Legislature eye exclusion of hiring / retention bonuses from Equal Pay Act

The Oregon Equal Pay Act prohibits employers from discriminating between employees in the payment of wages or other compensation for work of a comparable character unless the wage differential is based on certain bona fide factors such as seniority, education, training, experience, or other various factors listed in ORS § 652.220. Under the current definition of “compensation,” hiring and retention bonuses must be factored into any pay equity comparison. During the COVID crisis, Oregon briefly amended the Act to exclude hiring and retention bonuses, but that exclusion expired on September 28, 2022

While pay equity laws serve an important socio-economic function, the inclusion of hiring bonuses in a total compensation comparison means that employers, desperate to fill open positions during the ongoing labor shortage, that offer a hiring bonus to a new employee must provide similar bonuses to all employees performing similar labor. This can make offering a hiring bonus prohibitively expensive. Oregon employers who have eliminated hiring bonuses from their compensation arsenal, from the hospitality industry, to healthcare workers, to public safety officers, have found themselves at a great disadvantage trying to compete for national talent.

Finally acknowledging this unintended consequence of the Act, the Legislature has proposed HB 3205 to permanently exclude hiring and retention bonuses from the definition of compensation. The House Committee on Business and Labor held a hearing on the bill on March 13, receiving wholehearted support from many public and private employers and professional organizations who point out that Oregon is the only state in the country to include bonuses in its equal pay calculations. However, some unions and community organizations worry that permanently excluding bonuses from compensation comparisons creates an opportunity for both unconscious bias and overt acts of wage discrimination.

Whatever the outcome, Oregon employers should remain vigilant for important updates on this legislation. In the meantime, for more information about an employer’s responsibilities under the Oregon Equal Pay Act, pay equity audits, and other employment law matters, please contact the employment law experts at Bullard Law.
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