Why it matters

New York employers, take note: the state’s Department of Labor has adopted final regulations regarding permissible methods of payment for most non-exempt employees. Beginning March 7, 2017, employers are required to obtain written, informed consent from employees for the use of any method of payment except cash or check (such as direct deposit and payroll debit cards) and to ensure that employees are not charged fees for accessing payments. “These tough new standards protect some of our most vulnerable New Yorkers from predatory practices that seek to deny them a fair day’s pay for a fair day’s work,” Governor Andrew Cuomo said in a statement about the rules.

Detailed discussion

Employers in New York have four permissible methods of paying wages: cash, check, direct deposit, or payroll debit card. A “payroll debit card” is defined by the Department of Labor’s (DOL) new regulations as “a card that provides access to an account with a financial institution established directly or indirectly by the employer, and to which transfers of the employee’s wages are made on an isolated or recurring basis.” The new regulations provide detailed instructions regarding payment by methods other than cash.

Regarding wage payments by check, employers must ensure that the check is a negotiable instrument and that no fees are imposed on employees for using checks as a means to receive payment. For example, an employer may not charge a fee for the replacement of a lost or stolen check.

To be able to issue payment by direct deposit or a payroll debit card, an employer is required to provide adequate written notice and obtain the employee’s informed consent. The notice must include: (1) a plain language description of all options for receiving wages; (2) a statement that accepting wages by payroll debit card or by direct deposit is not required; (3) a statement that the employee may not be charged any fees to obtain access to full payment of wages; and (4) if payment is being offered by payroll debit card, a list of locations where employees can obtain wage payments at no charge “within a reasonable proximity” to the workplace or their place of residence. The term “reasonable proximity” is not defined in the regulations.

In turn, an employer offering these payment options must obtain informed, written consent from employees. Employers may not condition hiring or continued employment or take adverse action against an employee who refuses to consent to be paid through direct deposit or payroll debit card.

The notice and consent can be in electronic form as long as the employee is able to view and print the notice and consent for free while at work and the employee is notified of this right. In addition, the notice and consent must be provided in English and the employee’s primary language when the DOL makes a template available in that language.

The regulations describe additional requirements for employers who wish to make payments by payroll debit card. Employers must wait seven business days after receiving consent from the employee before issuing payment by debit card. Employers must also ensure local access to one or more automated teller machines at no cost and 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.

The regulations also prohibit employers and their agents from charging (directly or indirectly) specific fees to employees, including fees for opening or closing an account; account inactivity or overdraft, shortage or low-balance status; access to account or balance information and customer service; account maintenance; certain declined transactions; and any fee not explicitly defined in the contract between the issuer and employer or in the terms and conditions provided to the employee. The debit card may not be linked to any form of credit.

An employer may not pass on any of its own costs associated with a payroll debit card account to an employee and must guarantee that the funds on a payroll debit card do not expire. However, the account may be closed for inactivity provided that this is spelled out in the agreement between the employer and issuer and the issuer gives reasonable notice to the employee and refunds the remaining funds within seven days. An employer must also give adequate notice before a change in the terms and conditions of the debit card, subject to certain technical requirements defined in the regulations. For workers covered by a valid collective bargaining agreement, an employer must also obtain approval from the union before paying by payroll debit card.

To read the new rule, click here.