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OCTOBER 2018

 

In This Issue:

BOLI Issues Proposed Equal Pay Analysis Rules

By Ryan Orr, JD, HR and Compliance Consultant
Cascade Employers Association
[email protected]

On August 28, 2018, BOLI published a notice of proposed rulemaking for the new Oregon Equal Pay Act rules. These proposed rules (the Rules) help provide a great deal of clarity to some aspects of the Oregon Equal Pay Act (the Act). They also leave us completely in the dark about some other areas.

Below is a summary of the Rules and information about how to submit comments. I strongly suggest that you submit a comment if you have any feedback about the proposals.

Definition of Benefit/Fringe Benefit

A benefit is defined as either a “rate of contribution” that an employer irrevocably makes to a third party under a plan/fund/program or the “rate of costs” to an employer in providing benefits to an employee beyond what is required by federal, state, or local law.

Benefits can include things like medical or hospital care, pensions on retirement or death, compensation for injuries or illness resulting from occupational activity, insurance to cover any of the three aforementioned benefits, unemployment benefits, life insurance, disability insurance, sick leave pay, accident insurance, vacation or holiday pay, or defraying the costs of other bona fide fringe benefits.

Fringe benefits do not include reimbursement to workers for meals, lodging, or other travel expenses.

Definition of Bonus

A bonus is defined as an amount paid in addition to the employee’s regular rate of pay and includes things like signing, attendance, loyalty, performance, and productivity bonuses.

Definition of Equity-Based Compensation

Equity-based compensation includes non-cash payments that represent an ownership/membership interest or opportunity for investment in the employer’s business. It can include restricted stock awards, stock options, employee stock purchase plans, and stock appreciation rights. It does not, however, include one-time buyouts.

Definition of Salary

A salary is defined as a predetermined amount constituting all or part of the employee’s compensation paid for each pay period of one week or longer (but not to exceed one month). A monthly salary cannot be less than Oregon’s current minimum wage multiplied by 2080 and divided by 12.

Explanation of Prohibited Practices Related to Screening an Applicant Based on Past Compensation

The Act prohibits employers from inquiring about an applicant or employee’s current or past compensation or using it as a basis for determining current compensation or screening applicants. The Rules go on to explain that – regardless of how the information is obtained – an applicant’s past or current compensation may not be used to determine:

  • An applicant’s suitability for employment to group, sort, or select at any stage of the hiring process; or
  • A current employee’s eligibility for an internal transfer, move or hire to a new position with the same employer.

This second bullet point is one of the bombshells we found in the Rules, and while the wording is not completely clear, it appears to be saying that you must first determine whether a current employee is eligible for an internal promotion/transfer without any regard to current compensation. Current compensation can then be “considered” after eligibility is determined.

What BOLI means by “considered” is unclear. While at first blush, it looks like that would mean current compensation can be considered for setting new compensation in the position, that is probably not what was meant here. For the new job, the employee will still need to be paid equitably compared to individuals who perform work of a similar character, and disparities can be justified only by the factors outlined in the law. Compensation in an employee’s prior position is not a factor that can be used to justify a disparity.

The Rules also clarify that if an applicant or employee discloses their current or past compensation to an employer without the employer asking, the employer will not be liable for violating the Act.

Further Explanation of What Work of a Comparable Character Is

The Act directs employers to look at knowledge, skill, effort, responsibility, and working conditions to determine if work is comparable in character. The Rules expand on each of these with a non-exclusive list of examples of what may be considered and state that minor differences between jobs will not prevent them from being considered comparable.

Knowledge may include certifications, licenses, certificates, education, experience, or training.

Skill may include ability, agility, coordination, efficiency, or experience.

Effort may include amount of physical or mental exertion needed, amount of sustained activity, or complexity of job tasks performed.

Responsibility may include accountability, decision-making discretion, impact of an employee’s exercise of job functions on the employer’s business, amount/level/degree of significance of job tasks, autonomy or extent to which the employee works without supervision, extent to which the employee exercises supervisory functions, extent to which an employee’s work or actions expose an employer to risk or liability.

Working conditions may include work environment, split shifts, busyness during hours of work, duration of assignments, number of hours worked, overtime hours worked, part-time/full-time work, the time of day/week of work (i.e. shift differentials are allowed), physical surroundings, air quality, distractions, dust, exposure to weather, isolation, lighting, noise, physical design or layout of workspace, temperature, ventilation, wetness, degree or severity of potential injury, frequency of exposure to hazards, intensity of hazards, physical hazards, risk of injury, toxicity.

