Pennsylvania’s Wage Payment and Collection Law requires employers to pay all wages, other than fringe benefits and wage supplements, due employees on regularly scheduled paydays designated in advance by the employer in cash, bank check, or direct deposit. As of May 4, 2017, Pennsylvania employers will have another option to pay employee wages each pay period.
On November 4, 2016, Governor Tom Wolf signed Senate Bill 1265 which amends the banking code to allow employers to use a payroll debit card on which an employer can load an employee’s wages each pay period. The payroll debit cards work like an ATM card but without the employee needing to have a bank account to access the funds. The sponsor of the bill introduced this option to provide an option to employees to avoid the costs of check cashing and money orders for those with little or no access to traditional banking.
The amendment allows for employers to use the payroll debit cards with certain restrictions that are intended to ensure that employees have access to the full amount of their wages, with unlimited, no-cost access to their accounts. These restrictions include:
- Employers may not require employee to accept payment by payroll debit cards.
- Employers that decide to use payroll debit cards must provide notice to employees prior to obtaining the employee’s authorization in writing or electronically that informs the employee of the following:
- All of the employee’s wage payment options;
- Terms and conditions of the payroll card account option, including the fees that may be deducted;
- Notice that third parties may assess fees in addition to the fees assessed by the card issuer; and
- The methods available to the employee for accessing wages without fees.
- Employer must receive authorization from the employee prior to using a payroll debit card. The employer must also allow an employee to change their method of payment. The change must take effect as soon as practicable, but no later than the first payday after 14 days from receipt by the employer of the employee’s request.
- Payroll card account must provide the employee with the ability without charge to:
- Make at least one withdrawal each pay period for any amount up to and including the full amount of the employee’s net wages for that period or one such withdrawal weekly if the employee is paid more frequently than weekly.
- Make one in-network ATM withdrawal each pay period or one such withdrawal weekly if the employee is paid more frequently than weekly.
- Ascertain the balance in the employee’s payroll card account through an automated telephone system or other electronic means.
- Financial institution holding the payroll card account must provide the employee with the disclosures to the extent required by law and the financial institution funds must be insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration.
- Employer must provide an employee with a written or electronic statement of earnings and deductions each pay period.
- The employer may not use a payroll card account that charges fees to the employee for any of the following:
- The application, initiation or privilege of participating in the payroll card program.
- The issuance of the initial payroll card or issuance of one replacement card per calendar year.
- The transfer of wages from the employer to the payroll card account.
- Purchase transactions at the point of sale.
- Nonuse or inactivity in a payroll card account if the nonuse or inactivity is less than 12 months in duration.
- The funds in a payroll card account cannot expire.
Take Away for Employers: Payroll debits cards provide value to both employers and employees. For employers, the cards help reduce fraud and the costs and headache of providing paychecks each pay period. For employees, the cards provide them access to funds without the need for a bank account or the expense of cashing checks. However, employers must remember that the use of the payroll debit cards cannot be forced on employees and it provides a potential source of exposure if the employer and/or financial institution do not comply with the restrictions of the new law. Employers who consider using this new method of payment should review the specifics of the law and ensure that they and the financial institution they are using to provide the payroll card accounts comply with all requirements.