Direct Deposit & Payroll Cards: Final Rules Released

Date: September 20, 2016 Last Edit: September 27, 2016

Many, if not most, businesses in New York State will be impacted by a new Department of Labor regulation that affects how employers pay their employees, particularly those that use payroll debit cards and direct deposit. The new rules on the use of payroll debit cards are among the most comprehensive and strongest in the nation. NFIB/NY outlined concerns about the draft rule earlier this summer in a letter to the Commissioner of Labor. More information on NFIB’s position is detailed in this article

The final regulation, published on September 7, 2016, becomes effective on March 7, 2017.

In the coming months, employers should take time to develop a compliance strategy including reviewing current payroll processes and written notices/consents; updating record keeping practices to align with the new regulation; and working with local banks to ensure that employees have access to obtain fee-free payment of wages in proximity to home or work. 

Notice and Consent Requirements
In general, employers must:
-Obtain written consent to pay wages by direct deposit or payroll cards
-Provide written notice explaining methods for wage payment and informing employees that they are not required to accept payment via debit card or direct deposit (with some exceptions including white collar professionals making greater than $900 per week). 
-Provide written notice that no fees will be charged for services or access to wages.

The Department of Labor is currently working on notice templates for employers. 

Employers must: 
-Provide a list of locations where employees can access and withdraw wages without charge, including a replacement fee for lost or stolen checks, or provide a link to a website with this information.

Direct Deposit
Employers must:
-Obtain written consent from the employee and keep the consent form for the duration of the employment plus six years. 
-Prior written consent forms for direct deposit will remain effective, but employers must provide employees with the new written notice that describes pay options, method and option for withdrawing from direct deposit, states employees are not required to participate in direct deposit and sets forth that employers cannot charge fees associated with payment. Again, the Department of Labor is creating notice templates for employers. 

Payroll Debit Cards
Employers must:
-Obtain consent from employees at least seven days prior to payment of wages. This means that, in some circumstances when consent has not been obtained seven days prior, employers will have to make an initial payment of wages to an employee in another traditional method of payment such as by paycheck.  
-Provide local access to an ATM that offers no cost withdrawals.
-Provide at least 30 days written notice if the terms and conditions of a debit card will change, including changes to a list of fees. 

-Cannot charge fees and or pass along fees associated with various banking services including: declined transactions, written statements, replacement of the payroll debit card at reasonable intervals, account inactivity or maintenance, overdraft or low balance, customer service support, among other items. Employers using payroll debit cards should carefully review this list. 

If employees are covered by collective bargaining agreements that provides the method by which wages must be paid, the employer must get the union’s approval before paying by payroll debit card.

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