More Detail on the Factors that Can Justify Pay Disparities

The Act states that if there are pay disparities between employees performing work of a similar character, they may be justified by a seniority system, a merit system, a system that measures earnings by quality or quantity of production, workplace location, travel, education, training, experience, or a combination of these factors. The Rules provide greater detail about how each of these factors can be used.

Seniority System – Employees may be paid differently based on length of service.

Merit System – Employees may be paid differently based on job-related criteria. This may be measured by written performance evaluations or policies using a set numerical or established rating scale.

Quality or Quantity of Production System – This includes piece-rate work.

Travel – This does not include normal home-to-work commute.

Education – This includes substantive knowledge gained through relevant coursework, as well as completed certificate or degree programs.

Training – This includes on-the-job training or formal training programs.

Experience – This includes any relevant experience to the job.

BOLI also defines the use of the word “system” in the first three factors, which means “a devised coherent, consistent, verifiable and reasonable method that was in use at the time of alleged violation to identify, measure, and apply appropriate variables in an orderly, logical and effective manner.” I think it is safe to say that many of the ways that employers evaluate merit or quality of production may not currently meet this standard.

How Benefits Are Determined to Be Part of Compensation

An employer may provide different benefits to employees performing work of a similar character if the same benefit options are offered to all employees performing work of a comparable character. This covers situations where a company offers dependent health care, but some employees do not have dependents. Because the benefit offering is the same, the benefit amount would be considered the same for Oregon Equal Pay Act purposes, even though the employer has less out-of-pocket expense for the employee with no dependents.

The Rules go on to state that if a benefit is offered to an employee, but the employee declines it, the cost of the benefit that the employer would have incurred may also be considered in the employee’s total compensation.

Clarification about Reducing Pay in Response to the Act’s Requirements

The Act prohibits employers from decreasing an employee’s pay in response to the requirements of the Act, but the Rules clarify that an employer is not prohibited from freezing an employee’s pay while other employees’ compensation is brought into alignment.

An Unhelpful Rule about Conducting Pay Equity Analyses

The Rules provide almost no guidance about how an employer is supposed to conduct an equal pay analysis. For instance, there is no mention of how employees should be grouped for comparison purposes (presumably, it would be work of a comparable character, but it doesn’t say that), it doesn’t say how to conduct protected class comparisons (for instance, would we compare white compensation to minority compensation or would we compare the compensation of each racial group to each other), and it doesn’t state the types of statistical analysis to be used (e.g., two-standard deviation).

The one thing that we are told is that we can conduct surveys about protected class information, but we must give employees the means to complete the form without using their names. This is unhelpful. If we cannot link the responses to a particular person, we won’t know which protected classes fall into certain comparable salary groups. If the Rules are trying to tell us that we must create an anonymous process for individuals to respond, that seems workable. In such a scheme, one could imagine the individual conducting the survey would be able to match numerically coded responses to corresponding compensations without seeing the name of the individual or their protected class information or compensation levels. This would actually make a lot of sense. However, none of that is explained in the rule.

Poster/Notice Requirements

Finally, BOLI will be developing a poster (is anyone surprised?). If it isn’t practical to post a poster, employers will need to incorporate the information into a handbook, distribute a written notice personally or in a paycheck, or make the notice electronically available.

Comment

BOLI recently extended the deadline for comments on the proposed Rules until 5:00pm on October 12, 2018. If you have any feedback on the Rules (one area I would suggest commenting on is the lack of direction provided about conducting pay equity analysis), you can submit your comments by email to [email protected] or by mail to Christine E. Lewis c/o BOLI, 800 NE Oregon St. #1045, Portland OR 97232.

We will continue to monitor this situation and let you know when the final Rules are released and what they look like. If the timing is anything like the Oregon Sick Leave rules, employers will likely have little time to prepare. Smart employers are looking at their compensation practices now to see if adjustments need to be made.

If you’d like assistance with that, please give us a call and ask for one of our compensation experts.

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Five Things You May Not Know About Coleman Agriculture –
Featured Member

By Gayle Klampe, President
Cascade Employers Association
[email protected]

From hops to hazelnuts to seed crops and a variety of vegetables, for the Coleman family, farming has always been more than a livelihood – it’s a way of life. Did you know....

