New York Draft Payroll Card Regulations Aim to Prevent Wage Theft

Author: Rena Pirsos, XpertHR Legal Editor

UPDATE: The New York State Department of Labor revised the proposed regulations in October, 2015, and again in June, 2016. The proposed regulations will not be effective until six months after they are published and adopted as final.

June 8, 2015

The New York State Department of Labor (DOL) published draft regulations on May 27 aiming to better manage how employers pay employees with payroll debit cards to ensure that workers receive the full amount of wages they are entitled to. While the law in New York already permits employers to pay employees with payroll cards in addition to cash, check and direct deposit, the proposed regulations further outline employers' associated responsibilities and prohibit them from profiting from or passing along costs to employees.

Governor Andrew M. Cuomo commented in a DOL press release that "An honest day's pay for an honest day's work should never come with an asterisk" and that the proposed "regulations crack down on one of the more underhanded forms of wage theft and will better protect hundreds of thousands of employees who work and live in New York." The DOL estimates that 13,000 businesses in New York State pay approximately 200,000 workers by payroll debit card.

The proposed regulations would require employees' advance consent, which employers would have to document and keep on record for six years. In addition, employers would be required to notify employees of convenient locations where they can access their wages for free.

Employers would also be required to provide employees with unlimited free ATM withdrawals within a local network as well as a way to withdraw the full amount of wages each pay period. The proposed regulations expressly prohibit fees, such as those for customer service, account maintenance, overdraft and inactivity.

The DOL's Acting Commissioner, Mario J. Musolino, noted in the Press Release that the regulations will especially help protect low-income workers who don't have bank accounts and are, therefore, more susceptible to "predatory fees." He also said that the DOL "drafted these regulations to ensure a balance between convenience and cost-prohibitive fees. Workers should not be cheated out of the wages they have earned and should be able to access them at no charge through a network of local ATMs."

The regulations will take effect following a 45-day notice and comment period.