The Sullivan administration is proposing a $250,000 payment to the city police union to settle two grievances over the calculation of overtime pay.
The union alleges the city had miscalculated the way employees' regular wages were used for setting overtime rates.
"The municipality underpaid these employees," said Derek Hsieh, the president of the city police union.
Sullivan administration officials contested the allegations, but nonetheless opted to settle given the risk of an unfavorable ruling if the dispute had gone to arbitration, according to documents submitted to the Assembly.
The union asserted that the payroll errors dated back to 2008, with the city potentially liable for more than $100,000 annually, the documents said.
It also would likely have cost the city more than $250,000 to calculate the potential damages, or to reprogram its payroll software, according to the documents.
"We could fight about it," said Police Chief Mark Mew. "This just settles it and stops the bleeding."
Hsieh would not specify exactly how many police employees had been affected, but said it had been "hundreds." The union has about 450 members.