Hawaii Allows Wage Payment by Payroll Debit Card Effective September 1, Statutorily Permits Direct Deposit

Author: Rena Pirsos, XpertHR Legal Editor

August 4, 2014

A new law enacted in Hawaii will permit employers to pay wages to employees using payroll debit cards starting September 1, 2014, with significant restrictions. The state's wage payment law also now officially permits direct deposit of employee wages.

A payroll card program implemented by an employer under the new law will be subject to all of the following restrictions:

• An employer may not require employees to be paid via payroll card or make this method of wage payment a condition of hire or continued employment.
• Employees must have the option of being paid by paper check or direct deposit.
• An employee may not be paid by payroll card unless he or she voluntarily agrees to this method of wage payment, either in writing or by electronic signature - i.e., the employee must consent without intimidation or coercion by the employer and without fear of discharge or retaliation for refusing to consent.

In addition, before obtaining an employee's consent, an employer must provide the following information to the employee in writing, using plain language and in at least 10 point font:

• A description of the employee's options for receiving wage payments;
• The payroll card fee schedule, stating the dollar amount of all fees, in a form that the employee can retain for his or her records;
• A notice stating whether third parties may assess additional fees for use of the payroll card;
and
• A list of the services available to the employee at no cost.

The employer is responsible for all fees that may be assessed outside of the fee schedule provided.

An employer's payroll card program must also provide for all of the following, at no cost to the employee:

• A payroll card on which the employee may receive wages, with no charges for the application, initiation, transfer, loading of wages by the employer, privilege of participation or distribution or delivery of the initial payroll card;
• Three free withdrawals from the payroll card, at least one of which is for the full amount of the net wages on the card, at a federally insured depository institution or at affiliated automated teller machines;
• Free access to account information online and by phone, 24 hours per day and seven days a week;
• A readily accessible electronic history of the employee's account transactions covering at least the 60 days before the date the employee electronically accesses the account;
• A written history of the account transactions covering at least the 60 days before the employee requests the history verbally, in writing or by electronic signature;
• No overdraft fee or charge under the payroll card issuer's overdraft service against the employee or the employer's account; and
• The ability to close the payroll card account and obtain payment of the balance remaining on the card.

The new law also adds direct deposit to the Hawaii wage payment law as a permitted method of payment, and holds an employer responsible for any fees incurred if it has insufficient funds in its bank account for an electronic transfer of an employee's wages. These provisions took effect July 2. Previously, direct deposit was permitted under guidance issued by the Hawaii Department of Labor and Industrial Relations, but was not provided for in the wage payment law.

Earlier this year, Hawaii employers were also required to begin providing more detailed information than previously on employee pay statements and in employment records.