About Oregon’s Wage Claim Law
State wage claim statutes define precisely how and when employers must pay departing employees, what deductions may be taken from paychecks, and the penalties for failing to comply with all the statutory requirements. The penalties can be harsh, often bearing little relation to the actual violation. In Oregon, courts have fined employers thousands of dollars for petty claims of unpaid wages totaling less than $100.
Employers must establish and maintain regular paydays, which cannot be more than 35 days apart. Employers are also required to pay their employees by cash, check or other negotiable instrument. In other words, IOUs or other instruments with ambiguous terms are unacceptable. Violations of these provisions may result in a $500 fine.
Oregon law also prohibits an employer from taking deductions from an employee’s last paycheck except under very specific circumstances. Only where a particular law requires a deduction (for example, Social Security or income tax laws) or where an employee has authorized a deduction in writing that is made for the employee’s benefit, perhaps for payment of a health insurance premium, can a deduction be taken. Employers are not allowed to deduct for expenses incurred because of mistakes committed by the employee, for missing supplies or even for overpayments made directly to the employee.
Departing employees must also be compensated within certain statutory time frames. When an employer terminates an employee, all wages earned and unpaid at the time of discharge must be paid no later than the end of the next business day. When an at-will employee quits, all wages earned are payable immediately if the employee has given at least 48 hours’ notice. If the employee did not provide notice, wages must be paid within five days (excluding weekends and holidays) or the next regularly scheduled payday, whichever comes first.
The penalty provisions of the Oregon statute place an onerous burden on employers. For instance, if the employer makes an erroneous deduction from the final paycheck, the employee may collect actual damages or $200, whichever is greater, plus attorney’s fees. So even if the deduction was a nickel, it will cost the employer at least $200 plus possible attorney’s fees. In one recent case, an employer unlawfully deducted $68 from an employee’s final check, but also overpaid her by $142. The employee was ahead at this point, but filed suit to collect the penalty for the unlawful deduction. Despite the overpayment, a court held the employer liable for the full $200 penalty plus fees.
The penalty for failing to properly pay wages upon termination is also severe. Oregon law provides that if an employee is not paid on time after ceasing employment, the employee’s wages continue to accrue every day until the wages are paid, for up to 30 days. In addition, attorney’s fees may also be awarded and the Bureau of Labor and Industries may assess an additional $1,000 fine. This law has led to an obvious plaintiffs attorney strategy: waiting to file claims until at least the 30th day to drive up the penalty.
There are many instances where wage claim laws have been harshly applied to employers. For example, in one recent case, an employee agreed with his employer, Home Depot, to a wage reduction as part of a transfer. Home Deport accidentally failed to reduce his paycheck and ended up paying him more than $4,700 extra over the course of a few months. The parties agreed to let Home Depot deduct $588 from each of his next eight paychecks. After a falling-out and termination, however, the employee sued for the full amount. Not only did he show that the deduction was invalid under Oregon law, but he created a basis on which to recover another 30 days of wages as a penalty. Home Depot’s potential liability included a $588 unlawful deduction, 30 days of wages totaling over $5,000 and attorney’s fees — all because it erroneously overpaid an employee.
In another case, an employer retained a recently terminated employee’s final paycheck in her personnel file for the employee to come pick up. The company failed to tell her that the check was waiting for her. The court, holding the employer liable for a willful failure to pay on time because the employee had not been notified, imposed penalty wages for every day the check was waiting for her, plus attorney’s fees.
The Oregon wage claim statute was amended last year to reduce the likelihood of some of these troublesome results, but employers must still be vigilant. Below are steps employers should take to reduce the likelihood of getting hit with these penalties:
- Do not make deductions unless they are required by federal law or authorized by state statute. Even when an employee authorizes the deduction, such an agreement may not be enforceable unless it meets specific statutory requirements.
- Keep accurate books. This will aid in reporting compliance and limit the likelihood of overpayments. Overpayments may not be deducted from future checks. They must be recouped in some other manner.
- Keep current records of employees’ addresses. Notify them when their final checks are available, or mail them to a known address when personal contact is not possible.
- Pay departing employees promptly. Know how much time is available to pay employees and be sure that they are paid in full by that date. Failing to pay every penny owed may be grounds for imposing penalty wages. Although the statute has been amended to limit this possibility, it still exists, especially with larger employers that see many of these claims each year.
Wage claim lawsuits can generally be avoided by accurate bookkeeping and knowledge of the law’s obligations. Ensuring that those in charge of payroll know and follow the letter of the law, periodic review by corporate counsel of payroll policies, keeping abreast of changing employment law, redrafting relevant handbook provisions, and training management in this area are all cost-effective means of reducing exposure to wage claim litigation. Because the penalties can be so harsh in this arena, it is especially important to follow the old maxim — an ounce of prevention is worth a pound of cure.