New York Proposed Rule Impacts Direct Deposit and Payroll Cards

Date: July 08, 2016

Do you pay employees’ wages through direct deposit or payroll debit cards?
If so, you should be aware that the New York State Department of Labor has
proposed guidelines setting forth new requirements that employers must follow.
The proposed rule imposes significant burdens on direct deposit and payroll
debit cards, as outlined below.

The Department of Labor is accepting comments on the proposed rules through
July 15, 2016. NFIB outlined concerns in a letter submitted to the Department earlier
this month.
The proposed regulations, unless further modified by the state,
will go into effect during the first half of 2017.

Proposed Requirements for Consent to Electronic Payment of Wages
New York State law currently prohibits employers from paying employees via
direct deposit without advance written consent from the employee.  The most significant change proposed is that most,
if not all, current consent forms for direct deposit will be invalid. Ever
employee that accepts payment by direct deposit will therefore have to
reauthorize its use unless the existing consent form already provides some very
specific information.

The new consent form would be required to be provided in
English and the primary language of the employee, and it would have to include:
(1) a description of every method of payment available to the employee; (2) a
statement that the employer may not require the employee to accept wages by
direct deposit or by payroll card; (3) a statement that the employee may not be
charged any fees to access his or her wages in full; (4) if offering payment by
payroll debit card, the employer must also include a list of locations where
employees can access and withdraw wages in close proximity to their home or
place of work. The advance notice requirement wouldn’t apply to employees in
executive, administrative or professional capacity earning $900/week or more or
employees working on a farm. This is consistent with current law.

Additional Requirements for Payroll Debit Cards

Employers that use payroll debit cards would be required to follow additional
requirements including providing the written notice and consent and obtaining
the employee’s signature at least seven days before the first payment of wages.
 Employers also would be required to use
a check cashing or banking program within reasonable proximity to the employee’s
place of work or home that also offers free withdrawals and a means of
withdrawing up to the full account balance each pay period without a fee. The
new requirements also would compel employers to give employees 30 days of
advance notice of any changes to the terms or conditions of the payroll

NFIB’s Comments to Department Outline Concerns
NFIB’s letter to the Department of Labor outlined several concerns that make
the proposed rule unworkable for small business. More specifically, employers
would be required to do the following:
*Provide employees with individual lists identifying locations for cash access
in proximity to their home or place of work
*Coordinate arrangements with check cashers or banks for employees to cash
checks or access wages without fees
*Comply within rules within an unreasonably short time period.

What does this mean
for employers?
Employers are encouraged to review their existing direct deposit and
consent forms and determine whether existing consent forms comply with the
extensive new requirements. If employers use payroll cards, they should consult
their payroll companies and issuers of payroll cards in order to ensure that
they are in compliance should the proposed rule become adopted.  The final regulation will go into effect six
months after adopted.  

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