By Meagan Phillips, Trüpp.
The Oregon Equal Pay Act (OEPA) provision preventing employers from inquiring about or using pay history as a basis for making a job offer went into effect in October 2017. The remaining provisions went into effect on January 1, 2019. These provisions apply to all employers in Oregon and include strengthening pay equity laws to require employers to pay employees equally when they are performing substantially similar work. Specific factors can be used to justify differences in pay and the definition of what is considered in pay has been significantly broadened.
Complying with the Oregon Equal Pay Act
To achieve alignment with the new pay equity law, it is highly recommended that an organization conduct a pay equity analysis in order to identify any pay inequities and to leverage safe harbor provisions included in the law.
How do we conduct a Pay Equity Analysis?
While the approach may vary by organization or consultant conducting the analysis, there are four key phases to be considered.
- Preparing and gathering information. This purpose of this phase is ensuring accurate and reliable data will be leveraged for the work in other phases. This phase includes determining which sources will be used for determining who is performing substantially similar work (also called work of comparable character) and for assessing pay between those employees who are performing substantially similar work. This includes activities such as updating job descriptions, conducting an employee questionnaire, and extracting data from HR information systems.
- Determining who is performing work of comparable character. The law requires pay to be equitable among those who are performing work of comparable character, which is defined as employees who are performing “work that requires substantially similar knowledge, skill, effort, responsibility, and working conditions in the performance of work.” It is important to note that the analysis should not rely on job titles but the criteria that has been defined by BOLI.
- Analyzing employee pay for wage disparities. The purpose of this phase is to compare the employee pay (including salary and wages, bonuses, employee benefits, fringe benefits, and equity-based compensation) for those employees who are performing work of comparable character and determine if there are wage disparities. The law allows for pay differences, but those differences need to be justified by one or more bona fide factor (bona fide factor(s) used may vary by comparable character grouping and be weighted differently). Differences in pay (for employees who are doing substantially similar work) that cannot be reasonably justified based on differences in bona fide, will need to be addressed.
- Addressing wage disparities and pay practices. The last step in the pay equity analysis is to establish a plan for addressing pay inequities and for ensuring ongoing pay equity compliance. For employees who have been over compensated, employers may freeze their pay until they come into alignment but may not reduce their compensation to achieve equity. Employers may also need to establish or revise practices that may contribute to pay inequities—including those policies that impact how pay decisions are made, how bonuses are measured and determined, and how employee benefits are granted.
What else should be considered?
How to interpret provisions of the law. The language of the law leaves room for interpretation, so employers will need to determine the methodology to be applied when determining which employees are performing work of comparable character and when identifying where wage disparities are occurring. Employers will also need to determine how much of a disparity may be too much, how to best address the disparity, and how much time is reasonable to remedy. Compensation consultants specializing in pay equity and legal counsel can be valuable resources for determining the best course for your organization.
How to manage employee perceptions. The new law allows for employees to not only file a claim with BOLI but to also pursue a civil suit—much like a discrimination case. This can create significant risk for your company. To mitigate this risk, consider increasing transparency so that employees know who is performing substantially similar work to them and the factors that influence pay decisions for setting their pay. Since employees are likely aware of this law, it may also be prudent to communicate (at least at a high level) how your organization is ensuring compliance with the law. Additionally, this law only addresses equity within the walls of your company, so how you are paying employees in comparison to the market is irrelevant in terms of complying with the law.
How to maintain pay equity. To maintain pay equity moving forward, the following components should be in place:
- Leadership buy-in and clarity with regards to how the organization will approach, administer, and communicate pay decisions—this often comes in the form of a written compensation philosophy; a compensation structure where jobs are assigned to pay grades with associated salary ranges and jobs that are considered substantially similar are placed in the same grade;
- Clearly defined pay policies and processes to ensure decisions influencing aspects of pay (salary and wages, bonuses, employee benefits, fringe benefits, and equity-based compensation) are performed in a manner that is consistent and equitable; and,
- A rhythm for conducting a pay equity analysis at least once every three years to monitor compliance and leverage safe harbor provisions of the law.