New York State Department of Labor Publishes Revised Proposed Regulations Governing Use of Payroll Debit Cards

On October 28, 2015, the New York State Department of Labor (NYSDOL) published revised proposed regulations modifying its draft regulations (which were initially published on May 27, 2015) governing permissible methods of wage payment, including the use of payroll debit cards (also referred to as paycards).

While the focus of the revised proposed regulations is on an employer’s use of payroll debit cards, they also codify guidance provided by the NYSDOL in the agency’s opinion letter pertaining to paychecks. The revised proposed regulations closely track the draft regulations. They maintain the requirement that employers disclose all information to employees pertaining to payroll debit cards and receive written consent for using debit cards to pay employees; but they eliminate certain restrictions and clarify that electronic consent regarding method of payment is permissible.

Written Notice and Consent for Payroll Debit Cards and Direct Deposit

Employers using direct deposit or payroll debit cards must provide adequate notice of the terms and conditions before the employee selects a wage payment method. Under section 192-1.3(a) of the revised proposed regulations, the notice must include the following:

• a description of all of the options employees have for receiving wages;
• a statement that the employer will not require employees to accept wages by payroll debit card or by direct deposit (i.e., payment via direct deposit or payroll debit card is optional);
• a statement that employees may not be charged fees for services needed to access wages; and
• a list of locations where employees can access and withdraw wages at no charge within reasonable proximity to their place of residence or work.

Advance written informed consent from employees must be obtained without intimidation, coercion, or fear of adverse action by an employer against an employee who elects not to accept payment of wages by direct deposit or payroll debit card. The revised proposed regulations also prohibit employers from making payment of wages by direct deposit or payroll debit card a condition of hire or continued employment. Moreover, employers are required to permit employees to withdraw their consent to be paid via payroll cards at any time, and employers must finalize a change in payment methods within a reasonable period of time, but no longer than two full pay periods.

Employers may give written notice and obtain consent electronically provided that they provide employees access to the notice and consent forms at work, without cost, they permit employees to view and print both the notice and consent forms, and they notify employees of the right to print such materials.  Under section 192-1.3 of the revised proposed regulations, employers must provide the written notice and consent in both English and the primary language of the employee when a template notice and consent in that language becomes available from the NYSDOL’s Commissioner of Labor. Note that under the revised proposed regulations, an employer must have the approval of the union before paying by payroll debit card, where an employee is covered by a valid collective bargaining agreement that expressly provides the method or methods by which wages may be paid to employees.

Like the draft regulations, the revised proposed regulations, at section 192-1.4, prohibit retaliation or discrimination against “any employee because such employee has not consented to receive his or her wages by payroll debit card.” But, they expand the prohibition of “unfair, deceptive or abusive practices” to include any “method or methods of payment of wages,” not just payroll debit cards.

Payroll Debit Card Requirements

Before an employee selects a wage payment method, employers must provide adequate notice regarding the payroll debit card program including the terms and conditions (such as the cardholder agreement) of the payroll debit card and any and all fees. Employers must also provide employees with a plain language description of all of the methods available to access wages, including the locations of any free automated teller machines (ATM).

Prior to delivering payment of wages by payroll debit card, employers must also ensure that employees are provided with (i) at least one method to withdraw up to the total amount of wages for each pay period or balance remaining on the payroll debit card without incurring a fee; and (ii) at least one local, fee-free, ATM located within a reasonable distance to the employee’s worksite or home. Also, an employee’s funds on a payroll debit card must not expire. Under the revised proposed regulations, while an issuer may close an account for inactivity, the issuer must provide reasonable notice to the employee, and the remaining funds must be refunded within seven days.

The revised proposed regulations still prohibit certain fees for (i) services that are essential to employees’ access to their wages including for withdrawing the entire net pay for each pay period inactivity, dormancy, or other fees that result from card non-use; account maintenance; initiation, participation, loading, or other fees to receive wages; account closing fees; or a fee for a replacement card at reasonable intervals; (ii) overdraft or low balances; and (iii) transactions commonly undertaken by cardholders, including ATM balance inquiries, point of sale transactions, or certain declined transactions. The revised proposed regulations now permit fees for declined transactions at ATMs that provide free balance inquiries because “such fees can be reasonably avoided by employees.” See Response to Comment 11. The revised proposed regulations also eliminate the requirement that employers provide employees with bank statements, transactional history, and fraud/dispute resolution.

At least 30 days prior to the implementation of any change in the terms and conditions of a payroll debit card account or fees, an employer must provide written notice of the change, including an changes in the itemized list of fees, in plain language—in the employee’s primary language or in a language the employee understands and in at least 12-point font. If an employee is assessed a new fee or increase by the issuer before 30 days after notice is provided, the employer must reimburse the employee for the amount of that fee.

Payroll Paycheck Requirements

The revised proposed regulations are not all about the use of payroll debit cards. An important and oft overlooked aspect of the regulations addresses and codifies New York Opinion Letter, RO-IO-0028-Revised (June 29, 2010) regarding payments by check. Specifically, section 192-2.1 states that,

When paying wages by check, an employer shall ensure that:

(a) The check is a negotiable instrument;

(b) There is at least one means of no-cost local access to the full amount of wages through check cashing or deposit of check at a financial institution or other establishment reasonably accessible to the employee’s place of employment; and

(c) The employer does not impose any fees in connection with the use of checks for the payment of wages, including a fee for replacement of a lost or stolen check.

Direct Deposit Requirements

With respect to direct deposit, under section 192-2.2, employers must (1) have consent from the employee, (2) maintain a copy of the employee’s consent during the period of the employee’s employment and for six years following the last payment of wages by direct deposit, and (3) ensure that such direct deposit is made to a financial institution selected by the employee.

Exemptions, Comment Period, and Implementation

The revised proposed regulations still would not apply to individuals working in executive, professional, or administrative positions, but instead of an earnings threshold of $900.00 per week, the revised proposed regulations tie the threshold requirements into section 192(2) of the New York Labor Law.

The NYSDOL will receive comments for 30 days after the publication of the revised proposed regulations.

Of note, the NYSDOL revised the implementation of the rule to go into effect six months after adoption of the final rule, giving employers time to review and revise current policies to comply with the new law.

What Employers Should Do Now

Employers currently paying employees by check should take the following actions:

• ensure that there is at least one means of no-cost local access to the full amount of wages through check cashing or deposit of check at a financial institution or other establishment that is reasonably accessible to the employee’s place of employment; and
• confirm that fees, including a fee for accessing wages, are not imposed in connection with the use of checks for the payment of wages.

Employers currently offering wage payment by direct deposit should review their practices including their notice and consent forms and revise where necessary.

Employers currently using payroll debit cards should take the following actions:

• review their practices including but not limited to their notice and consent forms;
• draft compliant policies and consent forms;
• review their payroll debit card provider’s cardholder agreement and fee structure to ensure compliance with the revised proposed regulations; and
• review locations of ATMs and banks where employees are able to access wages and customer service.