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Payroll problems part of 'technology transformation' at the Kroger Co.

Expert: 'Sounds like a very gnarly problem'
Posted at 6:02 PM, Feb 14, 2023
and last updated 2023-02-14 18:32:21-05

CINCINNATI — Texas attorneys pursuing a class-action lawsuit over payroll problems at the Kroger Co. have signed up more than 200 people who want to join the case.

In a series of nearly identical court filings in the last three months, the Anderson Alexander law firm in Corpus Christi, Texas has submitted the names of 207 Kroger employees who gave the firm “consent to pursue claims of unpaid overtime” against Kroger.

The filings could enable those clients to join a proposed class action lawsuit filed in November by Brandon Wilder, a warehouse worker in Union, Ky. Wilder claims “Kroger’s timekeeping system suffered outages” between Sept. 1 and Nov. 5, causing him to miss three weeks of pay. He’s suing on behalf of himself and others who had payroll problems in that nine-week period.

The case is scheduled for mediation in June. It’s one of four class action lawsuits filed by Kroger employees in five states, alleging technical problems caused missing or late paychecks and mistakes in hours worked, wages paid and statements of deductions and withholdings.

Kroger has responded to those federal cases with arguments that it acted in good faith to identify and correct payroll mistakes and that employees failed to pursue grievance, arbitration and other remedies before suing. The company also objects to the use of a class-action process to settle the controversy.

But Kroger has yet to explain what caused the problems in the first place. So, WCPO has been looking for answers in public statements Kroger has made about a “technology transformation” it announced in 2021.

“The company is in the midst of a broad, multi-year, technology transformation project to modernize mainframe, middleware and legacy systems to achieve better process efficiencies across customer service, merchandising, sourcing, payroll and accounting through the use of various solutions,” Kroger told investors in its quarterly report to shareholders on June 24, 2021.

Kroger used similar language in every quarterly report since then. But it added this line in its most recent filing on Dec. 9: “During the third quarter, the company implemented new payroll modules.”

A Kroger executive described the technology transformation in a July 2021 promotional video, posted on YouTube by Oracle Corp., a Texas-based software company that declined to comment for this story.

“Truly standardizing to the Oracle HCM platform for core HR, talent management, compensation, payroll, having it all in the cloud, in one place, allows us to standardize and modernize our business processes,” said Bridget Klare, a senior advanced engineering manager at Kroger, in the Oracle video.

Klare said the system would include labor, productivity and payroll apps for employees in 2,750 stores, 35 manufacturing facilities, more than 1,000 fuel centers and over 2,000 pharmacies.

Klare said the company was working on mobile phone applications to make it easier for employees to interact with the company. The goal was to make employees more productive and happier in their jobs.

“We have about 15 disparate legacy applications across the HR platform,” Klare said. “Our goal is really to modernize our tool sets for the organization to provide a seamless associate experience that attracts and maintains the right talent. We have a very complex and customized environment right now in our legacy systems, which doesn’t allow us to adapt quickly to change to meet the demands of our business. Many of these systems are also at the end of life and they are requiring us to head in a different direction.”

Combining 15 different payroll systems into a single database would be an incredibly difficult assignment, said Jim Johnson, retired chairman of The Standish Group in Boston. Johnson, a project-management expert who has studied thousands of payroll conversions, said 15% of these projects fail and 44% have challenges, mostly due to data problems.

“Taking two databases together is problematic,” Johnson said. “Taking three is three times as complex. I can’t imagine taking 15 together.”

The customized nature of Kroger’s legacy systems is another problem, Johnson said.

“The longer a database exists the more it wanders,” Johnson said. “People start putting things in different places and calling things different names. The more complicated it gets, the more likely it is you’re going have problems. And that sounds like a very gnarly problem.”

Johnson can’t say what went wrong with Kroger’s payroll conversion, but he said cost pressures and deadlines were often a factor in failed projects he has studied in the past.

“When the project gets late, quality suffers,” Johnson said. “They’re under pressure from management to launch it because they probably spent millions and millions of dollars on the project and why isn’t it going? And so, you find out people shortcut the quality all the time. It happens a lot.”

Inadequate testing is another common problem.

“If you miss something in the migration and you didn’t test that area that’s going to bite you,” said Johnson. “And even if do you test a lot, you can’t test everything. And you can’t test human error. This is software. You know, it’s hard sometimes to see it.”