The software that ate my paycheck

By MALLORY GRUBEN

Attorney Richard Myers first learned about the perils of switching payroll software in 2019.

More than 4,000 Multnomah County workers had been paid wrong when the county replaced its old payroll program with a new system called Workday. Members of the Multnomah County Corrections Deputies Association approached Bennett Hartman, where Myers works, asking for legal help.

Myers specializes in wage claims and had experience with class action lawsuits. He expected the class action case would be a one-off diversion from his usual work representing individuals. But three years later, a similar payroll “migration” crossed his desk: More than 10,000 workers at Providence Health and Services in Oregon received incorrect wages after the hospital started using new payroll software in July 2022. In September, the same story played out for more than 10,000 workers at Oregon Fred Meyer stores. And again in December, for more than 45,000 state workers.

Myers is now representing workers in three class action lawsuits filed in Oregon courts seeking relief for more than 65,000 workers affected by botched payroll migrations. He’s also helping litigate a case involving more than 26,000 workers at Washington Fred Meyer stores. The Multnomah County suit was settled in August 2022 for nearly $2 million. He says cases like this will continue to happen until employers make sure the new software works correctly before they launch it.

“In every case I’ve worked on, the system has not been ready to go live, but nonetheless, the employer presses that button,” Myers said. “The system goes live, and predictably folks aren’t paid right.”

‘Very large, very high complexity’

Each lawsuit started with the otherwise boring concept of a software migration, Myers said. In lay terms, that means switching from one program to another. It’s a common way employers keep their technology up to date, and usually it’s straightforward, said Jim Johnson, the retired chairman of the Standish Group, an information technology consulting and research firm in Boston. Johnson has studied thousands of payroll migrations for his research with the Standish Group and found that only about 15% are failures.

But that rate jumps to 51% if the project is “very large and very high complexity,” he said. That was the case for Fred Meyer, whose parent company Kroger tried to migrate 15 different payroll systems used across multiple states into a single database. It also applies to the State of Oregon and Providence, which both consolidated multiple human resources software into one new program.

“Trying to merge multiple systems is difficult. Trying to merge multiple systems that have different unions and different ways they pay people is really trouble,” Johnson said.

A better strategy would be to piecemeal the rollout, he said. For example, Kroger could have transferred each system to the new software one at a time instead of getting rid of all 15 old programs for one big launch. It’s also important to test the program as each new part is added or each setting is configured to make sure it’s working as planned. A rollout shouldn’t happen until the system is working correctly at least 99% of the time, if not 99.9%, Johnson said.

“Taking a large user base that’s getting paid and not getting it right is very troublesome,” he said. “These things have to have some care.”

Myers said in every payroll migration case he’s worked on, the employer could have predicted there would be problems, but they went ahead with the launch anyway. In his first migration suit with Multnomah County, one manager admitted as much.

“The county referred to this as a ‘stability period’ that might last 12 months or more,” Myers said. “In other words, they knew there was going to be an extended period of time that some people would not be paid correctly.”

Instead of delaying the launch for additional testing and proactive corrections, the county rolled out the software anyway. In court depositions, a manager told lawyers they didn’t want to do more testing or a segmented rollout because it would be “really challenging” and “very expensive.” That appears to be the theme in the three active suits Myers is working on. (Unsurprisingly, Johnson found in his research for the Standish Group that it costs significantly more to fix a software problem after a screw up than it costs to do up-front testing.)

‘I don’t accept it’s OK’

Myers said in all the cases he’s involved in, the employers earnestly tried to resolve the paycheck errors, but once widespread payroll errors start, there’s not a quick fix. Usually workers see multiple mistakes, including extra tax deductions, missing overtime or holiday pay, absent bonuses, or incorrect direct deposit information. It takes a lot of time to pinpoint which settings are causing which problem, Myers said.

Even simple fixes, like correcting bank account information for direct deposits, will get drawn out because there are so many people that need help, Myers said.

“In the case of Fred Meyer, for example, there were thousands and thousands of problems, and their HR and payroll folks just weren’t equipped to respond to all of the concerns,” he said.

For workers, that can mean going months without receiving the right wages. In the State of Oregon case, paycheck errors continued through at least April 2023, four months after the new system had launched.

“Not only is there confusion with the new system and lack of an explanation, but very often folks don’t have any idea of when they might be paid,” Myers said. “Particularly with folks who are living paycheck to paycheck, the impact is just heartbreaking and awful.”

One short paycheck can be the difference between making rent or getting served an eviction notice, buying groceries or going hungry, Myers said. He spoke with one worker who relied on propane to heat their home and fuel their stovetop but wasn’t able to afford a $60 refill because they’d been paid wrong.

The best solution is for employers to be proactive, Myers said.

“I just don’t accept that it’s OK to implement a new system if you don’t know for sure if it will work accurately when it comes to folks getting paid.”