Changes to the Virginia Payment of Wage Law, Va. Code Ann. § 40.1-29, now provide additional flexibility for employers who wish to streamline their payroll process. These changes also have caused confusion, as the revised statute is not clear on whether employers are prohibited from mandating the payment of wages via direct deposit. The prior version of the statute specifically precluded employers from forcing employees to accept their wages via direct deposit. Under the revised version, however, this language has been removed. While it seems that the General Assembly attempted to modernize the law to allow additional means of payment, it obscured the direct deposit issue. What is clear is that in Virginia, it is permissible to pay wages via direct deposit into an account in the name of the employee at a financial institution designated by the employee. Also, it is clear that employers may not select the financial institution in which the wages are deposited.

Under the amendments to the Payment of Wage Law, employers may now pay wages to employees hired after Jan. 1, 2010 using a prepaid debit card or card account from which the employee is able to withdraw or transfer funds, so long as the employer provides full written disclosure of any applicable fees. Such payment arrangements may be made even if an employee has not consented to the use of the debit card and in cases in which the employee has failed to designate an account at a financial institution into which wages may be paid via direct deposit. Under the new law, employers can pay wages by funding debit cards provided that they arrange for the debit card or card account to be issued through a network system and that the employee has the ability to make at least one free withdrawal or transfer per pay period within the network. This withdrawal or transfer must be for any sum that the employee chooses.

According to the Virginia Department of Labor and Industry (the “DOLI”), these statutory revisions are confusing, and it is still working to interpret the language of the new statute. The DOLI is the state agency charged with administering and enforcing state laws governing the payment of wages, the minimum wage and child labor. It is arguable that the recent deletion of the prohibitory language in the law concerning direct deposits evidences the legislature’s intent to change the law concerning direct deposit. It also is arguable that, unless the employee designates an account into which wages are to be directly deposited, no such deposits can be made. We understand that the DOLI has requested assistance from the attorney general in interpreting the law, and we will update this article if and when the attorney general issues any guidance. For now, the conservative approach would be to assume that the prohibition against mandatory direct deposit remains in effect.