Many businesses do not adequately document pay disparities.
In July Nike was in the news for raising the salaries of more than 7,000 employees to address concerns about wage disparities. The move came shortly before a lawsuit was brought against the sportswear company by four women who allege Nike violated equal pay laws and allowed sexual harassment in the workplace.
Although Nike faces its own unique troubles stemming from sexual harassment allegations, it will probably not be the only Oregon company implementing broad-scale salary increases in the coming months. An expanded law that prohibits businesses from paying different salaries based on race, sex, national origin, disability, and age, among others, for comparable work, is coming into effect January 1, 2019.
Employers who violate the Oregon Equal Pay Act could be held liable for unpaid wages, damages and attorney’s fees.
The legislation has broad repercussions for Oregon companies both large and small. It is unclear how many firms have unequal pay practices, but it likely that most do not have the enough documentation to back up any disparities that exist.
One of the biggest changes coming from the act is the way companies advertise jobs. Including in the job description that salaries are negotiable, a common recruitment practice, will be increasingly untenable because the act sets stricter guidelines on pay.
Employers are also prohibited from asking applicants to disclose salary history.
“It will force employers to be upfront about pay, rather than working it out later,” says Lindsay Reynolds, an associate with law firm Tonkon Torp.
This could be challenging in today’s tight labor market where businesses have to compete aggressively for attracting employees. If an employer needs to increase the salary for a new hire then employees doing comparable work will have to receive more salary to comply with the equal pay rule.
“It is the hardest part of the law,” says Kara Govro, laws manager at HR consultant Mammoth. “It will change the look of the hiring process.”
Reynolds recommends companies do an equal pay analysis every three years to make sure they are in compliance. This should include documentation that explains discrepancies in pay. It will also help companies that are subject to litigation make a case of why discrepancies exist.
“Documentation is the saving grace for employers under any circumstance,” says Govro.
The law makes exceptions for varying levels of compensation. These are based on “bona fide” factors, including a seniority system that compensates employees based on length of service, a merit system based on written performance evaluations, as well as exceptions for workplace locations, education and training.
The Oregon Bureau of Labor and Industries, which will enforce the law, recently released a document that seeks to clarify what constitutes a bona fide reason for paying employees differently. A final rule is expected the beginning of November.
Ultimately, the policing of the law is left to employees. Action will only be taken against an employer if an employee files a complaint.
But because the law is so expansive, applying to all groups in the workforce, companies may be caught off guard if they do not do due diligence.
“Once companies start to look into pay, they may be surprised there are disparities,” says Reynolds.
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