New York Employers Brace for New Restrictions on Electronic Wage Payment Methods
On September 7, 2016, the New York State Department of Labor (“NYSDOL”) adopted regulations setting forth new rules for payroll processing that place restrictions on an employer’s ability to use electronic wage payment options. The new rules are intended to guarantee, among other things, that employees will not have to pay any fees to access the funds in their paychecks. While the regulation applies to all forms of payroll processing, the changes primarily impact employers utilizing electronic payment methods, such as direct deposit and payroll debit cards. Employers will have until March 7, 2017, to bring their payroll practices in compliance with the new requirements.
Over the last decade, many employers have implemented payroll debit cards as a counterpart to their direct deposit program in order to allow all of their employees to receive electronic wage payment, even those who do not have bank accounts. The benefits of electronic wage payment for the employer include minimizing check printing and distributing costs, along with providing a reliable and timely means to deliver wages to the employee. The use of electronic wage payment is also more secure and convenient for both the employer and employee. A September 8, 2016 press release by Governor Cuomo’s office estimated that approximately 200,000 workers and 13,000 businesses in New York State currently use payroll debit cards.
CHANGES TO EXISTING ELECTRONIC WAGE PAYMENT METHODS
One significant change in the new rule is that it augments existing notice and consent requirements whenever employers offer to pay an employee using an electronic form of wage payment. The new rule requires that employers provide a highly specific pre-consent written notice form, in English and the employee’s primary language, which contains all of the following information:
- A “plain language” description of all of the employee’s wage payment options, which must include a statement that the employee may be paid by check;
- A statement that the employer may not require the employee to accept direct deposit or payment using a payroll debit card;
- A statement that the employee cannot be charged any fees for services that are necessary for the employee to access his or her wages in full; and
- For payroll debit cards, a list of locations where employees can access and withdraw their wages without charge within a reasonable proximity to their workplace or place of residence. This requirement can be met by providing a link to a website that provides a list of ATM locations that provide local access – which is defined as a reasonable travel distance to the employee’s workplace or home.
The rule also establishes a new two-step process for enrollment of employees in payroll debit cards. The first step requires the employer to obtain the employee’s consent, as set forth above, and the second step requires the employer to wait an additional seven business days before taking any action to pay the employee using a payroll debit card. The new rule contains a number of additional requirements, such as: (a) record keeping requirements, (b) a ban on most types of fees for the payroll debit cards, and (c) a prohibition on retaliation against any employee who elects not to receive his or her wages through either direct deposit or payroll debit card.
As a result of the new consent and notice requirements, the NYSDOL has declared that any consent obtained prior to the effective date of the final rule, without the requisite notice, will only be valid if the employer provides its employees with such a notice prior to March 7, 2017, and the employees are explicitly notified of their right to withdraw their existing consent. Employers should review the practices of their payroll companies and debit card issuers to ensure compliance on their part as well. Finally, employers should consult with their labor and employment counsel to make sure that all new payment regulations are being followed going forward.
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