Equal Pay Audits: The Potential Costs of Avoidance

“We pay fairly, we have a scalable and defensible system to set and adjust pay rates, and we’ve never had anyone complain about being paid unfairly before.”

These are sentiments each employer hopes to express to its employees but this situation doesn’t just happen without intention and planning. As Oregon’s Equal Pay Act is coming up on its eighth birthday this year, some employers may be preparing for their third Equal Pay Audit and some employers may just be getting around to their first. Regardless of how many times your organization has conducted an equal pay audit, there are compelling reasons to start or continue this practice.

Oregon’s Equal Pay Act

The Oregon Equal Pay Act (OEPA) was enshrined into state law in 2017 and affects all employers with any number of employees performing work in the state of Oregon. The law’s core principle is equal pay for equal work of a comparable character.

To quote directly from the Bureau of Labor & Industries (BOLI)[i]:

• Employers must compensate employees the same as other employees doing comparable work (including wages, bonuses, benefits, and more).*
• It’s illegal to pay an employee less than another employee because of race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age.
• Employers may not cut an employee’s pay to make it equal with other employees’ pay.

*Any difference in pay must be based entirely on one or more of the following factors: a seniority system; a merit system; a system that measures earnings by quantity or quality of production, including piece-rate work; workplace location; regular and necessary travel; education; training; and/or experience. There must be a consistent and verifiable system for this pay structure. Temporary variance for modified work resulting from a workplace injury is also a potential exemption.

Penalties for Noncompliance – How Much Could it Cost?

Workers can file complaints and receive the back pay or wage differentials they were owed by their employer should an inequity be determined under the Act.

Here is an example scenario of two employees who are Laboratory Technicians and work for the same company, with a notable difference.

• Employee A is a 38-year-old woman who was hired as a Medical Laboratory Technician in June 2023. She earned her Bachelor’s degree and had 2 years of relevant work experience before joining the company. Starting pay of $24/hour was offered upon hire and her duties include running routine lab tests, specimen processing, equipment maintenance, etc.
• Employee B is a 28-year-old man who was hired as a Medical Laboratory Technician in January 2024. He also earned his Bachelor’s degree and brought 2 years of relevant experience to his current position. Starting pay of $27/hour was offered upon hire and his duties are the exact same as Employee A.

In June 2025 at a company summer picnic, Employee A learns that Employee B, with the same qualifications and job duties, is earning $3/hour more. Employee A submits a wage claim under Oregon’s Equal Pay Act.

If Employee A is paid less than Employee B for comparable work, and the only differences appear to be sex and age (i.e., protected classes), then there is no statutorily recognized reason (e.g., experience, education, merit, seniority, etc.) for the pay difference.

To rectify this claim, the company may owe back pay for the unjustified pay differential. Under OEPA, back pay is awarded for the lesser of:

• The two-year period immediately preceding the complaint, or
• The period the employee was subject to the unlawful wage differential.

Assume Employee A files a complaint in June 2025. The pay disparity began in January 2024 when Employee B was hired at the higher rate, so the period of disparity is 18 months.

There are three specific remediation actions required of the employer in this scenario, all of which must be completed:

1. Correct Pay Rate: Raise Employee A’s pay to at least $27/hour (cannot lower Employee B’s pay).
2. Pay Back Pay: Issue a lump sum payment of $9,360 to Employee A for the period of underpayment.
3. Document Correction: Keep records of the correction and ensure ongoing compliance through regular pay equity reviews. Conduct an equal pay analysis at least every three years or preferably on an annual basis.

The employer’s direct monetary cost to resolve this issue includes a one-time $9,360 payment to Employee A, an additional $6,240 in annual salary cost for Employee A, higher payroll taxes, and increased benefit expenses tied to the employee’s pay, such as life insurance and disability coverage. Proactively conducting pay equity audits and correcting disparities before they become claims is almost always less expensive than responding to complaints after the fact. It also helps preserve employee trust, avoids reputational damage, and reduces legal risk.

It’s important to note that Oregon does not target businesses for random pay equity audits; however, every employee is a potential claimant. All it takes is one employee to make a claim for an organization to have a potentially very expensive problem to solve, whether it was intentionally created or an honest mistake.

Set it Fair First – Monitor All Job Offers for Internal Equity

Many internal pay inequities stem from an inconsistent or inequitable starting wage. Perhaps some candidates negotiate and some do not, or there aren’t tight enough guidelines around what is available to be offered to brand-new hires joining the organization relative to what current incumbents are earning/internal tenures. This leads to inconsistencies that are not based on protected characteristics but still create risk.

Ensuring fair and consistent starting wages is the most effective and simplest way to set and maintain internal equity throughout an employee’s tenure.

Hope is Not a Strategy

Hoping that no one will file a claim is not an effective mitigation strategy. An annual pay equity audit is the best practice for both assessing current compliance with Oregon’s Equal Pay Act, demonstrating good faith efforts to prevent and resolve any internal discrepancies, and to avoid having large pay disparities to rectify through effective internal monitoring. Setting aside a small amount of dollars for any pay adjustments which may need to be made after the results are determined can help with shoring up issues of inequities prior to a performance appraisal process or applying annual compensation increases. Keep in mind that simply increasing all employees will maintain any inequities that existed prior to an across-the-board adjustment.

Employer-focused resources which can help on the journey of pay equity can be found in our HR Library under the Members Only Area:

• Equal Pay Act Guide
• Equal Pay Policy (Oregon & Washington available)
• Oregon’s Equal Pay Law Factsheet
• Educating Employees About Pay
• Wage Discussions Policy

If you’d like to include our Compensation team as part of your effective pay equity management strategy, we’d be delighted to support you!

[i] BOLI: Equal Pay: For Workers: State of Oregon (June 2025). Bureau of Labor and Industries. https://www.oregon.gov/boli/workers/pages/equal-pay.aspx