A business’ operational efficiency often hinges on the technology it invests in, but an overreliance on tech also creates gaps that are hard to close in a pinch. A prior outage of Honda’s timekeeping software, which resulted in a major lawsuit almost at once, will now cost the carmaker $2.3 million. The incident dates back to 2021, when a ransomware attack took Honda’s third-party payroll system offline. The attack on the Kronos system, provided by UKG, affected an estimated 8 million employees across organizations like PepsiCo and FedEx.
As a result, employees were not paid their full overtime wages of 1.5 times their regular pay on their scheduled paydays. Soon, Honda’s payroll outage led to a class action lawsuit, which has finally resulted in a settlement.
The Kronos timekeeping system outage that affected Honda in 2021 resulted in a lawsuit and settlement over underpaid overtime wage claims. (Image: Pexels)
What Do We Know About the Honda Timekeeping Software Outage and the Resulting Lawsuit?
Honda’s overtime pay lawsuit may have finally rewarded workers with results, but the journey to a conclusion was far from simple. Matters began on December 1, 2021, when UKG’s Kronos system went offline. The outage lasted till February 28, 2022, resulting in an extended period of operations without the timekeeping software to keep matters like payroll in check across multiple organizations. While the outage was determined to be a result of ransomware and many lawsuits were levied against UKG, Honda had to face underpaid overtime wage claims in the aftermath of the incident.
Plaintiff Michael Albert alleged that the class and collective members were not paid all of the overtime compensation of one and one-half times their regular rate of pay they were due during the period of the outage. This was seen as a violation of the Fair Labor Standards Act (FLSA) and Ohio state law. Honda tried to dismiss the case, but the courts denied this attempt. Similar other cases were also brought up against Honda, but the courts eventually consolidated them.
Terms of the lawsuit resulting from Honda’s timekeeping system outage were reached after significant mediation, and both sides determined that taking the case to trial would incur a considerable number of expenses. Now, the case resulted in a $2.3 million settlement that still has to be approved by the courts. The sum will be used to settle court-approved attorney fees, costs, service awards, and other expenses in relation to the settlement, and the net settlement amount will then be used to make payments to the plaintiffs and the members of the class and collective.
What We Can Take Away from the Honda Payroll Outage Lawsuit
While the allegations in the Honda lawsuit about failure to provide overtime pay have not been proved, and the company continues to deny the claims, the incident is a stark reminder of the importance of planning and establishing backup plans in the workplace. While the ransomware attack against Kronos and the resulting outage were no fault of the company, the decision to center its operations around the technology backfired against it.
Having to turn to manual methods of calculating overtime and regular pay may slow down many processes and overcomplicate procedures, but it is important to ensure that skilled hands are available to execute these tasks. Our overreliance on tech has been apparent in recent years, with businesses investing in an increasing number of apps to improve productivity or internal operations. While this is an inevitable consequence of operating in the modern world, individual skill-building and emergency planning are still critical to smooth operations.
In the era of AI, more and more work is being offloaded to tech, and new data on reasoning capabilities and intelligence show that cognitive prowess is on the decline, thanks to frequent artificial intelligence usage. This was also apparent when Amazon’s recent issues with the outage of its platforms prompted the company to meet with its teams to implement more supervision on AI-based changes being introduced to operations. These incidents serve as reminders that despite the rise in technology and its capable forms, investing in human skills and cognition will never truly go out of style.
Have insights on the Honda payroll outage and the resulting lawsuit, or have similar experiences of technological failures resulting in management incidents of your own? Share them with us in the comments. Subscribe to The HR Digest for more insights on workplace trends, layoffs, and what to expect with the advent of AI.
