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What can be classified as “harm” or “damage” in terms of…

second opinion] What can be...
second opinion] What can be classified as “harm” or “damage” in terms of suing a large payroll company that has been negligent in carrying out their services to us as a client? Examples of their negligence include: continuous errors in implementing additional controls that caused us large amounts of wasted time, being encouraged by their manager to process a payroll that almost caused us a one million dollar loss, an offshore employee of theirs manually changing our payroll manager’s email address to a fictitious email account (without permission or advance warning) due to “technical” difficulties he was experiencing, pushing firmware updates that resulted in timeclocks registering inaccurate in-punches (potentially causing wage and hour issues).
To reiterate, they are a major payroll company and probably have lots of details in their “terms and conditions “ of their contracts to protect themselves.
Are we powerless despite their gross negligence?Thank you!
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Answered in 2 minutes by:
1/17/2018
legalgems
legalgems, Lawyer
Category: Legal
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Hello! I will be reviewing your question and posting a response momentarily; if you have any follow up questions please respond here. Thanks!

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I am sorry to hear this; does the contract have any hold harmless provisions?

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Customer reply replied 4 months ago
What does that mean?

Any type of language that excuses the company's negligence, for example?

These may be a general release, or a waiver, or a hold harmless, or a limited liability clause for example.

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Meanwhile can I get your state please?

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Customer reply replied 4 months ago
I will check the contract. We are located all over the US. Corporate office is in ny

Basically a party may sue for damages that are "reasonably foreseeable" and "proximately caused". So for purely economic contracts this is usually limited to actual economic damages (ie no lost wages, no pain and suffering).

Most contracts will have some type of ceiling on contract liability as well.

So for example for a payroll company damages may include:

labor costs paid to employees to rectify the situation (but not unpaid labor time claimed after the fact by, for example, the owner)

any tax liability such as penalties;

any wages imposed by governmental agencies for nonpayment of wages earned.

As for firmware updates normally for a "negligent referral" case, the party would have had to known (or should have known) that there was a defect; if the timeclock was provided by the payroll company then it can be argued that this negligence was part of the payroll services by providing defective products.

The problem is that the plaintiff has the burden of proof to establish damages so the employees would have to testify as to hours they worked which were not registered.

Normally the court will not allow a contract to waive "gross" negligence or reckless disregard; but they do allow the waiver of general negligence.

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legalgems
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Customer reply replied 4 months ago
Thank you! What about the situation where their manager encouraged us to process a payroll where there was close to 1 million dollars erroneously exported? I have that conversation recorded and a screenshot of what occurred.

Were there financial damages from the transaction? From my reading of the initial question it stated almost, so I assumed there were no damages; please let me know if that is not correct.

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Customer reply replied 4 months ago
I caught the error before we processed but it was a very close call and was completely their fault.

Unfortunately the court will typically only allow for actual damages.

For economic contracts the court takes a very strict view of actual damages-so it generally requires actual economic harm.

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Customer reply replied 4 months ago
Ok thank you for your time

You are welcome;

sorry your company is having to deal with this.

Take care.

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Customer reply replied 4 months ago
By the way, regarding the firmware update on the timeclocks, yes, it is their timeclocks. We pay a few thousand dollars a month to them and it’s connected to their software. Does that change things? It took them close to 2 weeks of troubleshooting to correct the issue

Yes, as that can be deemed a breach of the contract (failure to provide properly functioning timecards) and negligence (that does not allow for double recovery but gives the plaintiff 2 causes of action to argue in case they are able to defeat one).

This will allow the court to award damages (economic) that resulted from the defective material (ie hours spent rectifying the situation).

If there is any type of fraud the court may award punitive damages (designed to punish defendant and deter others from similar misconduct).

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Customer reply replied 4 months ago
Ok thank you very much for the detailed explanations. Much appreciated!

Very welcome!

Thank you kindly as well for the 5 star rating!

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