By Joanna Perini-Abbott

With the Oregon Legislature’s passage of a minimum wage increase and the governor’s expected signature, employers need to be ready for a three-tiered minimum wage system.

Under the terms of Senate Bill 1532, an employer’s location will affect the wages it must pay employees. Employers in the Portland metropolitan area urban growth boundary face the greatest increases, stepping up to $14.75 by 2022. The law holds the annual cost-of-living increases in abeyance until 2023 and instead puts in place the following Portland metro area scale:

• July 1, 2016, to June 30, 2017—$9.75 (a 50-cent jump from the rate set on January 1, 2015);
• July 1, 2017, to June 30, 2018—$11.25 (a $1.50 jump, which is the biggest employers will see under the law);
• July 1, 2018, to June 30, 2019—$12;
• July 1, 2019, to June 30, 2020—$12.50;
• July 1, 2020, to June 30, 2021—$13.25;
• July 1, 2021, to June 30, 2022—$14; and
• July 1, 2022, to June 30, 2023—$14.75.

The Portland urban growth boundary, which incorporates all of Multnomah County and portions of Washington and Clackamas counties, is revisited every six years and can change based on 20-year growth projections. It will be revisited again before the end of 2018.

The law splits the rest of Oregon into two categories: (1) “nonurban counties” and (2) all areas that aren’t in the Portland urban growth boundary or one of the listed nonurban counties. The nonurban counties, which are specifically listed in the bill, are in the eastern and southern parts of the state, not including Josephine or Jackson counties. The counties that fall into the third category mostly ring the Portland metropolitan area, reaching out to Deschutes County.

For nonurban counties, the target minimum wage for 2022 is $12.50. Those counties will see a 25-cent increase on July 1, 2016. For counties that are neither in the Portland metro area nor specifically listed as nonurban, the target minimum wage for 2022 is $13.50, with a 50-cent jump on July 1, 2016.

Between 2016 and 2023, the annual cost-of-living increase will be on hold statewide, but it will start again in 2023. The new law changes the date the cost-of-living increase will take effect from January 1 to July 1. The non-Portland/non-nonurban area will set the baseline. The Portland area must remain at least $1.25 above the baseline, and nonurban counties can be up to $1 below the baseline.

What employers should do

The new law means employers need to check the statute to determine which tier they fall into. Employers on the outer edge of the Portland urban growth boundary will need to watch out for revisions to the boundary since it is reconsidered periodically. No matter which tier they are in, all employers must be prepared to raise employees’ pay by 25 to 50 cents per hour on July 1, 2016.

Also, employers need to keep in mind that there is talk of a ballot initiative for the November election that would supersede the new law and set the statewide minimum wage at $15. Senate Bill 1532 takes some wind out of the sails of the initiative, but more discussion can be expected heading into November.

More information on the minimum wage increases will be available in the March issue of Oregon Employment Law Letter.

Joanna Perini-Abbott is an attorney with Perkins Coie LLP in Portland, Oregon. She can be reached at jperiniabbott@perkinscoie.com.