Back in 2017, the Oregon legislature passed equal pay legislation prohibiting employers from asking applicants about compensation history. The law is known as the Equal Pay Act. This law, like other employment laws, applies to cannabis businesses. The equal pay provision of the law goes into effect on January 1, 2019. Oregon Bureau of Labor and Industries (BOLI) was tasked with drafting rules implementing the Equal Pay Act and recently released draft rules.
In this article:
- Compensation Under the Equal Pay Act
- Work of a Comparable Character Under the Equal Pay Act
- Systems Employers can Implement to Pay Employees
Compensation Under the Equal Pay Act
The Equal Pay Act prohibits employers from paying disparate compensation for work of a comparable character. The Equal Pay Act defines compensation as “wages, salary, bonuses, benefits, fringe benefits, and equity-based compensation.” What this means is each of these taken in total is an employee’s compensation. The proposed BOLI rules provide clarification to each of the words that make up “compensation.”
BOLI defines benefits as:
“the rate of contribution that an employee makes irrevocably to a trustee or to a third person under a plan, fund or program; or the rate of costs to the employer in providing benefits to an employee beyond what is required by federal, state or local law pursuant to an enforceable commitment to carry out a financially responsible plan or program which is committed to the employee affected including but not limited to the following: medical or hospital care; pensions on retirement or death; compensation for injuries or illness resulting from occupational activity; insurance to provide any of [the above]; unemployment benefits; life insurance; disability insurance; sick leave pay; accident insurance; vacation or holiday pay; or defraying costs of other bona fide fringe benefits.”
But what does this long-winded definition actually mean? As an example, if you have two extraction technicians that perform substantially the same work, you need to provide them the same benefits, otherwise, you will be in violation of the equal pay laws. If you provide one health insurance, you need to provide the other the same level of health insurance. Etc.
Bonus similarly has been given a long definition. Bonus is defined as:
“an amount that is paid or something of monetary or quantifiable value that is given to an employee by an employer in addition to the employee’s regular rate of pay, typically as a means of encouragement or in recognition of superior performance. Bonuses include but are not limited to the following: signing or job acceptance bonuses; attendance bonuses; loyalty bonuses; performance bonuses; and productivity bonuses.”
Again, if you provide a performance bonus to one extraction technician, you must provide a bonus on the same terms to any other extraction technician. A future post will discuss in detail exactly what the “same terms” means.
Finally, “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. And “wages” means all compensation for the performance of service by an employee for an employer. Your extraction technicians need to be receiving the same salary or wages otherwise, you’ll be in violation of the rules.
All of the above definitions need to be considered in total when setting compensation for your employees. Remember–work of a comparable character must be paid the same. And yes, a future post will explore what “comparable character” means.
The Equal Pay portion of the Equal Pay Act officially goes into effect on January 1, 2019. Now is the time to get familiar with the law and its implementing rules, and to ensure you are paying your cannabis employees in accordance with the requirements. If you are unsure, consult an attorney to review your pay practices. Non-compliance will come with hefty fines.
Work of a Comparable Character Under the Equal Pay Act
The Oregon Equal Pay Act prohibits employers from paying wages or other compensation to “any employee at a rate greater than that at which the employer pays wages or other compensation to employees of a protected class for work of a comparable character.” To put it simply, cannabis businesses need to pay employees doing the same work the same pay. But what is “work of a comparable character?”
The work of a comparable character is not determined simply by job title alone. Two cannabis workers who have the same job title but perform different tasks are not necessarily performing “work of a comparable character.” Similarly, two cannabis workers that perform essentially the same tasks but have different job titles may be performing work of a comparable character.
According to the BOLI draft rules, to determine if different jobs constitute “work of a comparable character” the employer must consider whether the jobs require “substantially similar knowledge, skill, effort, responsibility, and working conditions.” No one factor is determinative. Meaning, an employer should balance the factors against each other to determine if employees are performing the same work and therefore should receive equal pay. The proposed BOLI rules further define each factor.
- Knowledge. When considering whether two jobs require similar “knowledge,” the employer should consider whether the jobs require similar education, experience, or training.
- Skill. Things to consider to determine if two jobs require the same “skill” include the ability, agility, coordination, efficiency or experience required to perform the job.
- Effort. Considerations to determine the “effort” of a job include the “amount of physical or mental exertion needed; the amount of sustained activity; or complexity of job tasks performed.”
- Responsibility. To determine if the responsibilities of two positions are “similar,” an employer should consider the “accountability, decision-making discretion, or impact of an employee’s exercise of their job functions on the employer’s business; amount, level, or degree of significance of job tasks; autonomy or extent to which the employee works without supervision; extent to which the employee exercises supervisory functions; or the extent to which an employee’s work or actions expose an employer to risk or liability.
- Working conditions. Finally, to determine if employees are working in similar “working conditions” an employer should consider the “work environment; hours; time of day worked; physical surroundings; and potential hazards.”
Determining how to pay your employees is not an easy task. The Equal Pay Act, while it has good intentions, may make that task even more difficult. Regardless, now is the time to analyze how you are paying your cannabis employees. Now is the time to look at the jobs that are being performed, identify work of a comparable character, and adjust wages accordingly. If you’re unsure whether two workers should be receiving equal pay, you should contact an employment attorney.
The Equal Pay Act pay provisions are effective on January 1, 2019. Again, now is the time to ensure compliance before BOLI starts handing out penalties next year.
Systems Employers can Implement to Pay Employees
The Oregon Equal Pay Act prohibits employers from paying employees performing work of a comparable character different compensation unless the entire compensation differential is based on a bona fide factor related to the position in question. The statute and rules only allow employers to consider certain “bona fide factors.” Employers may pay employees differential wages for work of a comparable character if it’s based on: 1) a seniority system; a merit system; a system that measures earnings by quantity or quality of production; 3) workplace location; 4) travel requirements; 5) education; 6) training; and 7) experience. Let’s unpack these a little bit.
A seniority system is defined as a system that recognizes and compensates employees based on the length of service with the employer. A seniority system should be applied consistently. Meaning, If Budtender A is hired at $14 per hour and is raised to $16 per hour after two years of employment, Budtender B should receive the same raise after two years of employment.
A merit system provides for variations in pay based on employee performance as measured through job-related criteria. BOLI has provided an example of “a written performance evaluation plan or policy that measures employee performance using a set numerical or other established rating scale.” An employer should use such performance evaluation to determine employee pay rates.
A system that measures earnings by quantity or quality of production includes piece rate work. So for example, you could pay joint rollers a certain amount for each joint rolled. An employee who rolls more joints would be paid more.
Workplace location can be a consideration for differential wages. When determining if workplace location should factor into employees’ wages, the employer should consider the cost of living; desirability of worksite location; access to worksite location; minimum wage zone; or wage and hour zones.
Employers can also consider necessary and regular travel. This does not include consideration of normal travel between home and work.
When considering education, training, and experience, employers should consider substantive knowledge acquired through coursework, experience in the job field or training attended.
The rules require employers show a “devised coherent, consistent, verifiable and reasonable method.” This means more than an ad hoc decision to pay one budtender more than another. Instead, employers should have written policies describing how it pays its employees. This will require work—but in the long run could save you from BOLI penalties or a civil lawsuit from an employee (which is happening more and more in the industry as of late).
If you need assistance drafting compensation plans consult an attorney or a certified human resources specialist.