If a lawsuit alleging ADP should be held responsible for errors in employee pay is upheld by the California Supreme Court, it could “turn the payroll industry upside down”, a lawyer has warned.
The test case is being brought by Sharmalee Goonewardene, who sued her former employer, travel company Altour International, for discrimination, missed overtime and breaks and wrongful termination among other claims. She also included ADP as a defendant, claiming that the payroll services provider committed unfair business practices for not providing her with accurate pay.
According to the California Superior Court in Los Angeles in April 2017, errors found while auditing Goonewardene’s time sheets amounted to US$6,144.
Although ADP had never employed her, a state appeals court found that the payroll giant owed her a duty of care as a third-party beneficiary of the contract between it and her employer. As a result, Goonewardene was given leave to sue ADP for breach of contract and negligent misrepresentation.
Glen Broemer, who works for the Law Offices of Glen Broemer in New Jersey and who is representing her said in a brief to the state’s high court: “This is professional negligence is part of my point” as there is a “high degree of skill” required to process payroll, which ADP touts in its marketing.
But Robert Lewis, a partner with Morgan, Lewis & Bockius LLP, which is representing ADP, told the California Supreme Court during his oral arguments that the state’s Labour Code did not permit an employer to assign the duty for accurate wage statements to a third party such as ADP.
He added that service providers rely on the information they are given to process payroll and that, unless the Legislature changes the law, Goonewardene has no claim against ADP, which only has a contract with her employer.
Other members of the payroll industry have filed numerous briefs in support of ADP as a ruling against the vendor could wreak havoc among the 1,100 payroll service companies in California, all of which could be named as defendants in the thousands of wage and hour cases filed annually in the state.
Anthony Oncidi, a labour partner with Proskauer Rose LLP in Los Angeles, told Bloomberg Law: “If employees can claim to be third-party beneficiaries to these kinds of commercial relationships, it will turn the payroll industry upside down. There’s a basic unfairness to assigning potential liability to a company based upon a contractual obligation it didn’t even know it had.”
The state Supreme Court is expected to issue its final verdict by 5 March, 2019.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
OTHER ARTICLES THAT MAY INTEREST YOU
Optimising your time and attendance system to reduce payroll errors
Making friends with payroll metrics
Monthly Measures: Investigating different payroll errors
If a lawsuit alleging ADP should be held responsible for errors in employee pay is upheld by the California Supreme Court, it could “turn the payroll industry upside down”, a lawyer has warned.
The test case is being brought by Sharmalee Goonewardene, who sued her former employer, travel company Altour International, for discrimination, missed overtime and breaks and wrongful termination among other claims. She also included ADP as a defendant, claiming that the payroll services provider committed unfair business practices for not providing her with accurate pay.
According to the California Superior Court in Los Angeles in April 2017, errors found while auditing Goonewardene’s time sheets amounted to US$6,144.
Although ADP had never employed her, a state appeals court found that the payroll giant owed her a duty of care as a third-party beneficiary of the contract between it and her employer. As a result, Goonewardene was given leave to sue ADP for breach of contract and negligent misrepresentation.
Glen Broemer, who works for the Law Offices of Glen Broemer in New Jersey and who is representing her said in a brief to the state’s high court: “This is professional negligence is part of my point” as there is a “high degree of skill” required to process payroll, which ADP touts in its marketing.
But Robert Lewis, a partner with Morgan, Lewis & Bockius LLP, which is representing ADP, told the California Supreme Court during his oral arguments that the state’s Labour Code did not permit an employer to assign the duty for accurate wage statements to a third party such as ADP.
He added that service providers rely on the information they are given to process payroll and that, unless the Legislature changes the law, Goonewardene has no claim against ADP, which only has a contract with her employer.
Other members of the payroll industry have filed numerous briefs in support of ADP as a ruling against the vendor could wreak havoc among the 1,100 payroll service companies in California, all of which could be named as defendants in the thousands of wage and hour cases filed annually in the state.
Anthony Oncidi, a labour partner with Proskauer Rose LLP in Los Angeles, told Bloomberg Law: “If employees can claim to be third-party beneficiaries to these kinds of commercial relationships, it will turn the payroll industry upside down. There’s a basic unfairness to assigning potential liability to a company based upon a contractual obligation it didn’t even know it had.”
The state Supreme Court is expected to issue its final verdict by 5 March, 2019.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
OTHER ARTICLES THAT MAY INTEREST YOU
Optimising your time and attendance system to reduce payroll errors
Making friends with payroll metrics
Monthly Measures: Investigating different payroll errors
