In Alisha Siciliano et al. v. Albert/Carol Mueller et al., the owners of a fast food franchise required employees to be paid wages through payroll debit cards. The employees argued that the mandatory debit card payments ran afoul of the state’s Wage and Payment Collection Law, which states that wages must be paid “in lawful money of the United States or check.”
The Muellers argued that the state legislature has adopted the use of direct deposits as the functional equivalent of a check or lawful money and that payroll debit cards should be granted similar deference. However, the court determined that the “functional equivalent” argument was unavailing because the payroll cards, unlike direct deposit, caused the users to potentially incur over-the-counter withdrawal fees and inactivity fees. Furthermore, the court keyed its decision to the mandatory nature of the debit payroll cards at issue, noting that “the use of a voluntary payroll debit card may be an appropriate method of wage payment,” but that such a determination would require guidance from the Pennsylvania General Assembly.
Employers should be aware that, unlike Pennsylvania, many states explicitly allow employers to offer employees the option of receiving compensation through debit payroll cards, including California, Florida, Illinois, New York, and Texas. The federal Consumer Financial Protection Bureau (CFPB) has also issued a bulletin that emphasizes the protections afforded to users of voluntary payroll debit cards. The CFPB states that employees must be given the option of receiving wages through a payroll debit card or through other means (i.e., by cash or check) and that the balance and 60-day account history of the payroll debit card must be accessible by phone and online. The CFPB also mandates employers to provide a disclosure of any fees that may accompany a payroll debit card.
These recommendations do not cover the varying regulations of every state. Accordingly, employers should consult counsel before providing employees the option of payroll debit cards or to ensure their current payroll debit card policy is compliant.