Many employees do not have a bank account which employers can directly deposit wages on pay day. In looking for ways to increase efficiencies and reduce the costs of writing physical checks, many employers have looked to prefunded, reloadable debit cards, commonly referred to as payroll debit cards. States are beginning to catch up with the practice by amending their laws to allow for wages to be paid via payroll debit cards and to regulate the practice, mostly related to the permissible fees. This week, New York Department of Labor published proposed regulations for the issuance of payroll debit cards in lieu of cash, checks, or direct deposit.
The proposed regulations would require:
- Employers cannot require employees to receive their wages via payroll debit cards or direct deposit.
- Before employers can pay employees with payroll debit cards, employees would have to give advance written consent, which the employers would need to keep on file for six years. Employees would be able to withdraw consent at any time, provided that the employer has reasonable time to finalize such change. If an employee is covered by a collective bargaining agreement, the union must also give its consent before employees can be paid via payroll card.
- Employers would need to establish and notify employees about local locations where they can access their wages for free, without ATM or other access fees.
- Employees would have access to unlimited free ATM withdrawals within a local network and whether through the ATM or another method, the employer must allow the employee to withdraw the full amount of wages each pay period.
- Other common fees are prohibited.
- Employers cannot pass along its costs to the employee for receiving wages via payroll debit card, nor can the employer receive any compensation or remuneration from a card issuer for using this payment method.
- The card must contain fraudulent activity protection at no-cost to the employee.
The full text of the proposed language is available in the May 27, 2015, edition of the New York State Register. The payroll debit card regulation begins on page 16.
The Department of Labor estimates 13,000 businesses in New York State pay approximately 200,000 workers through debit cards.
Many employers have found that the use of payroll debit cards reduces their payroll related unclaimed property liability. However, employers should take caution when entering into a contract with a payroll debit card issuer to ensure that unclaimed property concerns are addressed proactively instead of waiting until an audit arises.