Overview. The New York Department of Labor (DOL) has published new regulations related to wage payment methods, including that an employer must obtain written consent to pay wages through any method other than check or cash. The regulations are effective on March 7, 2017 and will impose greater obligations on employers who wish to offer the option of wage payment through payroll debit cards or direct deposit.
Details.
Required Written Notice. Employers that 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 (generally, white collar exempt employees who make more than $900 per week); 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 where employees can access and withdraw wages without charge within “reasonable proximity” to an employee’s residence or workplace.
Consent for Wage Payments by Direct Deposit or Payroll Debit Card. Subject to limited exceptions, an employer must obtain an employee’s written consent to pay wages by direct deposit or debit card. An employer cannot make payment of wages by direct deposit or debit card a condition of hire or of continued employment.
For employees who elect to be paid via direct deposit, employers must maintain a copy of the employee’s consent during the period of the employee’s employment and for six years following the last payment of wages by direct deposit. In addition, a copy of the employee’s written consent must be provided to the employee.
Notices and consents must be provided or obtained in English, and the primary language of any non-English-speaking employee. The DOL plans to prepare templates that contain all of the information necessary for compliance with the notification and consent requirements. Employers are not required to use these templates, but may do so if they choose. Electronic notice is permissible if all regulatory requirements are met.
Additional Requirements Specific to Payroll Debit Cards
The heaviest burden imposed by the Regulation falls on employers seeking to make wage payments by payroll debit card.
· Waiting Period after Obtaining Consent: The 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.
· Employees May Not Incur Fee: An employee may not be charged a fee, directly or indirectly, associated with payroll debit cards.
· 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.
· 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.
· 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.
· 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.
· Existence of a Collective Bargaining Agreement: 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.
Call to Action
Employers will need to review current payroll practices to ensure all employees being paid with direct deposit or payroll debit cards have been provided with written notice that complies with the Regulation and have voluntarily signed compliant consent forms. Please note: Previously signed direct deposit and payroll debit cards consent forms will remain valid, assuming an employer provides written notice that complies with the Regulation before March 7, 2017, and employees are expressly notified of the right to withdraw consent.
Employers should begin to coordinate arrangements with existing or potential payroll debit card providers to ensure offerings comply with all new requirements, including, but not limited to, those related to fees, and provide employees with individual lists identifying locations for cash access in proximity to their home or workplace.
Employers should also review existing CBAs to determine whether union approval is needed to pay wages through payroll debit cards.
Future Legislation
In recent years, lawmakers have become increasingly interested in the topic of payroll cards as this method of wage payment continues grow in popularity with employees. This year alone, more than seven states considered legislation or regulations concerning payroll cards. Moving forward, we expect to see continued efforts from state and federal policymakers to either facilitate or further regulate elements of payroll cards.
For additional information on the new regulations, Addition of Part 192 to Title 12 NYCRR, please click here.
If you have any questions regarding this Alert please contact your Relationship Manager or Service Team.
Produced in cooperation with Jackson Lewis LLP.