It is very common for employers to pay employees by direct deposit, and an increasing number pay employees with payroll debit cards. Beginning March 7, 2017, employers in New York will have to deal with a new regulation regarding the use of direct deposit and payroll debit cards for payment of wages. The new regulation, issued by the New York Department of Labor and titled “Methods of Payment of Wages,” imposes heightened notice and consent requirements on employers offering either service.

Under the regulation, if an employer uses a method of payment other than cash or check, the employer must provide notice in English and the employee’s primary language (when the NYDOL offers a template). The notice must include:

  • a plain language description of the employee’s wage payment options;
  • a statement that the employee is not required to accept wages in the form of payroll debit card or direct deposit;
  • a statement that the employee will not be charged service fees for accessing wages; and
  • a list of places where the employee can access and withdraw wages for free within a reasonable distance from his/her residence or place of work.

Employers must also obtain informed consent (in writing) from employees in order to lawfully pay them via payroll debit card. As the required notice makes clear, employers may “not make the payment of wages by direct deposit or payroll debit card a condition of hire or of continued employment” or charge employees a fee, directly or indirectly, for the use of direct deposit or payroll debit cards.

Additionally, if wages are paid by direct deposit, the employer “shall ensure” that: (a) it retains a copy of the consent form during the employee’s employment term and for a period of 6 years after the last direct deposit, and (b) direct deposits are made to the employee’s chosen financial institution.

If wages are paid by payroll debit card, the employer “shall not deliver payment of wages unless”: (a) at least 7 business days elapse after the employee gives consent “during which time the employee’s consent shall not take effect,” and (b) the employee is provided with “[a]t least one method to withdraw up to the total amount of wages for each pay period or the balance remaining on the payroll debit card without incurring a fee.” Payroll debit cards may not be linked to other forms of credit, and payroll-debit-card funds cannot expire. The regulation also contains an anti-kickback provision, which prohibits employers from receiving “any kickback or other financial remuneration from the issuer, card sponsor, or any third party for delivery of wages by payroll debit card.”

A number of other states—including California, Florida, Virginia, and Georgia—have regulations or statutes dealing specifically with payroll debit cards. Employers in these states should review the applicable laws to ensure that their payroll methods are in compliance. Employers should also review the laws and regulations pertaining to direct deposit, which are more common across the country.