A recent case reinforces the principle that employers may ultimately be held responsible for wage and hour errors, even when those errors are caused by a technology or payroll system error.
Earlier this month, United States District Judge Nelson Roman issued preliminary approval of a $12.75 million settlement stemming from the failure of PepsiCo and related companies to provide pay and overtime to 70,000 non-exempt employees. The failure was caused by a ransom ware attack sustained by payroll company Kronos, which is used by the plaintiffs. The attack, which took place between December 11, 2021 and February 12, 2022, caused massive data breaches, creating chaos in the plaintiffs’ payroll recording and reporting capabilities.
In response to the data losses, the plaintiff companies resorted to “imperfect” efforts to determine several subsequent payroll period obligations, e.g. calculating averages and other estimation techniques. According to documents filed with the court, the payroll system failure resulted in $23 million in underpayments and nearly $60 million in overpayments. The underpayments were corrected earlier this year by the employers, however it was too late to prevent the litigation from being filed by employees who were affected. As a result of the settlement, the defendant companies will pay $12.75 million to resolve the workers’ claims.
Employers are reminded of the prevalence of breaches, hacking schemes, and ransomware attacks and the importance of backing up data in the event that they need to pivot to an alternate method of processing payroll. For employers in home care, where payroll is largely done on a weekly basis (with some exceptions), and “late” payroll is considered a major wage and hour violation, it becomes even more important to have a back-up plan for payroll and wage compliance as part of the organization’s emergency preparedness program.