The New York State Department of Labor recently published a revision to its proposed employment law regarding electronic payments and payroll, reported Paul Hastings, an international law firm. Many employers, lawyers and other related parties claim the June 15th revision burdens both businesses and employees who prefer to use preloaded payroll cards.
The original rule and proposed changes
Section 192, first proposed May 27th, 2015, requires that businesses obtain consent from employees before forcing them to receive their payroll wages electronically – through direct debit or a prepaid card – as opposed to getting a check.
The new proposal adds more information employers must provide in order to obtain proper consent from their employees. Businesses will be required to provide: a description of all the payment options available to employees; a statement indicating that employees can't be charged to access their wages; a list of nearby locations where employees can make withdrawals from their payroll cards without incurring a charge; and a statement saying that they have the freedom to choose to receive their wages however they wish and are not required to use prepaid cards or direct deposit.
In addition, employees would have the right to withdraw their consent to direct deposit or payroll cards at any time.
Changes specific to prepaid cards
There are a few noticeable details in the recent proposal that would greatly affect how businesses handle payroll cards. First, employers could not begin the process of establishing cards for employees until a week after receiving the consent form. Employees electing to use direct deposit would be eligible to receive their money immediately.
Second, the proposal holds numerous requirements regarding an employee's ability to access funds on a payroll card. Businesses would have to work with a card company that offers unlimited free withdrawals at an ATM within a reasonable distance of the employee's work or home. These companies must also allow their cardholders to withdraw their full balance without being charged. Businesses would also be prohibited from charging employees for any card-related fees the company incurs from the card-issuing business it works with.
What this means for businesses and employees
Should the proposed changes go through, businesses will have to obtain consent from employees who already use direct deposit or prepaid cards. If they do not get this consent or the forms they use do not meet the state-mandated requirements, employers must issue paper checks instead, PYMNTS.com reported. Employers would have six months to comply after the legislation passes.
Bill Sullivan, senior director for the National Automated Clearing House Association, spoke with PYMNTS.com about his concerns regarding the law. He told the publication that he believes the proposal sets paper checks as the default and is therefore biased toward this particular payroll option. Because of this bias, he said he believes many employees without bank accounts will gravitate toward using paper checks. They'll then have to head to a check-cashing service and pay a fee to access their money.
Businesses with employees in New York should partner with a check issuing service that can also dispense electronic payments via direct debit and prepaid card. By using a service that offers all three forms, companies will encounter less of a struggle to ensure their employees are paid in accordance with state law.