Author: Emina

Part 1 of Series, “Payroll Mistakes that turn into Class Actions”

A recent federal court decision out of Western Pennsylvania serves as a powerful reminder that wage and hour compliance failures—particularly those embedded in payroll practices—can expose employers to significant and expensive litigation. The case arose from a lawsuit filed by employees who claimed that they were not properly compensated for: 

• out-of-town travel time
• time spent in pre-shift safety meetings
• bonuses (because bonuses were not calculated or considered in the regular rate for overtime calculations)

While the decision reflects a careful application of class certification principles, the underlying claims highlight a more fundamental issue: many wage and hour violations are not the result of bad intent—but of flawed payroll and compensation systems design.

The Claims: Where Payroll and Compliance Intersect

On March 31, 2026, in Justin Lawrence, et al. v. Sun Energy Services LLC d/b/a Deep Well Services, the U.S. District Court for the Western District of Pennsylvania certified, but significantly narrowed, a Rule 23 class action and Fair Labor Standards Act (“FLSA”) collective action.  

The employees in the Lawrence case worked in oilfield operations, performing field-based services such as well servicing, snubbing, and other energy extraction support functions. These roles required workers to travel to remote job sites, often across state lines, stay overnight, and report to centralized locations for assignments. Their work was structured around shifts, with operational requirements that included travel, safety protocols, and coordination across crews—all of which created multiple categories of compensable and potentially compensable time.

Each of their claims in the lawsuit arose directly from how compensation policies are structured, interpreted, and ultimately operationalized in payroll systems.  After much back-and-forth in the lawsuit (and expensive litigation discovery), the federal court certified the class and collective action only as to the travel time and bonus claims.  The off-the clock claim did not proceed in the lawsuit because the court did not find a “uniform” policy or procedure in the employer’s business that would sustain a systemic claim (i.e., the class claim). But the travel and bonus claims were both tied to uniform employer practices, making them suitable for class-wide adjudication.

The Court’s Message: Uniform Practices Create Uniform Risk

The decision reinforces a critical point for employers: When compensation practices are applied uniformly—but incorrectly—they create scalable liability.  The court emphasized that differences in damages calculations do not defeat class certification where liability stems from a common policy.  In other words, once a flawed payroll rule is applied across a workforce, exposure can multiply quickly—regardless of variations in individual circumstances.

What Went Wrong—and What Could Have Been Prevented

From a compliance perspective, the issues in this case were not novel. They reflect recurring problem areas under the FLSA:

• Misclassification or exclusion of compensable travel time from consideration as work time – and if the employer does not consider specific travel time to be compensable worktime, then the employer will not pay for that time (resulting in minimum wage and overtime exposure)
• Failure to properly account for non-discretionary bonuses in overtime calculations  (employers cannot just pay employees a bonus without any consideration of its impact on the overtime calculation but that is exactly what happened in this case)
• Non payment of pre- and post-shift activities – activities mandated or accepted by the employer before or after a shift will often be considered compensable work time and need to be accounted for

The Missed Opportunity: Pre-Payroll Legal Structuring

What this case illustrates most clearly is not just litigation risk—but a missed opportunity.  Had the employer:

• Conducted a legal analysis of compensable time under the FLSA
• Properly structured its bonus programs to align with regular rate requirements
• Designed payroll rules to reflect compliant compensation logic

…it is likely that the certified claims—those based on uniform practices—could have been avoided altogether.

A Shift in Approach: From Reactive Defense to Proactive Design

Traditionally, employers address wage and hour compliance after problems arise—through audits, litigation defense, or reactive policy changes.  That approach is increasingly insufficient. Modern compliance requires a shift toward pre-payroll structuring, where legal analysis is embedded into the design of compensation systems before they are implemented.

How Forework Changes the Equation

Unlike traditional payroll providers, Forework integrates labor and employment law analysis directly into payroll setup, from day one.  This includes:

• Learning an employer’s systems and procedures, how its employees work, so as to ensure that all work time is being captured.  Because if the employer does not know that it must pay for XYZ time, then the employer will not pay a worker for that time, and the employer will be exposed to labor law claims 
• Structuring compensation policies to comply with FLSA requirements and local laws (state and city-specific wage compensation laws) 
• Designing payroll rules that properly capture compensable time, and that ensure this captured time is compensated
• Ensuring bonuses and other incentives are correctly incorporated into overtime calculations
• Identifying and resolving compliance risks before the first payroll is processed

Key Takeaways for Employers

This decision offers several practical lessons:

• Uniform payroll practices create class-wide exposure if they are not legally compliant
• Differences in damages will not shield employers from certification where liability is common
• Courts are closely scrutinizing compensation policies, not just high-level compliance statements
• Prevention—not defense—is the most effective strategy

Conclusion

The Lawrence decision is not just a procedural ruling, nor is it a novel case.  Class action litigation related to compensation practices and wage/hour errors are some of the most expensive lawsuits in the United States to litigate, and they are often not cases where employers win.  

Employers that rely on off-the-shelf payroll setups or operational shortcuts are increasingly vulnerable to wage and hour litigation. The cost of getting payroll wrong is no longer limited to back wages—it includes class certification, litigation expense, and reputational risk.

The better approach is clear: build compliance into payroll from the outset.