Oregon’s labor regulator needed a bailout, and this year state Democrats got out their buckets.
Faced with a mountain of languishing worker complaints and a shortage of staff, the Oregon Bureau of Labor and Industries convinced state lawmakers in March to send a cash infusion its way. The Legislature’s solution, House Bill 4027, created a new charge for Oregon workers and employers that’s expected to fund dozens of BOLI staff members.
That is, if lawmakers didn’t break the law in passing the bill.
Business groups filed a lawsuit this week arguing legislative Democrats didn’t follow a fundamental rule in Oregon’s constitution: that all bills raising revenue require support from three-fifths of lawmakers in both chambers.
HB 4027 was three votes shy of that 36-vote mark when it passed the House in late February. Oregon Business and Industry, the Portland Metro Chamber and the National Federation of Independent Business are now asking a court to rule the bill invalid.
“The Legislature failed to meet the constitutionally required threshold to pass revenue-raising bills, something brought to their attention during the 2026 session,” a release from Oregon Business and Industry said this week.
The new lawsuit names the state’s Department of Revenue and Department of Consumer Business Services as defendants. Both agencies declined comment Wednesday.
But legislative attorneys previously disagreed with the business groups. They advised lawmakers during this year’s session that HB 4027 would “more than likely” be upheld in court even without a three-fifths vote.
“Please note that we are aware of no cases directly on point for this question,” legislative attorney Alan Dale wrote in an analysis provided to lawmakers, “so our conclusion cannot be free from doubt.”
Democrats took that as a legal hall pass and ran with it. “[Legislative counsel] is confident that this bill is not a revenue-raising measure,” state Rep. Mari Watanabe, a Beaverton-area Democrat and chief sponsor of the bill, told colleagues on the House floor. “We can count on the professional legal opinions that LC provides us for our work in this building, and have the utmost confidence that this opinion was made in good faith.”
The lawsuit takes issue with a new fund created under HB 4027 to pay for BOLI’s work. To so-called BOLI Expenses Fund is to be filled by new charges levied on each hour Oregon employees work.
The state already funds worker compensation under a similar scheme, setting a 1.8-cent assessment on every hour worked. Employers take half of that amount directly out of paychecks, and are responsible for matching the money from workers with their own payment to the state.
With HB 4027, Democrats expanded the concept, authorizing the state’s Department of Consumer Business Services to set a new assessment on workers and employers. Once fully up and running, it will put a minimum of $9.5 million every year into a fund for BOLI.
Legislative lawyers say that does not amount to a new tax, in part because the bill did not set a new tax rate on its own. It merely authorized a state agency to do so.
Plaintiffs in the lawsuit filed this week argue that justification is nonsense.
“Even though the rate has not yet been set, the effect of the Labor Tax Bill is clear: it imposes a new charge on a broad base of taxpayers,” the suit says.
This story comes to you from the Northwest News Network, a collaboration between public media organizations in Oregon and Washington.