Paychex, Inc. has been named in lawsuits over a 2024 data breach, accused of skimming fees from small business clients, sued over 401(k) plan mismanagement, hit with a race discrimination verdict, and penalized by several state regulators for operating money transmission services without a license. Outcomes have ranged from quick dismissals to a $5.99 million settlement paid by its Oasis Outsourcing subsidiary. Here is where each Paychex lawsuit and enforcement matter stands.
The 2024 Data Breach Class Actions
On March 22, 2024, during a mandatory exchange of unclaimed property information with the State of California, Paychex allowed an unauthorized individual to access data meant for the state. The exposed information included names and Social Security numbers of workers whose employers used Paychex payroll services. Paychex discovered the incident on April 30, 2024, and the compromised data was limited to an “Unclaimed Property List” compiled for California’s annual reporting.1ClassAction.org. Paychex, Inc. Data Breach Lawsuit Investigation2Orrick. Waterman v. Paychex Inc., Opinion
Two proposed class actions followed, and both are now closed.
Stevenson v. Paychex, Inc. was filed July 11, 2024, in the U.S. District Court for the Western District of New York. A Florida worker alleged negligence and inadequate cybersecurity, and complained that Paychex waited roughly a month after discovering the breach to notify affected individuals.3HR Dive. Paychex Sued for Negligence After Data Breach The plaintiff voluntarily dismissed the case on August 15, 2024, about a month after filing.4Bloomberg Law. Plaintiffs Dismiss Class Action Against Paychex Over Data Breach
Waterman v. Paychex Inc. (No. 25-cv-02908), filed in the Eastern District of Pennsylvania, went further but ended the same way. Lead plaintiff Colleen Waterman alleged the breach caused identity theft and financial fraud between March and December 2024. Paychex responded that Waterman’s information was not on the compromised list, which contained only data for individuals whose last known address was in California.2Orrick. Waterman v. Paychex Inc., Opinion On October 22, 2025, Judge Joseph F. Leeson granted Paychex’s motion to dismiss, finding Waterman had not shown Paychex’s conduct caused her injuries and therefore lacked standing.5Bloomberg Tax. Paychex Escapes Proposed Class Action Over Data Breach The dismissal was without prejudice, but Waterman did not amend. Judge Leeson dismissed all claims with prejudice on December 11, 2025, and ordered the case closed.6PACER Monitor. Waterman v. Paychex, Inc.
The Oasis Outsourcing 401(k) Settlement
The largest financial resolution on Paychex’s record involves its subsidiary, Oasis Outsourcing Holdings Inc. In Clark v. Oasis Outsourcing Holdings, Inc. (S.D. Fla., No. 9:18-cv-81101), investors in the company’s multiple-employer 401(k) plan alleged that Oasis offered poor investment options and charged excessive plan fees. The case was settled on August 17, 2018, the same day it was filed, for $5.99 million.7Bloomberg Law. Lawyers Suing Oasis Outsourcing 401(k) Defend Fee Bid Judge Robin L. Rosenberg granted final approval in December 2018 and awarded class counsel $2 million in attorney fees.8Bloomberg Law. Attorneys Suing Oasis Outsourcing 401(k) Get $2M in Fees
Rollover Theft Suit
A separate 401(k) case, Handy v. Paychex (W.D.N.Y., No. 6:2024cv06206), was brought by a plan participant who alleged Paychex was responsible for the theft of a rollover distribution because the company would only issue the payment by paper check. The court granted Paychex’s motion to dismiss but allowed the plaintiff to refile the claims under the Employee Retirement Income Security Act.9Law360. Paychex Wins Initial Toss of Worker’s Rollover Theft Suit
Small Business Client Fraud and Skimming Claims
In October 2008, Los Angeles fireplace accessory company Ironforge.com filed a class action in the Central District of California accusing Paychex of a “deliberate and lucrative fraud” that allegedly siphoned tens of millions of dollars from small and mid-sized clients. The complaint alleged that Paychex skimmed small amounts by arbitrarily increasing fees or imposing undisclosed charges, then dismissed any discovered withdrawals as innocent mistakes.10Courthouse News Service. Class Accuses Payroll Firm of Big-Time Fraud
Two Rochester-area firms joined later. Handyman Home Solutions Inc. and Road Service Inc. added allegations of roughly $1,100 in unauthorized withdrawals after Ironforge’s contract was canceled, about $850 intended for a 401(k) plan that was never deposited, and erroneous payments at bonus rates instead of standard hourly rates.11Rochester Business Journal. Judge Narrows Clients’ Legal Case Against Paychex The plaintiffs also alleged that Paychex wrongfully retained interest earned on client funds it held while waiting to disburse payroll and tax payments.12vLex. Ironforge.com v. Paychex, Inc., 747 F.Supp.2d 384
