Barclay Damon
Barclay Damon

Legal Alert

Wage Payment by Debit Card Permitted By NYS Department of Labor

The New York State Department of Labor (“NYSDOL”) published final regulations to clarify the methods of payment employers are permitted to use to pay employee wages. The new regulations, which go into effect March 7, 2017, include the option to pay employees by payroll debit card and add additional safeguards for employees paid through direct deposit.

The regulations provide for four permissible methods of payment available to an employer: (1) Cash; (2) Check; (3) Direct deposit; or (4) Payroll debit card. The crux of the regulations deal with employers who decide to pay their employees using either direct deposit or a payroll debit card. Employers using one of those two methods have additional requirements as a result of the new regulations.

First, those employers must provide written notice to their employees that includes: (1) A plain language description of all of the employee’s options for receiving his wages; (2) A statement that the employer may not require the employee to accept wages by payroll debit card or direct deposit; (3) A statement that the employee may not be charged any service fees to access his wages in full; and (4) If the employer is offering the employee the option of receiving his wages by payroll debit card, the employer must provide a list of locations, or a link to a website that lists the locations, where the employee can access and withdraw his wages for free within a reasonable distance from his home or place of work.

In addition, employers offering payment by direct deposit or payroll debit card must get written consent from the employee. The employer must ensure that it obtains informed consent from the employee without intimidation, coercion, or fear of adverse action by the employer. The employer is also prohibited from making payment of wages by direct deposit or payroll debit card a condition of hire or of continued employment. Employees can withdraw their consent at any time, as long as they give their employers a reasonable time not longer than two full pay periods to finalize the changes to payment method.

Written notice and written consent can, however, be provided electronically, as long as the employee can view and print the notice and consent for free while at work. Furthermore, the written notice and written consent must be provided in English and in the primary language of the employee if the NYSDOL makes a template notice and consent available in that language.

Regarding payment by payroll debt card, the employer is not permitted to charge the employee, whether directly or indirectly, any of the following fees: (1) An application, initiation, loading, or participation fee; (2) A fee for point of sale transactions; (3) A fee for overdraft, shortage, or low balance status; (4) A fee for account activity; (5) A maintenance fee; (6) A fee for telephone or online customer service; (7) A fee for retrieving balance and account information online; (8) A fee for providing the employee with written statements, transaction histories, or the issuer’s policies; (9) A fee for ordering a replacement card; (10) A fee for closing the account or issuing payment of the remaining balance; (11) A fee for declined transactions; and (12) Any other fee not explicitly stated in the contract between the employer and the card issuer or in the conditions of the card provided to the employee.

A major concern during the comment period was the potential influx of new paperwork employers would have to deal with for employees already enrolled in direct deposit. Fortunately, the final ruling allows those prior consents and authorizations to direct deposit to remain valid in the face of the new regulations, provided the employers give those employees the new notices required by these new regulations before the March 7, 2017 effective date.

If you have any questions about compliance, or are unsure how this new enforcement initiative may impact your business, please contact the Labor & Employment attorney at Barclay Damon with whom you normally work or any attorney in our Labor & Employment Practice Area.