the new system, increases in the minimum wage will be phased in over several years, and at different rates in different areas of the state.

The new law implements a three-tiered minimum wage system across Oregon. Each tier corresponds to areas with different levels of population density. The three tiers are defined as:

鈥� high density: the area within Portland鈥檚 urban growth boundary;
鈥� medium density: the areas of Multnomah, Clackamas and Washington counties that lie outside Portland鈥檚 urban growth boundary, as well as Benton, Clatsop, Columbia, Deschutes, Hood River, Jackson, Josephine, Lane, Lincoln, Linn, Marion, Polk, Tillamook, Wasco and Yamhill counties; and
鈥� low density: Baker, Coos, Crook, Curry, Douglas, Gilliam, Grant, Harney, Jefferson, Klamath, Lake, Malheur, Morrow, Sherman, Umatilla, Union, Wallowa and Wheeler counties.

The medium density areas鈥� minimum wage will establish the base rate. Employers in high density areas will pay a premium over the base rate, while employers in low density areas will receive a discount from the base rate. The minimum wage for each area is set by statute until July 2023.

For 2023 and beyond, Oregon鈥檚 labor commissioner will determine the base rate minimum wage, in similar fashion to the current system based on the Consumer Price Index.

Until then, minimum wages in high, medium and low density areas are set by the new law:

鈥� From July 1, 2016 through June 30, 2017, high density will be $9.75, medium density (base rate) will be $9.75 and low density will be $9.50.

鈥� From July 1, 2017 through June 30, 2018, high density will be $11.25, medium density (base rate) will be $10.25 and low density will be $10.

鈥� From July 1, 2018 through June 30, 2019, high density will be $12, medium density will be $10.75 and low density will be $10.50.

鈥� From July 1, 2019 through June 30, 2020, high density will be $12.50, medium density will be $11.25 and low density will be $11.

鈥� From July 1, 2020 through June 30, 2021, high density will be $13.25, medium density will be $12 and low density will be $11.50.

鈥� From July 1, 2021 through June 30, 2022, high density will be $14, medium density will be $12.75 and low density will be $12.

鈥� From July 1, 2022 through June 30, 2023, high density will be $14.75, medium density will be $13.50 and low density will be $12.50.

鈥� From July 1, 2023 onward, high density will be $1.25 greater than the base rate, medium density will be CPI-adjusted and low density will be $1 less than the base rate.

These minimum wages will take effect on July 1 each year 鈥� a change from the previous annual effective date of Jan. 1.

Many employers with locations or job sites in multiple counties are wondering which minimum wage will apply to them. The law states that the applicable minimum wage shall be determined by the 鈥渆mployer鈥檚 location.鈥� Unfortunately, 鈥渆mployer鈥檚 location鈥� is not defined in the law, leaving employers with multiple locations on standby until Oregon鈥檚 Bureau of Labor and Industries defines the term. Since the penalties for noncompliance with minimum wage laws are significant, employers should carefully review the rules to ensure they are paying the correct minimum wage.

Oregon鈥檚 minimum wage law is the only one of its kind in the nation, and represents a compromise between the goals of boosting wages for workers while simultaneously recognizing the challenges facing businesses and rural economies. The compromise law was passed while two separate ballot measures were moving forward, each of which sought faster hikes to the minimum wage. One would have raised Oregon鈥檚 minimum wage to $13.50, another to $15. The groups advocating for a $13.50 minimum wage joined in supporting the bill passed by the Legislature, while the backers of the $15 minimum wage initiative ended their campaign after Gov. Kate Brown signed Oregon鈥檚 new minimum wage system into law. Taking action on the minimum wage was Brown鈥檚 top legislative priority for 2016.

The new law鈥檚 adoption does not mean that employers can count on a steady and predictable minimum wage system through 2023 and beyond. Already, legislative leaders are calling for relief from the new minimum wage system for younger workers and trainees. Other legislators have called for relief for Oregon businesses along the border with Idaho, which has a substantially lower minimum wage. These proposed changes may be strenuously opposed by groups that lobbied hard during the legislative session to avoid industry- and worker-specific carve-outs from the new minimum wage system.

Another potential source of change could be action at the federal level requiring a higher minimum wage than Oregon鈥檚, though that prospect appears unlikely. Finally, several counties are exploring the possibility of mounting a legal challenge to the new law. Employers will need to follow these developments closely to make sure all their jobs and workers remain in compliance.

Damien T. Munsinger is an attorney at Barran Liebman. He represents and advises private and public employers regarding a wide variety of employment law issues, including discrimination and wrongful termination claims. Contact him at 503-276-2112 or [email protected].