Employer-provided payroll cards programs remain a topic of discussion in the news and are now the subject of proposed legislation backed by New York State Attorney General Eric Schneiderman.
On June 13, Scheinderman’s office published a report entitled “Pinched by Plastic: The Impact of Payroll Cards on Law-Wage Workers”. This report synthesized the results of the AG’s investigation into payroll card programs, which included both voluntary and involuntary responses from 38 local and national companies with operations in New York. While acknowledging many of the benefits associated with the programs, the report concluded that they present many problems for employees, particularly “low-wage or limited English proficient (LEP) workers, and those without internet or smartphone access.” In particular, the report took issue with insufficient and confusing information concerning the employees’ ability to obtain wages free of charge, the various fees associated with using payroll cards, and the lack of voluntary employee consent and availability of a traditional paper check alternative.
To combat these perceived shortcomings, Schneiderman has proposed the Payroll Card Act, which, according to the report, would protect the rights of workers and provide clarity to employers in their implementation of payroll card programs. As currently drafted, the Act would:
- Mandate that employers obtain the employee’s written, informed consent to participate in a payroll card program;
- Require employers to provide adequate notice of the terms and conditions of the card before the employee chooses his/her wage payment method;
- Require employers to select a payroll card vendor that provides one free network of ATMs and a limited number of free out-of-network transactions per pay period;
- Prohibit employers from using a payroll card vendor that charges a fee for services that are essential to employees’ access to their wages (i.e., fees for withdrawing net wages, maintenance fees, etc.);
- Prohibit employers from using a payroll card vendor that charges overdraft or negative balance fees;
- Require employers to select a payroll card vendor that provides employees with ample access to account information;
- Mandate that traditional paper checks be provided to those employees who choose not to receive wages via a payroll card or direct deposit;
- Prohibit employers from using a payroll card vendor that charges fees for transactions commonly undertaken by cardholders (i.e., ATM balance inquiries, debit and/or credit transactions, etc.)
- Require employees to select a payroll card vendor that provides free customer service;
- Mandate that employers provide cardholder employees with written notice concerning the terms and conditions of the card at the time their employment is separated;
- Prohibit an employer from receiving from the payroll card vendor any portion of payroll card-related fees paid by its employees; and
- Require employers to respect employee privacy.
While much of the Payroll Card Act focuses on the terms and conditions of the payroll card program itself—which would impact the financial institutions providing payroll card services just as much as the employers themselves — the Act does include provisions that have more specific implications on the wage payment methods made available by New York employers. Among other things, it would require that New York employees be given the option to receive wages through a traditional paper check. For many New York employers, providing a paper check alternative is inconsistent with the savings and efficiency of using an entirely electronic payroll system.
Schneiderman’s report is the result of an investigation his office began last July, after Democrats in the U.S. Senate urged the Consumer Financial Protection Bureau and the U.S. Department of Labor to investigate the legality of such programs. His investigation included letters and subpoenas to a number of employers requesting details on their payroll card programs.
Financial industry lobbyists are expected to strongly oppose the bill. With the current New York State Assembly session expected to conclude on June 19, little legislative progress is likely in the short term.