On June 15, 2016, the New York State Department of Labor (“NYSDOL”) published a proposed rule governing the permissible methods for an employer in New York to pay wages to employees. The most radical change is that all current consents for direct deposit will be invalid and every employee that accepts payment by direct deposit will have to reauthorize its use. New York employers only have until July 15, 2016, to submit proposed comments.

New Proposed Notice and Consent Requirements

New York Labor Code section 192 prohibits employers from paying wages using direct deposit without the employee’s advance written consent. The proposed rule adds new requirements regarding notice and consent. Specifically, before any employee may be paid by direct deposit or a paycard, such employee must receive notice in English or the employee’s primary language if not English and the Labor Commissioner has provided a template in such language, that contains:

  • A description of all of the employee’s wage payment options;
  • A statement that the employer may not require the employee to accept direct deposit or payment using a payroll debit card;
  • 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
  • For payroll cards, a list of locations where employees can access and withdraw their wages without charge within reasonable proximity to their workplace or place of residence. The NYSDOL has indicated this requirement may be satisfied by providing employees with access to an online or telephone system that allows them to identify such locations.

Any existing notice that fails to contain the above information is invalid, and any consent obtained without such notice, such as consent obtained prior to the requirements of the new rule, is invalid. In addition, any consent obtained through intimidation, coercion or fear of adverse action, or as a condition of employment, is invalid. Employees must also be able to withdraw their consent at any time.

Employers may use electronic notice and consent so long as employees are provided with the ability to view and print the notice and consent without cost while at work. The employer must notify employees of their right to print the materials. Employers must also maintain the consent forms for the duration of employment and six years after the last wage payment.1

Additional Proposed Requirements for Paycards

The proposed rule also imposes the following additional requirements for paycard programs:

  • A seven-day waiting period after notice and consent but before the employee may pay the employee using a paycard.
  • Employee access to at least one ATM within a reasonable travel distance to the employee’s work location or home that offers unlimited free withdrawals to the employee
  • At least one means of withdrawing up to the full account balance each pay period without a fee.
  • Employers or their agents are prohibited from charging most fees that could be incurred using a payroll debit card, such as overdraft type services.
  • Employers must give at least 30 days’ advance notice of any changes to the terms and conditions of the paycard program.

Recommendations

If the final rule resembles the proposal, New York employers should consider taking the following steps:

  • Review current pay practices to determine whether employees are paid with direct deposit and/or paycards.
  • Determine whether existing consent forms comply with the new requirements, which is unlikely given the extensive new requirements.
  • If they are or would like to use paycards or direct deposit, make a list of all current pay alternatives and, if necessary, have the list translated into the employees’ primary languages, as that will be needed for the new notices.
  • Provide all employees being paid by direct deposit and paycards with the new notice and obtain new written consents.
  • If no new consent is obtained, suspend payment by direct deposit or paycards and cut paper checks.2

In addition, New York employers should consider submitting comments on the proposed rule, whether individually or in coordination with other employers or various organizations, to express their concerns about the proposed rule. Employers must act quickly, as the comment period expires on July 15, 2016.