Paycard Regulations Invalidated in New York, Challenged at Federal Level
Author: Rena Pirsos, XpertHR Legal Editor
The State of New York Industrial Board of Appeals issued a decision invalidating the below final paycard regulations before they took effect. An appeal of that decision, filed by the New York State Department of Labor, is pending in the New York State Supreme Court. In addition, a resolution has been introduced in the US House of Representatives challenging forthcoming federal paycard regulations.
February 21, 2017
New York Developments
The State of New York Industrial Board of Appeals (the Board) has issued a decision invalidating and revoking the final paycard regulations that were about to go into effect on March 7. In response to a petition challenging the validity of the regulations filed by Global Cash Card, a national provider of payroll debit cards, the Board concluded that the state Department of Labor (DOL) exceeded its authority under New York's wage payment law because the final regulations concerned the regulation of banking services rather than the payment of wages.
The state DOL issued the regulations intending to clarify and supplement existing guidance on paycards and direct deposit. The regulations would have required New York employers to comply with additional notice and consent requirements and to ensure employees' full access to their pay at ATMs. They also would have prevented card issuers from charging fees to the employees for a variety of card-related services.
Despite the Board's decision, New York State employers may still offer employees the option to be paid by paycard under the guidance that has been in place for several years. The issue may not be fully settled though, as the state DOL has 60 days to appeal the Board's decision.
Federal paycard regulations may also now be on the Congressional chopping block. Representative Roger Williams (R. Tex.) has introduced House Joint Resolution 73 under the Congressional Review Act (CRA), which would nullify the final regulations issued by the Consumer Financial Protection Bureau (CFPB) that are expected to take effect October 1, 2017.
The CFPB's final regulations require employers to ensure employees who want to be paid by paycard receive and understand certain disclosures from the financial institution issuing the cards before the first time pay is loaded onto them. The final regulations also enhance other already existing employee protections.
The CRA allows Congress to review new federal regulations via an expedited legislative process and to overrule them by passing a joint resolution. Both the House and the Senate must pass the joint resolution to invalidate the regulation and then the president must sign it. However, it remains to be seen whether a comparable resolution to invalidate the CFPB regulations will be introduced in the Senate.