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Direct Deposit Laws by State

Author: Alice Gilman

This chart summarizes the requirements under state law with which an employer must comply to pay wages to employees by direct deposit into their checking or savings accounts. Many employers offer direct deposit as an alternative method of wage payment because it is generally a more secure, efficient and inexpensive method than paying employees in cash or with paper paychecks.

Federal Regulation E sets the overall rules for electronic payments, including direct deposit. The regulation allows an employer to mandate direct deposit of wages subject to certain restrictions. For example, employees must be able to choose either the bank or other depositary institution into which their wages will be deposited, or if this choice is not available, at least one alternative wage payment method.

State wage payment laws specify the wage payment methods an employer may offer to employees - cash, check, direct deposit or paycard. At a minimum, most state wage payment laws adopt Regulation E's provisions. But some states extend additional protections to employees, such as prohibitions on mandatory direct deposit or added employee fees, or requirements to provide a pay statement for each deposit.

States that do not have a direct deposit law are marked N/A. In the absence of a state law, federal Regulation E may be followed.