  1. Coleman Agriculture logoColeman Agriculture is a 6th generation family owned and operated farm with headquarters just south of the small community of St. Paul, Oregon. It all started in the spring of 1847 when James Coleman, his wife Frances and his infant daughter Anna left behind their friends, family and everything they knew in Iowa for the promise of a new life in Oregon. Finding their way via the Oregon Trail, the family was one of the first to settle in the St. Paul Mission, putting plow to earth and beginning their legacy.
  2. Six generations later, the Coleman family has grown and expanded across much of the Willamette Valley – some of the most fertile land on the planet. Over the past 170 years, the crops and farming methods have changed, but their innovative spirit and impassioned work ethic remain deeply ingrained in their family and business. They now manage over 8,000 acres of land.
  3. When it comes to hops, Coleman Agriculture is one of the most diverse hop growers in Oregon, producing over 2 million pounds, from 22 distinct varieties, every year. 95% of US-grown hazelnuts come from Oregon and Coleman accounts for a large chunk of that total production. Since first planting hazelnut trees in 1969, the family has harvested over 20 million pounds of nuts. Rounding out their primary plantings are seed crops and vegetables, varying the acreage and types of vegetables planted each year to increase the biodiversity and overall health of the soil.
  4. Believing that by combining hundreds of years of traditional farming know-how with modern sustainable methods, the Coleman family strives to utilize their land in a way that best serves everyone. That’s why they partner with conservation-minded folks like Salmon Safe, Oregon State University and the Natural Resources Conservation Service.
  5. So how does a multi-generation family stay intact? The obstacles to survival are not uncommon in multi-generational farms. According to partner Liz Coleman, the game-changer was the family’s investment in a new business structure. Through robust efforts in organizational development, the Colemans have formed an ownership board that works closely with the company’s president in overseeing the crop management of its 12 entities. Today the land remains owned by individual family members but decisions about farming fall on the ownership board, board of directors and its non-family president.

Cascade is proud to feature this member, producing the highest quality products in a responsible and sustainable manner, while remaining true to themselves and their heritage.

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Hot Compliance Question

By Jenna Reed, JD, General Counsel and Director, Compliance Services
Cascade Employers Association
[email protected]

Question: How often do I really need to update my employee handbook?

Answer:  Because there are so many changes to employment laws that impact your policies and practices, we recommend updating your handbook on an annual basis. If you have changes to single policies during the year, simply republish those policies at the time. In both situations, obtain new employee acknowledgement sheets to verify your employees have received the new policy or updated handbook. Because many new laws take effect at the beginning of the year, now is a great time to update your employee handbook.

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HR Stats You Should Know

By Jenna Reed, JD, General Counsel and Director, Compliance Services
Cascade Employers Association
[email protected]

3.8%. This is the current unemployment rate in Oregon. Although you probably had a pretty good idea about that because if it’s one thing we hear a lot about, it is how hard it is to find great people right now.

We are 9 years removed from record high unemployment rates, and yet some employers’ approach to attracting and hiring talent have not evolved with the current environment. The market is hypercompetitive and when it comes to recruitment, you might need to be too.

If you’re in need of some support in this area, just email us at [email protected] and let’s chat.

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Consumer Financial Protection Bureau (CFPB) Issues Revised Notice

By Ryan Orr, JD, HR and Compliance Consultant
Cascade Employers Association
[email protected]

On September 12, 2018, the CFPB issued a revised summary of rights notice that must be given when obtaining a consumer report on an individual. The new notice contains information about how to place a security freeze on your credit, which was added in response to legislation addressing the 2017 Equifax breach. Employers are required to use this notice beginning September 21, 2018 (yeah, that’s right, CFPB didn’t give us a lot of time on this one).

As an employer, why do I care about this? Well, the definition of consumer report is broad and includes things like criminal background checks or other pre-employment inquiries if obtained by a third-party who compiles reports on individuals. So when an employer uses a third-party to conduct a background check, the employer is obligated to provide the candidate with a notice of the individual’s rights under the Fair Credit Reporting Act (FCRA).

While some background companies take care of the notices on behalf of their employer clients, it is the employer’s obligation to make sure that the notice is provided. Therefore, it is incumbent on an employer to either confirm that the background checking company is taking care of the notices, or the employer must provide the notice itself.

One last reminder: in addition to the summary of rights notice, employers should be getting an authorization to perform a background check that meets the requirements of FCRA, as well as providing an adverse action letter to candidates who are not hired based on information found in the background check.

If you have questions about background checks or your legal obligations when performing them, give us a call.

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