CLIENT UPDATE

Putney, Twombly, Hall & Hirson LLP
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February 23, 2017

New York State Industrial Board of Appeals Invalidates Department of Labor Regulations on Use of Payroll Debit Cards by Employers for Payment of wages

On February 16, 2017, the New York State Industrial Board of Appeals (the “IBA”) revoked final regulations published by the New York State Department of Labor (the “DOL”) concerning the use of payroll debit cards. The regulations were set to take effect on March 7, 2017. See September 9, 2016 Client Alert, available at http://putneylaw.com/cu_090916.html.

In striking down the regulations, the IBA held that the regulations exceeded the scope of the DOL’s authority because the regulations placed impermissible restrictions on financial institutions. Specifically, the regulations infringed on banking regulations that set the fees that banks may charge. The IBA also noted that at least eight bills on payroll debit cards had been introduced in the New York State legislature in recent years, and none of the bills were enacted. 

If they had been implemented, the regulations would have required employers using payroll debit cards or direct deposit as methods of compensation to provide special written notice to employees about their options and rights with their receipt of wages.  The regulations also would have codified DOL guidance requiring that employees paid by payroll debit cards have access to unlimited free withdrawals and access to at least one A.T.M. located “a reasonable travel distance” from home or work.  The revocation of the regulations does not disturb these requirements and employers are advised to continue to adhere to preexisting DOL guidance.

Takeaway for Employers

The DOL has 60 days to appeal the decision, but has not indicated whether it intends to do so. Barring a successful appeal, the regulations will not be implemented. However, we remind employers that Labor Law § 192 continues to require advance consent from an employee before making wage payments by payroll debit card. In addition, employers may not directly or indirectly charge an employee to receive his or her wages, pursuant to Labor Law § 193.

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If you have any questions regarding the IBA’s decision or the revoked regulations, please do not hesitate to contact us.