The Oregon Legislature in 2017 was, as usual, busy regulating employers. Two new laws are particularly significant to the construction industry: a pay equity law (HB 2005) and an overtime law (HB 3458).
The new pay equity law fails to provide workers with significant additional protections, but does provide employers with new tools to avoid pay discrimination claims. The overtime law, however, if broadly applied by the Bureau of Labor and Industries (BOLI), could have devastating effects on construction industry employers.
House Bill 2005
The pay equity law is duplicative of other Oregon and federal laws that already prohibit employers from paying employees less because they belong to a protected class, such as a certain race, gender, national origin, sexual orientation, veteran’s status, age, disability, etc. Under these existing laws, pay discrimination cases could be difficult to defend.
For example, an employee sues her employer, alleging she is paid less because she is a woman. The employer responds that she is not paid less because of her gender, but rather because pay is based on production and she does not install roofing as quickly as the other workers (who all happen to be men). The employee responds that the employer’s productivity standard is veiled discrimination because the average woman could never install roofing as quickly as the average man, and therefore, women will predominantly be paid less than men.
The new pay equity law could eviscerate the employee’s argument that payment based on productivity is discriminatory because the law lists productivity as a statutorily permissible basis upon which to pay employees differently. HB 2005 lists other nondiscriminatory bases upon which an employer is permitted to pay different wages to classes of employees for the same or similar work, including: a seniority or merit system, a system that measures earnings by quantity or quality of production (including piece-rate work), workplace locations, travel, education, training, experience, or any combination of these factors.
Because the Oregon Legislature has declared these pay systems to be nondiscriminatory, employees may have a more difficult time arguing that these systems are discriminatory. This list of permissible reasons to pay workers differently applies only to claims made under the new pay equity statute. However, it could be persuasive for employers who are sued under other discrimination statutes as well.
The new law also gives employers a partial affirmative defense. If an employer performs an equal pay analysis of their practices and eliminates any discriminatory differentials, the plaintiff may not collect compensatory or punitive damages and the employee may have to pay the employer’s attorneys’ fees.
The law contains a statutory framework for this self-analysis. Therefore, employers should seek legal advice on the best way to structure such an analysis. Once it is established, if an employer conducts the self-analysis every three years and makes required adjustments, it will have a strong defense if sued.
There are two additional requirements of HB 2005 to be aware of: (1) employers cannot reduce any employee’s pay to comply with the law, and (2) employers cannot ask for wage history on employment applications.
House Bill 3458
The biggest negative impact of the new overtime law is that it limits a manufacturing worker’s total weekly work hours to 55. Why does a construction employer care about manufacturing? Because the definition of “manufacturing establishment” is so broad, it could apply to certain construction industry employers and restrict their workers to a 55-hour workweek.
Under HB 3458, a “manufacturing establishment” is a company that uses power-driven equipment to transform materials, substances or components into new products. A paving company uses power-driven equipment to turn raw materials into roads. A roofing company uses power guns to transform roof tiles (components) into a new roof. The list goes on with flooring, siding, HVAC, etc.
The need for HB 3458 arose after BOLI imposed a new interpretation of a long-established law and began requiring manufacturing establishments to pay both daily and weekly overtime, forcing employers to pay time and a half twice for hours worked over 10 in one day and 40 in the workweek. HB 3458 was a compromise fix.
HB 3458 fixed BOLI’s erroneous interpretation by requiring manufacturing employers who owe daily and weekly overtime to calculate the two amounts and pay the greater of the two —but not both. The compromise is that HB 3458 also caps workers’ number of weekly work hours to 55, with five more hours allowed if the employee agrees or requests to work them.
This could have a devastating impact on the Oregon construction industry, which has limited productive months throughout the year and is suffering from a shortage of workers. It’s too early to tell where this may lead, but given that BOLI was willing to reinterpret a long-standing overtime rule applicable to the manufacturing industry, it certainly could apply this new “fix” to a broad swath of employers.
These are but two of the many new employment laws passed by the Legislature in this session. To find out more, call your human resources professional or employment attorney.
Column first appeared in the Daily Journal of Commerce on July 25, 2017.
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