The New York State Department of Labor recently adopted a final regulation which greatly changed the conditions under which an employer in New York State can pay wages by direct deposit or by debit card.
While New York law already permits employers to pay employees via these two wage payment methods – subject to obtaining the employee’s prior written consent (New York Labor Law section 192), in addition to cash and paper paychecks, the final regulations provide many new detailed requirements and restrictions.
Under the new regulations, in addition to obtaining the employee’s “prior written consent” to be paid via either direct deposit or paycard, the employer must also provide the employee with a written notice that contains all of the following information:
- A plain language description of employees’ available wage payment method options;
- A statement that the employer may not require employees to accept wage payments by paycard or direct deposit; and
- A statement that employees may not be charged any fees for services they need to access their wages in full.
In addition, if the employee is opting to be paid by paycard, the written notice must also contain:
- A list of locations where they can access and withdraw their wages at no charge within reasonable proximity to their place of residence or work.
This written notice must be provided to the employee before payment is made either via direct deposit or paycard. Moreover, this notice must be provided to the employee in English and also in the employee’s primary language, if other than English. The New York State Department of Labor will be making templates available on its website before the new regulation goes into effect.
In addition to the foregoing notice requirements, for employees who are opting to be paid via paycard, there are other requirements that employers must follow for payments via paycard:
- An employer must wait seven business days after receiving an employee’s consent before it can make the employee’s first wage payment and
- If there is a collective bargaining agreement, the employer must also obtain the union’s approval before issuing paycards.
- Automated teller machines (ATMs) must be free, allow full pay accessibility and be located within a reasonable travel distance from work or home;
- Employees must have at least one free method to withdraw their total net wages for each pay period, or any remaining balance on their paycard;
- Employers or their agents cannot charge employees any direct or indirect fees for many services, which are listed in the final regulations (e.g., point of sale transactions; overdraft, shortage or low-balance status; customer service); and
- Employees are entitled to at least 30 days’ written notice (all language requirements applicable to notices apply here as well) before any changes are made to terms and conditions, especially changes to the itemized list of fees (employees must be reimbursed for any new or increased fees incurred before the 30-day period expires).
This new law impacts both new employees and existing employees who have already requested (i.e. submitted prior written consent) to be paid via direct deposit or paycard.
In order for existing employees’ consents to remain valid, before March 7, 2017 (the regulation’s effective date), employers must do the following:
- Comply with the new notice requirements detailed in the final regulations before March 7; and
- Expressly notify employees that they have the right to withdraw their prior consent at any time (an employer must honor a consent withdrawal by paying the employee by another method of his or her choice within two pay periods).
It is recommended that employers who have employees in New York whom they pay via direct deposit or paycard take steps to comply with the new law before the March 7, 2017 effective date. This means that for existing employees, employers should starting taking steps now to provide the required written notices to existing employees who have consented to payments via either of these methods. For new employees, employers should start complying with the new requirements as soon as possible.