This month, Oregon joined a number of other states, including California, Massachusetts, Maryland, and New York by strengthening existing equal pay laws. The new law, the Oregon Equal Pay Act of 2017 (“OEPA”), has three (3) central components:

• Applying equal pay protections to disparities based on race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age;
• Curbing an employer’s ability to obtain or rely upon an applicant’s prior compensation to determine his or her current compensation; and
• Changing and substantially limiting the defenses available to employers sued for alleged equal pay violations.

The bulk of the OEPA’s substantive provisions is effective January 1, 2019. 

Broadening Scope of Equal Pay Protections

The OEPA prohibits disparities in “wages or other compensation” between employees performing work of a “comparable character” based on race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age. Work is of a “comparable character” if it requires “substantially similar knowledge, skill, effort, responsibility and working conditions [.]” This is a substantial expansion of prior law, which only applied to sex-based pay disparities. 

The OEPA also limits an employer’s ability to rely upon prior compensation by:

• Making it unlawful to seek information about an applicant’s or employee’s compensation history; and
• Prohibiting employers from screening job applicants or determining compensation based on a prospective employee’s current or past compensation. 

However, these pay history restrictions do not apply “during a transfer, move or hire of [an] employee to a new position with the same employer.”

Limited Defenses to Equal Pay Claims

Under prior Oregon law, an employer could defend a sex-based pay disparity by demonstrating that it was based on (a) a seniority or merit system, or (b) good faith factors other than sex.

However, under the OEPA an employer can only pay differential wages for work of a comparable character if the disparity is attributable to “a bona fide factor that is related to the position in question and is based on” one or more of the following:

• A seniority system;
• A merit system;
• A system that measures earnings by quantity or quality of production;
• Workplace locations;
• Travel, if travel is necessary and regular for the employee;
• Education;
• Training; or
• Experience. 

The employer must also demonstrate that the factor(s) creating the pay disparity account for the entirety of the differential. 

Potential Limits on Remedies

In addition to back wages, employees bringing claims under the OEPA may also seek compensatory and punitive damages. However, the law limits remedies against employers that take specified steps to achieve pay equality. 

Under the OEPA, a court “shall” disallow an award of compensatory or punitive damages if the employer shows that within three (3) years of the employee bringing the OEPA claim, the employer conducted a good faith equal pay analysis that: (a) was “[r]easonable in detail and scope in light of the size of the employer”; (b) related to the protected class at issue in the action (e.g., sex, age, race, etc.); and (c) “[e]liminated the wage differentials for the plaintiff and [] made reasonable and substantial progress toward eliminating wage differentials for the protected class asserted by the plaintiff.” 

What This Means for Employers

Because the bulk of the OEPA changes are not yet effective, now is the time for employers to commence their compliance efforts including:

• Reviewing job applications to ensure they do not seek prior compensation information;
• Auditing compensation data to identify protected class-based disparities, if any. If this analysis reveals disparities, employers can avoid or limit future claims and damages by eliminating any identified differentials; 
• Training managers and human resources professionals regarding the permissible considerations when making compensation decisions, and how to document such decisions;
• Revising employee job descriptions to ensure they reflect the substantive distinctions between positions – i.e., the fact that jobs are not of a “comparable character” is reflected in job descriptions; and
• Revising employee reviews on which compensation decisions are based to ensure they reflect the considerations that are permissible grounds for a pay disparity under OEPA.