Effective March 7, 2017, a New York State Department of Labor (NYSDOL) rule will provide additional protections to employees who are paid through direct deposit and payroll debit cards against the fees, expenses, and other burdens associated with these payment methods (the Rule). New York State currently allows employers to pay employees through multiple methods, including cash, check, direct deposit, and payroll debit cards.

Employee Authorizations

While these methods provide employers with greater flexibility, the Rule subjects employers to certain restrictions. For example, employers who issue payment via direct deposit or payroll debit cards must obtain written authorization from their employees to be paid through these means, and must provide written notice to employees of all of the options for receiving wages. Such written notice must also inform the employees that they will not be charged fees for services that are necessary for them to access their wages in full, and must include a list of locations where an employee can access and withdraw the wages at no charge within reasonable proximity to his or her place of residence or work. The NYSDOL is currently in the process of creating template forms that satisfy the notice and written authorization requirements of the Rule. After obtaining written authorization from their employees, employers must wait seven business days to issue the payment of wages by payroll debit card. Employers subject to a collective bargaining agreement that expressly provides for the methods by which wages must be paid must obtain written approval from the union before issuing payroll debit cards. Employers may not require employees to use direct deposit or payroll debit cards under any circumstances. Written authorizations to use direct deposit and/or payroll debit cards prior to March 7, 2017 will remain valid after the effective date of the Rule as long as notices required by the Rule are provided to employees before its effective date and employees are expressly notified of their right to withdraw consent.

Payroll Debit Cards

In addition to the requirements above, employers who wish to pay employees through a payroll debit card must provide employees with (i) local access to one or more automated teller machines that offer withdrawals at no cost to the employees; and (ii) 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. Furthermore, employers may not charge an employee a fee for other activities typically associated with the use of debit cards, including, for example, overdraft, shortage, low balance status, account inactivity, or closing an account. The additional costs associated with a payroll debit card account may not be passed on to employees. An employer must provide written notice at least thirty days before any change in the terms and conditions of a payroll debit card takes effect.

Questions?

Prior to overhauling their wage payment system, employers should consult with counsel on drafting their notice and written authorization forms, navigating the requirements of the Rule, and determining the cost of compliance.