The case was transferred to the Western District of New York in May 2009. In October 2010, U.S. District Judge David Larimer dismissed 11 of the 12 causes of action. The fraud and breach of fiduciary duty claims were tossed, with the judge noting that reliance on anonymous internet complaints was insufficient. All claims under California law were dismissed on the ground that only New York statutes applied. Only a breach of contract claim based on the unauthorized withdrawals survived, and the plaintiffs were allowed to pursue class certification on that count.11Rochester Business Journal. Judge Narrows Clients’ Legal Case Against Paychex
Race Discrimination Verdict in Cooper v. Paychex
An Eastern District of Virginia jury found in favor of Lloyd M. Cooper, an African American former District Sales Manager, on claims of race discrimination under Title VII and 42 U.S.C. ยง 1981. Cooper was awarded $350,272, comprising $200,272 in back pay, $50,000 in compensatory damages for emotional distress, and $100,000 in punitive damages.13U.S. Court of Appeals for the Fourth Circuit. Cooper v. Paychex, Incorporated
Trial evidence showed that Cooper’s supervisor, Ed Reid, terminated him to assemble an “all white” team, and that Reid’s stated performance justifications were pretextual. Statistical evidence showed Paychex employed very few African American District Sales Managers between 1993 and 1995. On August 31, 1998, the Fourth Circuit affirmed the verdict and the trial court’s award of attorney fees to Cooper.13U.S. Court of Appeals for the Fourth Circuit. Cooper v. Paychex, Incorporated
Paychex as Plaintiff: Trade Secrets Suit
In October 2019, Paychex sued three former employees in State Supreme Court in Monroe County, New York. The complaint named Richard D. Gettings, Brad C. Hartmann, and Mona H. Nguonly, and alleged they took confidential training materials, sales playbooks, and client lists to their new employer, PuzzleHR. Paychex asserted claims for breach of contract, misappropriation of trade secrets, and tortious interference with client relationships.14Rochester Business Journal. Paychex Lawsuit Alleges 3 Former Employees Stole Trade Secrets, Client Info
State Regulatory Penalties
Several state agencies have penalized Paychex, mostly for operating money transmission services without a license.
New Hampshire. On April 17, 2019, Paychex Inc. and Paychex Holdings LLC entered a consent order with the New Hampshire Banking Department (Case No. 18-280) resolving allegations of unlicensed money transmission under New Hampshire RSA 399-G. Paychex agreed to pay a $304,446 penalty.15New Hampshire Banking Department. Paychex, Inc. Consent Order 18-280
Idaho. Under an agreement and order dated December 3, 2020 (Docket No. 2020-12-03), the Idaho Department of Finance found that Paychex Inc. and Paychex Holdings LLC conducted money transmission in Idaho without a license from April 2016 through December 2019, processing over 170,000 transactions totaling more than $909 million. The civil penalty was $20,000.16Idaho Department of Finance. Paychex Holdings LLC and Paychex Inc. Agreement and Order
Texas and Michigan. Good Jobs First’s Violation Tracker records a $212,500 consumer protection penalty against Paychex Inc. from a Texas financial regulator in 2018 and a $15,694 wage and hour penalty from Michigan in 2020.17Good Jobs First. Violation Tracker – Paychex
New Jersey Workers’ Compensation Conflict-of-Interest Ruling
In February 2026, the New Jersey Appellate Division addressed a conflict-of-interest dispute from a Paychex client relationship. Johann Mejia Arboleda filed a workers’ compensation claim in October 2024 after an injury at Prop N Spoon, which had contracted with Paychex as its professional employer organization for HR and workers’ compensation coverage. The law firm Goldberg Segalla first filed an answer for Prop N Spoon, then four days later filed an amended answer stating it actually represented Paychex and denied coverage to Prop N Spoon.18New Jersey Courts. Mejia Arboleda v. Paychex and Prop N Spoon
A compensation judge disqualified Goldberg Segalla, finding the firm had “clearly represented Prop N Spoon, even if it was for just four days,” and that switching sides to deny that same client’s coverage violated professional conduct rules. On February 25, 2026, the Appellate Division affirmed the disqualification, while clarifying that Paychex and its insurer, American Zurich, could share new counsel rather than each hiring separate attorneys.18New Jersey Courts. Mejia Arboleda v. Paychex and Prop N Spoon