With an increased number of technological advances in wage payment methods, many employers are now faced with uncertainty about which methods are permitted under wage and hour laws. On November 4, 2016, the state of Pennsylvania passed a law (S.B. 1265) to help address whether employers may issue payroll debit cards as a method of payment. Under the law, the use of electronic funds transfer systems is facilitated by providing that credits to accounts in financial institutions satisfy legal requirements for payments by cash or checks. Starting May 3, 2017, employers that choose to pay their employees via payroll debit cards will have to fulfill specific requirements. Employers must obtain an employee’s authorization and provide him or her with a “clear and conspicuous” notice of:
- wage payment options;
- terms and conditions of the payroll card account option;
- fees assessed by third parties in addition to fees assessed by the card issuer; and
- methods available for accessing wages without fees.
S.B. 1265 was most likely a result of several prominent cases that tried to clarify the use of payroll debit cards. In Siciliano v. Mueller, for example, employees working at a McDonald’s franchise were receiving their wages via a JP Morgan Chase Payroll Card. Plaintiffs argued that a payroll debit card is neither “lawful money of the United States” nor a “check” as clarified in the Pennsylvania Wage Payment and Collection Law. The employer, on the other hand, argued that payroll debit cards are both equivalent of “money” and “check” as required under the Pennsylvania Wage Payment and Collection Law. Furthermore, it was stated that funds could be “loaded” to payroll debit cards and converted to cash at a bank or automated teller machine (ATM). The Court concluded by interpreting the text of the law and applying basic principles of statutory construction that payroll debit cards are neither “lawful money” nor “check.”
The new Pennsylvania law clarifies that the use of payroll debit cards is allowed under the Pennsylvania Wage Payment and Collection Law. Covered employers are encouraged to review the text of the law to stay compliant.