Arizona Allows Employers to Mandate Electronic Payment of Wages

Posted on July 12, 2011 by Wage and Hour Practice Group

By William Hays Weissman

Effective on July 20, 2011, employers in Arizona can mandate electronic payment of wages. Employees that do not elect direct deposit may be paid by payroll debit card, which now can be treated as the default option.

HR 2151 amends Ariz. Stat. sections 23-350 and 23-351 by allowing employers to choose one of four methods of payment of wages: (1) cash; (2) check; (3) if elected by the employee, direct deposit into a financial institution of the employee’s choice; or (4) if an employee does not designate a financial institution for direct deposit, by payroll debit card.

If an employer chooses to pay wages by payroll debit card, the employee must be entitled to withdraw his or her full wages without fee at least one time per pay period, but not more than once per week. The employer must also provide the employee with a list of all potential fees an employee may incur. Also, if the employee is paid by direct deposit or payroll debit card, the employer must furnish the employee with a written or electronic statement of the employee’s earnings and withholdings.

Payroll cards can be a win-win option for both employers and employees. Employers are given greater flexibility in methods of paying wages at reduced cost, and with greater security than cash or traditional checks. Employees no longer have to incur check cashing fees, and also have protection against lost cash. While it is not clear that Arizona’s bill represents any kind of trend by the states toward mandating electronic payment of wages, Arizona’s law should definitely be welcome by Arizona employers.

Photo credit: MBPHOTO, INC.

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Vermont Employers Now Permitted to Pay Wages by Payroll Debit Card

Posted on June 14, 2010 by Wage and Hour Practice Group

Vermont State FlagAs of May 21, 2010, Vermont joins a growing number of states who now allow employers to pay employee wages with payroll debit cards. The new law, Act 115 (S.58), amends Vermont State Code §§ 342 and 343 to permit an employer to credit an employee’s wages to a “payroll card account directly or indirectly established . . . in a federally insured depository institution.” Before the employer can do so, however, it must obtain the employee’s written consent, and fully disclose the terms and conditions of the payroll card account option. Furthermore, the employer may not pass on any of the expenses associated with the payroll card account to the employee nor may the employer receive any remuneration for using the card at the employee’s expense. Also, Vermont’s Department of Banking, Insurance, Securities, and Health Care Administration, the agency charged with regulating the Act, may impose additional obligations on employers who utilize payroll debit cards.

Before the passage of Act 115, Vermont employers could only pay wages by check, direct deposit, or cash. Indeed, the state’s Department of Labor had long maintained that, “A debit card does not fit the definition of cash or check defined by the [Vermont Uniform Commercial Code].” Now, employers have a cost-effective alternative to writing checks for those employees who lack or refuse to use direct deposit.

The problem for employers, however, is that the payroll debit card alternative remains just that – an alternative. Because an employee’s written consent must first be obtained, employers are prohibited from simply mandating payroll debit cards for those employees who lack or refuse to use direct deposit. Thus, employers may still have to incur the expense of paying employee wages with checks. In fact, the average, annual cost to employers in having to generate replacement checks and checks for exception pay is $48 million.

According to its drafters, the Act is a win-win for all parties: “The intent of this act is to provide employees with a convenient, safe, and flexible way to receive wages and to reduce employers’ payroll costs by allowing for the transfer of wages to a payroll card account.”

This entry was written by Milton Castro.
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Tennessee Permits Wage Payment by Prepaid Debit Card

Posted on May 20, 2010 by Wage and Hour Practice Group

Effective July 1, 2010, Tennessee has amended its wage payment statute, Tennessee Code section 50-2-103, to allow employers to pay their employees using prepaid debit cards if the following conditions are met:

  • The employee has the ability to make at least one withdrawal or transfer each pay period without cost to the employee for any amount contained on the card; and
  • The employer provides the employee with a full written disclosure of any fees that may apply.

Employees must be provided the option of being paid via direct deposit or prepaid debit card. If an employee elects to be paid by direct deposit but does not designate an account at a financial institution in a timely fashion for the transfer to occur, the employer may arrange to pay the employee via prepaid debit card.

This entry was written by Andrew Voss.

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Utah Joins the Growing List of States Allowing Employers to Pay Wages With "Pay Cards"

Posted on April 29, 2010 by Wage and Hour Practice Group

Effective March 24, 2010, employers in Utah are now permitted to use pay cards to compensate their employees for their wages or salary. The new regulation (Utah Admin. Rule R610-3-22) defines a pay card as a “stored value card that can be used at an ATM-type machine to access wages that are credited to the card.” If an employer in Utah intends to pay employees with a pay card, it must ensure that this new practice meets the following conditions:

  1. With one use, or a single transaction, the employee must be able to withdraw the full amount of earned wages without incurring a fee.
  2. The full amount of wages for a pay period shall be available for the employee via the pay card on the applicable payday.
  3. On each payday, the employer must provide the employee with a written or electronic statement of deductions from the employee’s gross wages for the pay period at issue.
     

Utah is not the only state to permit employers to utilize pay cards for the payment of wages. At this time, many states allow this practice, including: Alaska, Arizona, California, Colorado, Delaware, District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. Many of these states, however, have different requirements governing the use of pay cards. Moreover, in a number of these states, it may be unlawful to require employees to accept payment via pay card. As a result, before implementing a pay card system, employers should check the laws in states in which they operate to ensure that any change to existing pay practices complies with state law.

This entry was written by Jennifer L. Mora.

Image credit: Channel R
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