Timeout! Guidance for Employers amid Kronos Outage and Best Practices to Ensure Compliance

Does your company have an incident response plan in case your personnel related digital and cloud based platforms are shut down?  Federal and state laws require companies to maintain compliance with personnel related regulations, regardless of such failures.  A recent incident highlights the need for your company to be prepared now.

On Saturday, December 11, 2021, the Ultimate Kronos Group (UKG or Kronos) sent a notice to its customers— that it was “made aware of issues impacting the availability of UKG solutions using the Kronos Private Cloud (KPC).” These impacted systems—including UKG Workforce Central, UKG TeleStaff, and Banking Scheduling Solutions—are software that many employers rely on for managing critical personnel operations including timekeeping and payroll.

Kronos has informed its customers: “At this time, we still do not have an estimated restoration time and it is likely that the issue may require at least several days to resolve. We continue to recommend that our impacted customers evaluate alternative plans to process time and attendance data for payroll processing, to manage schedules, and to manage other related operations important to their organization. For additional assistance, please open a case in the UKG Kronos Community. UKG Support Representatives are available to assist walking you through alternatives.”

While this incident is limited to Kronos customers, leaving many employers scrambling to figure out how to make payroll, keep track of employees’ schedules and time worked, and maintain compliance with state and federal wage and hour laws, it is a sober reminder of the importance of having a backup plan in place to account for an interruption in digital and cloud–based platforms, which we’ve become so accustomed to relying. Indeed, employers must endeavor to satisfy their legal obligations notwithstanding the disruption caused by a third-party vendor. The following bullet points contain general advice on best practices during the outage, but employers are encouraged to consult with counsel given the variation in how an outage can impact their operations and the various state laws involved:

• Ensure that employees are paid in a timely manner for the current/next payroll cycle. If timekeeping data is completely unavailable, we recommend that companies utilize alternative measures to calculate wages owed, including posted work schedules, utilizing past payroll cycles to estimate current or future work time, security badge swipes, or other similar means.

   

• If, after regaining access to timekeeping data, an employee is shorted pay because they worked more than their prior payroll cycles or scheduled hours, make a “true up” payment to make up the difference as soon as possible (and no later than the payroll cycle after the timekeeping data is recovered and can be verified). Conversely, if an employee is overpaid, consult your local state law to identify legally compliant means of recouping such overpayments, subject to state and federal minimum wage and payroll deduction laws. Several states (e.g., California and Illinois) prohibit employers from engaging in “self help” in the form of deducting overpayments from future wages without notification to and consent from employees.

   

• Identify feasible means for tracking hours worked while Kronos remains inaccessible. Possibilities include the use of manual time cards that employees fill out, utilizing a schedule to “estimate” hours and subsequently requesting that employees verify their hours worked and report deviations from their scheduled hours, or using IT systems to track employee ingress and egress (e.g., employees who use a card to access and exit the workplace).

   

• Evaluate the personnel information that is stored on the third-party timekeeping vendor’s systems. Some companies maintain far more sensitive information on these systems than they might realize, including social security numbers and home addresses. While Kronos has yet to publically announce whether the “issues impacting the availability” of their products includes a data breach that would implicate explicit disclosure requirements, we recommend that companies get prepared for such a possibility if occurs.

   

• Engage counsel to review contracts with timekeeping vendors to identify possible indemnities, as well as contractual obligations an employer may have to notify employees of outages and/or possible data breaches. Notifying insurance carriers of a possible or suspected data breach may also be necessary to ensure coverage in the event of any liability.
  
  
• Consult legal counsel on legal obligations in the event of an actual or suspected data breach to ensure any required notification procedures are implemented in a timely and comprehensive fashion. Many such notices have short time frames for distribution.

Foley’s Labor & Employment attorneys are continuously monitoring developments relating to Kronos and are available to answer client inquiries as they relate to this fluid situation.