UPDATE (6/26/23): The article below analyzes House Bill 3205, which was going to amend Oregon’s Equal Pay Act (“Act”). The bill did not pass by June 25, 2023, and will not go into effect. Therefore, hiring and retention bonuses remain subject to the Act. As such, hiring and retention bonuses are part of employees’ compensation which must be equal for all employees who perform work of comparable character unless a pay difference is justified by one of the Act’s bona fide factors. If you have any questions about bonuses or the Equal Pay Act, please contact employment counsel.

Oregon’s Equal Pay Act

Under Oregon’s Equal Pay Act (the “Act”), employers may not pay employees differently if they perform work of comparable character unless the pay difference is based on a listed “bona fide” factor, such as seniority, education, or experience.

Currently, the Act’s definition of compensation is broad. It includes: wages, salary, bonuses, benefits, fringe benefits, and equity-based compensation. That means that each of those types of pay – including bonuses – must be paid equally for work of comparable character (unless a bona fide factor justifies a difference).

Recently, employers have expressed concern that the Act’s broad definition of compensation has effectively prohibited hiring and retention bonuses, further exacerbating labor shortages.

House Bill 3205

In response, several state legislators introduced House Bill 3205 which aims to alleviate employer concerns by removing hiring and retention bonuses from the Act’s definition of compensation.

If passed, employers could provide hiring and retention bonuses as they please without needing to justify the bonus with one of the Act’s bona fide factors. If the bill does not pass, then employers must continue providing bonuses – of any type – on an equal basis unless the difference is justified by a bona fide factor.

House Bill 3205 must pass by June 25, 2023 or it will die in the legislature.

What Employers Can Do

Oregon’s Pay Equity Act mentions several “systems” that employers can use to justify pay differences, including a seniority system, a merit system, or a system that measures earnings by quantity or quality of production. If an employer relies on one of these systems to explain a pay difference, the system must be consistent and verifiable at the time of any alleged violation.

If an employer offers different bonuses to employees, it must be able to justify the difference either by showing that: (1) the employees do not perform work of comparable character or (2) the difference is justified by one of the Act’s bona fide factors, such as merit, seniority, or quantity or quality of production.

If an employer fails to justify pay differences, it can be costly. Employees can sue under the Act and, if they win, they are entitled to unpaid damages, liquidated damages equal to their unpaid wages, attorney fees, and other relief. Employees can sue on their own behalf or on behalf of other, similarly situated employees. Last, a violation of the Act is a Class A misdemeanor.

If you have any questions about the Equal Pay Act or about non-monetary ways to attract and retain talented employees, please contact employment counsel.