Connecticut Payroll Card Law to Take Effect

Author: Rena Pirsos, XpertHR Legal Editor

June 13, 2016

A new law taking effect in Connecticut on October 1 will allow employers the convenience of paying employees by payroll card. Previously, this method of wage payment was not permitted, and employers in the state could pay employees only in cash, by check or direct deposit.

The new law defines a payroll card as "a stored value card or other device used by an employee to access wages from a payroll card account and that is redeemable at the employee's election at multiple unaffiliated merchants or service providers, bank branches or ATMs." A gift certificate does not qualify as a payroll card.

A payroll card account is an account at a bank, or a Connecticut or federal credit union, directly or indirectly set up by an employer, into which the employer may transfer an employee's pay or other compensation, in accordance with federal Regulation E.

An employer's payroll card program must meet several requirements. The following are some of the most important ones:

  • Payment by payroll card must be optional.
  • An employee must provide voluntary, written authorization to opt into the program.
  • An employer must provide employees with clear, written notice of the payroll card option in the language the employer usually uses to communicate employment-related policies to its employees.
  • The employer's notice must:
    • State that the program is voluntary;
    • Include all terms, conditions and an itemized list of any fees charged by the financial institution;
    • Explain how employees can access the compensation loaded onto the card and check the remaining balance at no cost; and
    • State that third parties may charge fees.
  • If an employee who is usually paid by payroll card requests payment by direct deposit or check, the employer must comply with that request within 14 days after receiving notice from the employee.

In addition, an employer may not charge employees a fee to pay for the cost of the program. Employees must be able to make at least three free withdrawals per pay period and to withdraw the full amount on the card for the pay period at a convenient location. An employer also must enable employees to check their account balances 24 hours a day, seven days a week, either by automated phone system, teller machine or electronically.

Current written and electronic pay statement requirements will apply to employees paid by payroll card as they do to employees paid by other methods. However, the new law adds the requirement that, for employees paid by payroll card, an employer must obtain the employees' explicit consent if it wants to provide their pay statements electronically rather than on paper.