Are you Violating State Laws?
More and more employers use payroll cards to deposit paychecks for employees. Employees use the payroll cards much like a debit card, and each electronic payroll payment is less expensive than a paper check. However, legal restrictions vary by state and can be difficult to navigate.
Are you in compliance with state law requirements and restrictions? Here are some questions to ask:
1. Does my company's payroll card charge employees fees?
If so, you might be violating state laws, even if the payroll card provider is collecting the fee, not your company. In most states, an employer may not deposit an employee's paycheck on a payroll card unless the payroll card provides at least 1 free withdrawal of the employee's full pay per pay period.
2. Do you have employees in New York?
If so, you might be violating NY state law if your card charges any fees. In New York, the Department of Labor has confirmed that the payroll card must provide free "essential banking services," including unlimited free withdrawals and a free replacement for lost, stolen, or damaged cards at reasonable intervals. See N.Y. DOL Opinion Letter RO-09-0158; NY Opinion Letter RO-08-0001, RO-08-0045, RO-09-0022, RO-09-0086. We expect the NY laws will only get more complicated. New York's Attorney General, Eric T. Schneiderman, is now investigating payroll cards by issuing letters seeking information from some of the state's largest employers, including McDonald's, Walgreens, and Wal-Mart.
3. Do you have employees in Minnesota?
If so, you might be violating MN state law if you are not registered with the state. Minnesota requires employers using payroll cards to complete the Minnesota Department of Labor and Industry's registration form. See Minn. Stat. §§ 177.255(1)(c), (2).
4. Have your employees authorized the payroll card and all terms and conditions in writing?
If not, you might be violating state laws. In most states, employers may not deposit paychecks for employees on a payroll card without written employee consent. In some states, the written consent must include a complete list of the terms, conditions, and itemized fees of the payroll card option, see, e.g., Minn. Stat. §§ 177.255(5), (6), and those terms must be printed in at least 12 pt. font, see, e.g., Md. Code Lab. Empl. § 3-502.
More than ever, courts and state regulatory agencies are scrutinizing payroll cards. In addition to New York, other state agencies have initiated investigations. In Pennsylvania, the Department of Labor commenced an investigation after a class action lawsuit against a McDonald's franchise was filed for allegedly unlawful payroll card fees.
If you use payroll cards to deposit paychecks for employees, now is the time to ensure your payroll card practices are compliant. Please call us if we can assist.
