On September 7, 2016, the New York Department of Labor adopted a final regulation which details the four permissible methods for paying employee wages, and outlines the strict notice and consent requirements for paying wages by direct deposit or payroll debit cards (the “Regulation”). A link to the Regulation can be found by clicking here. The Regulation takes effect on March 7, 2017.
The Regulation, part of the New York Labor Law, provides clarification and specificity as to the permissible methods of paying employee wages, which include cash, check, direct deposit and payroll debit cards. Critically, the Regulation includes specific guidance on paying wages by direct deposit and payroll debit cards. By way of example, employers in New York who wish to pay employee wages by direct deposit or payroll debit card must provide employees with a written notice which identifies the following:
- A plain language description of all of the employee’s options for receiving wages;
- A statement that the employer may not require the employee to accept wages by payroll debit card or by direct deposit;
- A statement that the employee may not be charged any fees for services that are necessary for the employee to access his or her wages in full; and
- If offering employees the option of receiving payment via payroll debit card, a list of locations where employees can access and withdraw wages at no charge to the employees within reasonable proximity to their place of residence or place of work.
Likewise, under the Regulation employers must obtain written consent from employees to make payment by direct deposit or payroll debit card. Consent, however, is not required for individuals employed in a bona fide executive, administrative or professional capacity whose earnings exceed $900 per week. The Regulation also specifies that when paying wages by direct deposit in New York, an employer must: (i) get written consent from the employee; (ii) maintain a copy of the employee’s consent for six (6) years following the last payment of wages by direct deposit; and (iii) the direct deposit must be made to a financial institution selected by the employee.
The majority of the Regulation, however, addresses payment by payroll debit cards, and the Rule is among the nation’s most comprehensive. A “payroll debit card” is defined as a “card that provides access to an account with a financial institution established directly or indirectly by the employer, and to which transfers of the employee’s wages are made on an isolated or recurring basis.” With regard to such payroll debit cards, an employer must ensure that it has consent from the employee and such consent must be received at least seven (7) days prior to taking action to issue the payment of wages by payroll debit card. Further, in order to pay employees by payroll debit card, an employer must also provide local access to one or more automated teller machines that offer withdrawals at no cost to the employee and provide at least one method to withdraw up to the total amount of wages for each pay period or balance remaining on the payroll debit card without the employee incurring a fee. Critically, the Regulation prevents an employer from charging an employee fees in connection with the use of a payroll debit card. Pursuant to the Regulation, an employer or agent shall not charge, directly or indirectly, an employee a fee for 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;
- Telephone or online customer service;
- Accessing balance or other account information online;
- 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 automated teller machine that does not provide free balance inquires;
- Any fee not explicitly identified by type and dollar amount in the contract between the employer and the issuer or in the terms and conditions of the payroll debit card the employer provides to the employees.
Moreover, the Regulation provides the following restrictions on the payment of wages with a payroll debit card:
- The wages paid with a payroll debit card must not be linked to any form of credit, including a loan against future pay or cash advance on future pay;
- An employer cannot pass any of its costs associated with the payroll debit card to its employees, nor can an employer receive a kickback for delivering wages via payroll debit card;
- An employer or its agent shall not deliver the payment of wages by payroll debit card unless the agreement between the employer and the issuer requires that the funds on a payroll debit card shall not expire, but the account may be closed for inactivity provided “reasonable notice” is given to the employee;
- At least 30 days before any change in the terms and conditions of a payroll debit card takes effect, an employer must provide written notice in the employee’s primary language of the change, which must be in at least 12-point font; and
- Where the employee is covered by a valid collective bargaining agreement that expressly provides the method by which the wages are to be paid to employees, the employer must have the approval of the union before paying wages via payroll debit card.
Importantly, the Regulation prevents an employer from engaging in any unfair, deceptive or abusive practices in relation to the method or payment of wages to an employee. Likewise, an employer may not condition continued employment upon the payment of wages by direct deposit or payroll debit card, nor can they discriminate against any employee on that basis.
The Regulation is comprehensive and imposes significant new wage payment requirements on employers. Employers should review their current payroll practices and agreements with payroll providers prior to the Regulation’s effective date to ensure they comply in all respects with the new rule. Likewise, employers should review applicable collective bargaining agreements as to not run afoul of the new Regulation.