“Equal pay for equal work.”  Everyone – employees and employers alike – can agree that no workers should be paid less than others simply because of their gender, race, veteran status, or any other protected characteristic.  But the reality of the pay gap is more complicated.  Employers make salary decisions based on a number of business factors, like experience, education, and merit, as well as prior salary history.  The Oregon Equal Pay Act (the “Act”), which was unanimously approved by the legislature and is expected to be signed into law by Governor Kate Brown this week, will prohibit employers from asking job applicants about past salary history.

What is the Act intended to do?

According to the Oregon Commission for Women, women are paid 81 cents for every dollar a man makes, and minority women are paid even less, with Latina women making 51 cents for every dollar paid to a white male.  In passing the Act, the legislature may have recognized that systemic wage inequality is perpetuated when employees are paid based on what they made before.

What does the Act actually do?

Generally, the Act makes it unlawful for an employer to pay employees performing work of comparable character differently on the basis of race, color, religion, sex, sexual orientation (including gender identity), national origin, marital status, veteran status, disability, or age.  Specifically, the Act prohibits employers from:

1. Screening job applicants based on current or past compensation;
2. Determining compensation for a position based on current or past compensation of a prospective employee (this does not include current employees transferring or moving into a new position); and
3. Asking job applicants about their salary history or seeking it from other employers.

However, the Act allows employers to pay employees performing work of comparable character differently if the difference is based on a bona fide factor related to the position and is based on:

1. Seniority;
2. Merit;
3. A system measuring earnings by quantity or quality or production, including piece-rate work;
4. Workplace locations;
5. Travel;
6. Education;
7. Training;
8. Experience; or
9. Any combination of the above.

Deadlines and consequences

The prohibition on salary inquiries goes into effect 91 days after the legislature adjourns, though related civil actions are not authorized before January 1, 2024.  The screening and wage discrimination provisions become effective January 1, 2019.  (And remember, federal and state law already prohibits wage discrimination on the basis of gender.)

Eventually, employers violating the Act can be liable for unpaid wages; liquidated, compensatory, and punitive damages; and attorneys’ fees and costs.  However, an employer can avoid paying compensatory and punitive damages if the employer completed an equal-pay analysis within three years of the civil action.

What does the Act mean for employers?

The most immediate change for employers will be revising job applications and interview questions to avoid asking about salary history.  Employers have 91 days after the legislature adjourns to do so.

But the biggest risk to employers will be the burden of justifying any pay differential between male and female or non-minority and minority employees.  Here are a few suggestions to help do that:

• Document the factors that support salary decisions for all employees. For instance, John is paid more than Mary, even though they perform work of comparable character, because he has a relevant master’s degree and 10 years of relevant work experience, whereas Mary just graduated from college and this is her first job.

• Create a salary range for each position based on the position’s value to the company, independent of any qualifications of the employee filling the position. Then the most qualified candidates can secure the upper end of that range while less qualified applicants can enter the position at the lower end of the range.

• If, after establishing a salary range for a position, you wish to get input from an applicant on salary, ask about their salary expectations, not history. Asking about expectations is permissible.  You also may request written permission from a prospective employee to confirm their previous salary with prior employers, but only after you have made a job offer that contains the compensation amount.

• Finally, regularly conduct an equal-pay analysis to ensure your pay practices are based on the business-related factors listed above. Ask your employment counsel to participate in this analysis to maintain privilege.