Rules on Wages Paid on Debit Cards – NY Department of Labor

New York Department of Labor (NYDOL) Protects Workers from Hidden Payroll Costs

A recent New York Times article reported that “Workers in New York State who receive their wages on prepaid cards will gain consumer protections next year that advocates say are among the strongest in the nation.” The intention of new rules that will take effect in March 2017 is to ensure that employees do not have to pay hidden fees to access to their wages.

The Times estimates that approximately 200,000 individuals working in New York receive their wages through debit cards. Federal law prohibits employers from mandating that employees accept payroll debit cards, but this law is “routinely flouted.”

Many workers are forced to accept wages this way, and some choose this method of payment voluntarily. Receiving wages on a prepaid debit card has many advantages, particularly for employees with no bank accounts. Payroll debit cards provide a secure way to store and spend their earnings.

However, activists complain about the high fees, hidden costs and other abuses often associated with payroll debit cards. The New York Attorney General issued a report in 2014 which found that some employees, many of whom are considered low-wage workers, paid an average of $20.00 per month to access their wages. Activists argue that accepting payments on debit cards or via direct deposit should always be voluntary and that workers who choose one of these payment methods should not have to pay fees for using or obtaining their wages.

Wages on Debit Cards Must be Voluntary

Under the new NYDOL regulations, workers in New York will receive extra protection against some of the problems associated with payroll cards. The rules reiterate and support what the federal law says: employers may not require employees to accept payments on debit cards. Beginning in March 2017, employers must give workers written notice containing a plain language description of payment options. The notice must also state, among other things, that employers may not require workers to accept wages via direct deposit or payroll debit card. In fact, the regulations specifically prohibit employers from making an offer or the continuation of employment conditional on the acceptance of a particular payment method.

Employees Will Not Have to Pay Fees to Access Wages

The new regulations will require that any employee who consents to be paid by debit card have the ability to make unlimited cash withdrawals from at least one ATM located a reasonable distance from their home or place of employment.

Perhaps most importantly, the NYDOL rules will also ensure that workers’ not incur fees for various activities including:

  • checking account balances
  • account inactivity
  • overdrafts
  • contacting customer service online or by phone
  • receiving written statements
  • obtaining transaction histories
  • closing an account
  • replacing a lost, stolen or expired card
  • taking action necessary to receive wages
  • using the card to make point-of-sale transactions

It is likely that many companies will continue to offer and utilize payroll debit cards. Some business owners have expressed concern, however, that the new rules will deter companies from offering this type of wage distribution. The naysayers fear that the imposition the new regulations place on employers will result in high compliance costs. Such costs may make it impractical for them to offer debit cards to workers who prefer them. We will see what, if any, shifts take place once the new regulations become effective.

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Leeds Brown Law, P.C. is a fullservice employment law firm representing clients in the New York City, metropolitan area. If you have an issue regarding wages, unpaid overtime, workplace discrimination or wagetheft, consider contacting our experienced legal team at 1-800-585-4658.


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