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September 12, 2016

New York Department of Labor Limits Use of Debit Cards by Employers for Payment of Wages

On September 8, 2016, the New York State Department of Labor (the “DOL”) published final regulations that prohibit the use of payroll debit cards without employee consent and prohibit charging employees fees for using the cards. The regulations will take effect on March 7, 2017.

Under the regulations, employers must offer their workers the option of being paid either by cash or check, and may only provide compensation in a debit card with an employee’s approval. Employees who are paid on debit cards must be allowed to make unlimited, free withdrawals from their cards from at least one A.T.M. located “a reasonable travel distance” from home or work.  An employer who uses methods of compensation other than cash or check must provide employees with a written notice that identifies:

  1. A plain language description of the employee’s options for receiving wages;
  2. A statement that the employer may not require the employee to accept wages by payroll debit card or by direct deposit;
  3. A statement that the employee may not be charged any fees for services that are necessary for the employee to access his or her wages in full;
  4. If offering employees the option of receiving payment via a payroll debit card, a list of locations where employees can access and withdraw wages at no charge to the employees within reasonable proximity to their place of residence or place of work.

The regulations do not apply to employees in a bona fide executive, administrative or professional capacity whose earnings are in excess of $900 per week, or an employee working on a farm not connected with a factory. However, under “Regulation E” of the federal Electronic Fund Transfer Act, employers are nevertheless prohibited from requiring such employees to receive wages via payroll cards. Instead, such employees must at least be offered the option of receiving wages via direct deposit and/or check.

Takeaway for Employers

Employers who offer debit cards as a method of compensation should review their policies to ensure they comply with the DOL’s regulations regarding debit cards. Specifically, employers should ensure that they obtain employee consent, provide their employees with the requisite notice and remove any deductions from employees’ wages for fees associated with the cards.

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If you have any questions regarding the regulations, please do not hesitate to contact us.