New York Payroll Card Regulations Upheld by Appellate Court
On January 9, 2020, a New York appellate court upheld the New York State Department of Labor’s (“NYSDOL”) regulations regarding the use of payroll debit cards as a method for paying employee wages. In Reardon v. Glob. Cash Card, Inc., 2020 NY Slip Op 00187 (3d Dept Jan. 9, 2020), the Appellate Division, Third Department, ruled that NYSDOL Commissioner Roberta Reardon acted within her authority in adopting the regulations, which initially took effect in September 2016.
Global Cash Card, Inc., a provider of payroll debit cards, initially challenged the regulations before the New York Industrial Board of Appeals, which determined that the Commissioner had exceeded her rule-making authority and revoked the regulations. The NYSDOL subsequently prevailed on appeal and the Appellate Division has now affirmed the lower court’s order. Thus, the regulations are now in effect.
As an initial matter, the regulations require employers who use electronic methods of wage payment (i.e., payroll debit cards and/or direct deposit) to provide to employees a specific pre-consent written notice containing all of the following information:
- a “plain language” description of all of the employee’s wage payment options;
- a statement that the employer may not require the employee to accept wage payment by direct deposit or 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 employers offering payment by payroll debit cards, a list of locations where employees can access and withdraw their wages without charge and 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 within a reasonable travel distance to the employee’s workplace or home.
Next, employers must obtain the employee’s informed written consent to payment of wages by payroll debit card or direct deposit. The regulations specify that such consent must be “without intimidation, coercion, or fear of adverse action.” Simply, the consent must be truly voluntary.
The written notice and consent must be provided in English and the employee’s primary language (when a template notice and consent in such language is made available by the NYSDOL). The notice and consent may be provided and obtained electronically as long as employees are able to view and print the notice and consent while at work and without cost. Employees must also be notified of their right to print such materials through such electronic process.
The NYSDOL regulations specifically regarding the use of payroll debit cards impose additional obligations on employers. Such rules require, among other things, the following:
- after obtaining the employee’s consent to payment of wages by payroll debit card as mentioned above, employers must wait at least seven business days before issuing the first payment by payroll debit card;
- employees must be able to access their wages in full without any charges, fees, or encumbrances;
- there must be at least one method for employees to withdraw up to the total amount of wages for each pay period or balance remaining on a payroll debit card without incurring a fee;
- employers must not link any wage payment by payroll debit card to any form of credit, such as a loan against future pay or a cash advance on future pay;
- employers must not pass any costs associated with a payroll debit card account to an employee, and employers are prohibited from receiving any kickback or other financial award from the card issuer for delivering wages by payroll debit card;
- the agreement between the employer and the payroll debit card issuer must state that the funds on a payroll debit card shall not expire;
- employers must provide employees with at least 30 days’ advance written notice of any change in the terms and conditions of a payroll debit card, which notice must be in “plain language,” in the employee’s primary language or in a language the employee understands, and in at least 12-point font; and
- employers are prohibited from charging employees various fees, including, without limitation, point of sale transactions; overdraft, shortage, or low balance status; account inactivity; maintenance; providing the employee with written statements, transaction history, or the issuer’s policies; telephone or online customer services; accessing balance or account information; and others.
In light of the appellate court’s ruling, employers will need to begin complying with the regulations immediately. Global Cash Card could appeal the appellate court’s decision, but the regulations would remain in effect unless stayed pending the appeal. Accordingly, employers using payroll debit cards should coordinate with their payroll card issuers and be sure to issue compliant written notices to employees of their wage payment options in accordance with the regulations, and wait the requisite seven business days after receiving an employee’s written consent before making the first wage payment by payroll debit card. Given the significant penalties employers could face for violating wage payment laws, employers should consult with employment counsel to ensure compliance with these regulations.
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