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As employers grapple with labor shortages, many are turning to increased compensation 鈥� salary increases, bonuses and other pay perks 鈥� to recruit candidates. Improving wages and other compensation may indeed fill open positions, but employers also must keep in mind the implications for internal pay equity. Pay equity is not only important for workplace culture and fairness, but Oregon requires comparable work to be paid equally, unless the entirety of the compensation differential is based on a bona fide factor related to the position.

What is pay equity?

Prior to the pandemic, recent studies showed a slow but steady narrowing of the difference in pay between men and women. For example, a recent study found that the gender pay gap in the U.S., comparing working women and men overall,聽had narrowed by 6 cents between 2017 and 2020. In 2017, a typical woman earned 77 cents for every dollar earned by a typical man; in 2020, that amount was聽83 cents. The pandemic erased some of that progress, however.

Additionally, a 2019 study found black or African American men have the largest uncontrolled pay gap relative to white men. They earn $0.87 for every dollar a white man earns. Pressure to increase wages, like labor shortages, risks exacerbating these disparities.

What are the legal obligations?

The Oregon Equal Pay Act was signed into law on June 1, 2017 by Gov. Kate Brown. This makes it unlawful for any Oregon employer:

• to discriminate between employees, in wages and other compensation for 鈥渨ork of a comparable character,鈥� on the basis of a protected class;
• to seek or use the salary history of an applicant before an employment and salary offer has been made;
• to screen applicants on the basis of current or past compensation; or
• to determine compensation for a position based on current or past compensation of a prospective employee.

Oregon defines 鈥渃ompensation鈥� broadly to include not only wages, but also salaries, benefits, bonuses, fringe benefits and even equity-based compensation. As discussed below, pay differentials for comparable work must entirely be based on 鈥渂ona fide factors.鈥� Oregon defines bona fide factors as: 1, a seniority system; 2, a merit system; 3, a system measuring earnings by quantity or quality of production (e.g., piece-rate work); 4, workplace locations; 5, travel (if necessary and regular for employees); 6, education; 7, training; and/or 8, experience.

Steps for Oregon employers

1. Create transparent compensation systems

Employers should ensure they have transparent compensation systems and objective metrics around recruitment, performance, advancement and compensation to help ensure consistency. For example, consider implementing standard pay ranges or guidelines for each position or job classification. Hiring managers and compensation decision-makers must be trained in regard to the compensation system and taught how to properly document decisions. Additionally, they must communicate regularly and honestly with employees about metrics and progress in order to build trust within the entire organization.

2. Have a verifiable system for pay differences

Any pay differences for positions performing comparable work must be justified if all of the difference is based on a bona fide factor or factors. What this means for employers is that having good systems in place ensures they are legally compliant. In particular, employers will want to review and make any necessary improvements to current seniority, merit or other systems in place to make sure they account for current compensation distinctions between employees who perform work of comparable character. Moreover, the seniority and merit systems should apply across the organization.

3. Update your job descriptions

Another best practice for employers is to keep job descriptions up-to-date to ensure that the work being done and the skills required to do the work are accurately reflected. Oregon law requires equal pay for 鈥渨ork of comparable character.鈥� That is defined as work that requires substantially similar knowledge, skill, effort, responsibility and working conditions in the performance of work, regardless of job description or job title. Making sure a job description accurately reflects the work performed in the role makes it easier for employers to compare which employees are performing comparable work and identify any pay discrepancies.

4. Perform a pay equity analysis

If an employee sues for violation of the pay equity law, the law does provide a partial safe harbor if the employer has performed an equal pay analysis within the past three years. Specifically, the law allows an employer to move for no award of compensatory and punitive damages to the employee. This defense is attractive to many because it should significantly limit the employer鈥檚 economic exposure in the event of a lawsuit. However, to qualify for this defense, the employer has to show that the equal pay analysis it performed was reasonable in detail and scope in light of the size of the employer; eliminated the wage differentials for the plaintiff; and has made reasonable and substantial progress toward eliminating wage differentials for the protected class asserted by the plaintiff.

With potential for pay equity disparities heightened by today鈥檚 post-pandemic environment and compensation increases intended to offset labor shortages, it is more important than ever for employers to implement effective pay equity policies and practices. Furthermore, there are many considerations as to the extent of analysis required to satisfy a pay equity safe harbor defense. With a multitude of factors in play, consultation with legal counsel may be advantageous.

Sarah Hale is a partner at Barran Liebman LLP. She advises and represents employers in a wide array of employment and labor law matters. Contact her at 503-276-2111 or [email protected].

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91视频 guarantees the accuracy or completeness of any information published herein.