The federal Paycheck Fairness Act, which seeks to expand the protections of the Equal Pay Act of 1963, has been introduced in Congress in every congressional session for the past 20 years. But while that federal pay-equity bill continues to stall along party lines, on June 1, 2017, Governor Kate Brown signed Oregon's bipartisan Pay Equity Act.
Most of the provisions of the Pay Equity Act take effect on January 1, 2019, but employers in Oregon should begin taking steps now to ensure that their compensation practices are in compliance.
What practices does the Pay Equity Act prohibit?
The Pay Equity Act prohibits employers (and prospective employers) from:
Paying employees differently for work of a comparable character on the basis of their race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability, or age—this includes payment of wages, salary, bonuses, benefits, fringe benefits, and equity-based compensation;
Screening job applicants based on their current or past compensation;
Seeking the salary history of an employee or applicant from the employee/applicant or the employee/applicant's current or former employer; and
Determining the compensation for a position based on the current or past compensation of a prospective employee.
Additionally, employers may not lower an employee's compensation to comply with the provisions of the Pay Equity Act.
What practices do not run afoul of the Pay Equity Act?
The Pay Equity Act does not prohibit employers from compensating two employees differently if all of the difference in compensation is based on a "bona fide factor" related to the employees' position. Bona fide factors identified by the statute are:
Seniority and merit systems;
Systems that measure earnings by quantity or quality of production (including piece-rate work);
Travel (if travel is necessary and regular for the employee);
The employees' respective education, training, and experience; and
Any combination of these factors.
The Pay Equity Act also does not prohibit an employer from considering a current employee's compensation during a transfer, move, or hire of the current employee to a new position with the same employer.
Finally, the Pay Equity Act does not prohibit an employer from requesting from a prospective employee written authorization to confirm the prospective employee's prior compensation, so long as the employer does so only after making an offer of employment to the prospective employee that includes an amount of compensation.
How will the Pay Equity Act be enforced?
An employee who believes he or she has been aggrieved by an employer's compensation practices may file a complaint with the Bureau of Labor and Industries ("BOLI"). The Pay Equity Act also provides employees with private rights of action under Oregon's unpaid-wage statute (ORS 652.230) and Oregon's antidiscrimination statutes (ORS Chapter 659A).
What are the penalties for violating the Pay Equity Act?
If an employee files a BOLI complaint and BOLI determines that the employer violated the Pay Equity Act, BOLI can order the employer to pay the employee backpay for the lesser of (1) the two-year period preceding the filing of the BOLI complaint plus the period of time between the complaint filing date and the date of BOLI's order, or (2) the period of time that the employee was receiving lower pay plus the period of time between the complaint filing date and the date of BOLI's order.
If the employee prevails in a lawsuit for violation of the Pay Equity Act, he or she may recover backpay, compensatory damages, costs, and attorney fees. Additionally, punitive damages may also be available if (1) the employee proves by clear and convincing evidence that the employer engaged in fraud or acted with malice or willful and wanton misconduct, or (2) the employer was previously adjudicated in a proceeding for violation of the Pay Equity Act.
How can employers avoid some of the penalties for violating the Pay Equity Act?
An employer may avoid having to pay compensatory and punitive damages for a violation of the Pay Equity Act if it can establish that:
It completed in good faith an equal-pay analysis—defined as "an evaluation process to assess and correct wage disparities among employees who perform work of a comparable character"—within three years of the date on which the employee filed his or her complaint;
The equal-pay analysis was both (1) reasonable in detail and scope in light of the employer's size and (2) related to the protected class asserted by the employee; and
It eliminated the wage differentials for the plaintiff and made "reasonable and substantial progress" toward eliminating wage differentials for the protected class asserted by the employee.
One question that employees and employers will likely dispute—and that courts will likely have to tackle soon after the Equal Pay Act becomes effective—is what "reasonable and substantial progress" means.
Is there anything else that public employers—including cities, counties, school districts, and special districts—should know about the Pay Equity Act?
The Pay Equity Act also extends the time that a claimant has to notify a public employer of a claim.
Under the Oregon Tort Claims Act—which applies to most lawsuits filed against public entities—an individual must normally provide notice of a claim within 180 days after the alleged loss or injury. The period in which to give notice begins to run when the individual discovers (or reasonably should have discovered) (1) the injury, (2) the cause of the injury, and (3) the identity of the tortfeasor.
But the Pay Equity Act significantly expands that notice period: a public employee's tort claim notice is timely if it is given within 300 days of discovery of the alleged loss or injury.
What should employers do now?
In the next year and a half before the Pay Equity Act becomes operative, employers should consider analyzing their compensation practices to ensure that they comply with the law and, if compensation discrepancies are identified, work to eliminate them. Doing so could help to eliminate potential employee claims under the Pay Equity Act, and if claims are brought, it could help employers avoid having to pay compensatory and punitive damages. Employers should also consider the best ways to work with an attorney when conducting the pay-equity analysis: although the attorney-client privilege would likely apply to communications relating to the analysis, an employer may want to raise the analysis as a defense to claims for compensatory and punitive damages.
Employers should also make their hiring personnel aware of the Pay Equity Act's prohibitions on inquiring about a job applicant's current salary before making an offer of employment.
Finally, employers should also consider updating their compensation and hiring policies to ensure compliance. If you would like assistance with this, or have other questions about the Pay Equity Act, please call a member of the firm's Employment Law & Labor Relations team.