Pay Cards and Their History of Drama in New York

Paperless payroll systems have done nothing but rise in popularity since being introduced. They cause less errors, are more efficient, are more convenient, and provide an immediate way for employees for employees to use their paychecks. Among these systems is the pay card, payroll debit cards that operate similar to a bank-affiliated debit card. Employees are able to use their pay card to withdraw money, online purchases, and basically anything else a bank debit card can do. The major difference between the two is that an employer dictates how much money is deposited onto the card rather than a bank. Pay cards have certainly been one of the most popular forms of electronic payroll systems, but like any other system they come with a slew of rules and regulations to make sure everything is done properly. For the state of New York, these rules and regulations have been debated back and forth for years.

Issues regarding paycards and direct deposit in the state of New York have been going on for years. As of 2018, every proposed litigation involving paycards and direct deposits for employers and employees has been annulled by a New York court (Supreme Court and Court of Appeals). The past few years has seen a battle for this rules and regulations fought by the New York State Department of Labor (NYSDOL), the New York State Industrial Board of Appeals (IBA), and Global Cash Card (a national paycard provider), just to name a few. As of 2017, the IBA reported that at least eight bills on this subject have been introduced to New York state legislation but none have been passed. Among the proposed regulations include:

• Imposition of a seven business day waiting period from execution of consent to initial payment by means of payroll debit card.
• A prohibition on a laundry list of potential fees.
• Requiring that wages paid by payroll debit card may not be linked to any form of credit.
• A prohibition on employers passing on costs associated with payroll debit card accounts or otherwise receiving kickbacks from third parties associated with payroll debit card programs.
• A prohibition on expiration of wages.
• An additional notice requirement if there are changes in the terms and conditions of the card accounts or fees charged to employees.
• A requirement that union approval be obtained for unionized employees.

Additionally, New York employers wanting to provide the option of paycards and/or direct deposit would be subject to further obligations:

• Providing a detailed written notice to employees.
• Obtaining voluntary consent prior to payment by either of these methods.

These regulations have yet to be enacted as the DOL, IBA, and NYSDOL have gone back-and-forth on revoking and proposing their ideas. 2016 had the IBA declare the NYSDOL to be overstepping their jurisdiction on a proposed regulation that would result in banking fees the NYSDOL aimed to regulate. Global Cash Card had challenged final DOL regulations regarding paycards in 2017, claiming they were “burdensome and unreasonable”. However, due to Global Cash Card not being an employer subject to New York’s wage payment law, it was decided that the company did not have the right to file a complaint with the New York Industrial Board of Appeals. Additionally, the DOL also claimed that Global Cash Card “usurped the DOL’s authority to issue regulations without prior legislative action”.

New York’s paycard issues don’t seem to be headed for a conclusion anytime soon. 2018 had the New York Supreme Court annul the ongoing litigation of “revoking burdensome regulations regarding payment of wages by direct deposit and paycards, plus other regulations governing wage payment method”. The regulations are currently revoked, pending further litigation. In the state of New York the Supreme Court is the lower, trial-level court while the Court of Appeals acts as the state’s highest court, so there may be more rulings regarding these regulations in the future.

We recommend you stay up to date on the on-going litigations regarding paycards, especially if you are a New York employer, as any large scale changes could eventually impact other state legislations as well. Keep an eye on the Proliant blog for more information as it releases.

Bibliography

APA staff. (2018, June 22). New York Court Issues Ruling in Paycard Case, Burdensome Paycard Regulations Remain Revoked. Retrieved from American Payroll Association: https://www.americanpayroll.org/news-resources/apa-news/news-detail/2018/06/22/new-york-court-issues-ruling-in-paycard-case-burdensome-paycard-regulations-remain-revoked

Jeffrey W. Brecher, R. I. (2017, Feb 22). New York State Regulations Governing Payroll Debit Cards Revoked. Retrieved from Society for Human Resource Management: https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/pages/new-york-state-regulations-governing-payroll-debit-cards-revoked.aspx

Pirsos, R. (2017, May 22). https://www.xperthr.com/news/new-york-dol-appeals-decision-invalidating-final-payroll-debit-card-regulations/26405/. Retrieved from XpertHR: https://www.xperthr.com/news/new-york-dol-appeals-decision-invalidating-final-payroll-debit-card-regulations/26405/