The New York State Department of Labor adopted a final regulation that sets the conditions by which New York employers can pay wages by direct deposit or payroll debit card. The regulation, which goes into effect March 7, 2017, imposes significant obligations on employers who wish to offer the option of wage payment through these means.
Coverage: Employers with employees in New York who are paid by payroll debit card or direct deposit.
Effective: March 7, 2017
Action Required: Employers should:
- Ensure that employees are provided with written notice that complies with the final regulation and obtain voluntarily signed compliant consent forms;
- Before March 7, 2017, in order to ensure the forms remain valid, provide employees who previously signed direct deposit and payroll debit cards consent forms valid written notice and expressly notify these employees of their right to withdraw consent (the NYDOL recently released for public comment proposed templates of the notice and consent forms and are expected to release the final forms in the near future. Employers are not required to use these templates, but may do so if they choose); and
- Contact your payroll debit card provider and/or Human Resources Business Partner with any questions you may have.
The New York Department of Labor (“NYDOL”) published its final regulations related to the payment of wages, including rules affecting payment via direct deposit and payroll debit cards. Under the new rules, which go into effect on March 7, 2017, employees must receive certain notification and they must provide written consent prior to being paid by direct deposit or payroll debit card.
Required Written Notice, Consent for Wage Payments by Direct Deposit, Payroll Debit Card
Employers who wish to pay wages with direct deposit or payroll debit card will be required to provide detailed written notice to employees explaining:
- The employee’s options for methods of receiving wages;
- Acceptance of wages by payroll debit card and/or direct deposit is not required, with limited exceptions; and
- No fees will be charged for services necessary to access wages in full if receipt of wages by payroll debit card is being provided as an option.
Employers also will be required to provide a list of locations, within “reasonable proximity” to an employee’s residence or workplace, where employees can access and withdraw wages without charge.
Subject to limited exceptions, an employer must obtain an employee’s written consent to pay wages by direct deposit or debit card. Further, an employer cannot make payment of wages by direct deposit or debit card a condition of hire or of continued employment.
Notices and consents must be provided or obtained in English or the primary language of any non-English-speaking employee, assuming a template notice and consent in such language is available from the NYDOL. Electronic notice is permissible if all regulatory requirements are met. The NYDOL recently released for public comment proposed templates of the notification and consent forms, and they are expected to release the final forms in the near future. Employers are not required to use these templates, but may do so if they choose.
Additional Requirements Specific to Payroll Debit Cards
Employers who wish to pay wages by payroll debit cards must ensure compliance with multiple additional requirements.
1. Waiting Period after Obtaining Consent
An employee must consent to wage payment by debit card at least seven business days prior to the employer making payment through use of the payroll debit card — potentially necessitating initial payment of wages by another means, such as a traditional payroll check.
2. Employees May Not Incur Fees
An employee may not be charged a fee, directly or indirectly, for a number of list of items, including:
- Application, initiation, loading, participation, or other action necessary to receive wages or to hold the payroll debit card;
- Point-of-sale transactions;
- Overdraft, shortage, or low balance status;
- Account inactivity;
- Maintenance;
- Telephone or online customer service;
- Accessing balance or other account information online, by Interactive Voice Response through any other automated system offered in conjunction with the payroll debit card, or at any ATM in network made available to the employee;
- Providing the employee with written statements, transaction histories, or the issuer’s policies;
- Replacing the payroll debit card at reasonable intervals;
- Closing an account or issuing payment of the remaining balance by check or other means;
- Declined transactions at an ATM that does not provide free balance inquiries; or
- Any fee not explicitly identified by type and by dollar amount in the contract between the employer and the issuer or in the terms and conditions of the payroll debit card provided to the employee.
3. Wages Separate from Credit, Future Pay
Wages paid with debit card must not be linked to any form of credit, including a loan against future pay or a cash advance on future pay.
4. Employer Cannot Pass Costs, Obtain Kickbacks
Should an employer incur costs associated with payroll debit card accounts, it may not pass any of them to the employee or receive kickbacks or any financial remuneration from the issuer, card sponsor, or any third party for delivering wages by payroll debit card.
5. Wages May Not Expire
Funds placed on a debit card cannot expire. However, an agreement may allow the employee’s account to be closed for inactivity, provided the issuer gives “reasonable notice” to the employee and the remaining funds are refunded within seven days.
6. Additional Notice Requirements, Reimbursement for Fees Charged
At least 30 days before any change in the terms and conditions of a debit card take effect, an employer must provide written notice (in “plain language” and in the employee’s primary language, or in a language the employee understands, and in at least 12-point font) of any change to the terms or conditions of the payroll debit card account, including any changes in the itemized list of fees. If the issuer charges the employee any new or increased fee before 30 days after the date the employer has provided the employee with written notice of the change, the employer must reimburse the employee the amount of that fee.
7. Existence of a CBA
If an employee is covered by a valid collective bargaining agreement (CBA) that expressly provides the method(s) by which wages may be paid to employees, an employer also must have the approval of the union before paying by debit card.
If you have any questions, please contact your payroll debit card provider and/or Human Resources Business Partner.