Everything’s Bigger in Texas (Except, Thankfully, the New Payroll Card Law)

The Texas governor recently signed into law Texas House Bill 2240. The mercifully short bill authorizes payment of wages via payroll cards, places reasonable fee disclosure obligations on the employer, and gives employees the right to opt-out of receiving their wages via payroll cards.

While payroll cards are permissible methods for paying wages in every state, payroll cards are not expressly recognized by every state’s wage payment laws. In those states where the statutes are silent, employers and payroll card providers are left applying somewhat loose-fitting direct deposit regulations to payroll cards.

The new law (which goes into effect September 1) goes beyond just explicitly authorizing payroll cards as a permissible wage payment method, though. Employers will be able to default employees into receiving wages via payroll cards. Employees will retain the right to opt-out to an alternate form of payment, but defaulting employees promises to increase adoption of electronic receipt of wages, saving costs for employers and making payment of wages easier and more reliable.

The team here at Payrollcardlaw.com is pleased to see the developments in Georgia and now in Texas. While the legislative sessions in most states are coming to a close, we expect to stay busy this summer as the litigation in New York slogs on. And while we’re closely monitoring the payroll card landscape, we’ll let you know if we see something noteworthy. Until then, check out the blog and, if you haven’t already, subscribe to receive updates.

Good News for Payroll Cards in Georgia

As we teased a couple of months ago, there’s good news for Georgia employers that still begrudgingly pay some employees by check. Earlier this week, Governor Kemp’s office announced he signed into law Georgia House Bill 373, which amends the wage payment statute to allow employers to achieve 100% electronic wage payment.

A bit of background: In 2015, Georgia amended its wage payment statute specifically to permit the payment of wages via payroll card with the consent of the employee, but required employers to provide employees with opt-out forms through which they could switch to payment by check. Since employees could demand payment via a check, employers were never able to realize the efficiencies associated with 100% electronic wage payment.

House Bill 373 changes that. Employers are no longer required to provide opt-out forms, and employees no longer have the ability to demand their wages via check. Reg E still prohibits employers from requiring employees to accept their wages via payroll card, but now employers can let employees choose between payroll cards and direct deposit without providing them with a paper check option.

Georgia’s wage payment statute still requires employers to obtain employee consent to pay via direct deposit, but employers can default workers who don’t provide direct deposit information to a payroll card. 

For all the payroll card news that’s fit to blog, check out our Payroll Card Blog. While you’re there, make sure to subscribe to receive updates. We’ll let you know if and when the Texas bill goes into effect and when we get a resolution to the saga in New York.

State Court Upholds New York Payroll Card Regulations Yet Again

Game of Thrones may be ending soon, but the drama in New York over the Department of Labor’s (“NYDOL”) payroll card regulations has been renewed for another season. In the most recent episode, the trial court reconsidered its prior decision reinstating the payroll card rules but again ruled in favor of the NYDOL.

Subscribers of the 50 State Payroll Card Law Blog should be well-acquainted with the saga of the New York payroll card regulations, but for our readers who can’t remember the intricacies of the plot, here’s a refresher:

September 2016 The NY DOL issued regulations regarding the methods of wage payment, which included provisions regulating the use of payroll cards.  
October 2016 Global Cash Card (“GCC”) challenges the rules before the Industrial Board of Appeals (the “Board”)  
February 2017 The Board sided with GCC and revoked the rules.  
April 2017 The NY DOL petitioned a New York court to review the Board’s revocation.  
May 2018 The court annulled the Board’s revocation, relying in part on documents that were not part of the administrative record, concluding that the Board’s determination was arbitrary and capricious.  
October 2018 At GCC’s request, the Court agreed to reconsider its order.

On February 20, 2019, the Court issued a new opinion, which again ruled in NYDOL’s favor, upholding the regulations. The court held that the Board acted arbitrarily and capriciously by revoking the entirety of NYDOL’s rule instead of just revoking the provisions addressing payroll cards that had been challenged. GCC had unsuccessfully argued that the Board had only revoked the challenged portion of the rule.

The story isn’t over yet, though. GCC recently appealed the decision, arguing that the lower court got it wrong and that the Board clearly intended only to revoke the payroll portions of the proposed regulations. The NYDOL has until June to file its response and we anticipate the appeal will continue for the rest of the year. Let’s hope we get a final decision on New York payroll card rules before the Night King enslaves us all.

Georgia and Texas Introduce Bills That Would Make It Easier to Pay Employees

Finally, some good news when it comes to payroll card legislation! While we’re waiting with breathless anticipation to see what happens with the litigation in New York, the legislation in New York, and the other piece of legislation in New York, Georgia and Texas legislatures are considering bills that would make it easier for employers to pay their workers electronically.

As it stands right now, Georgia’s wage payment statute does not permit employers to mandate electronic receipt of wages. While employers may default employees to payroll cards, employees may opt-out to their choice of direct deposit or check. House Bill 110 would amend the wage payment statute to remove this opt-out right.  Because Reg. E requires employers to offer employees the option of direct deposit to a financial institution of their choice, the Georgia bill effectively allows employers to mandate electronic pay by defaulting employees to payroll cards with the option to elect direct deposit.

While Texas doesn’t have any statutory or regulatory provisions specifically addressing payroll cards, its Labor Code allows employers to pay wages by electronic transfer of funds and “in another form” if agreed to by the employee. House Bill 2240 and its companion bill, Senate Bill 1485, would explicitly authorize employers to pay wages via payroll card and allow employers to default employees to a card unless they elect another form of payment.  This bill would allow employers to get close to 100% electronic pay.

The Texas and Georgia bills are obviously good news for employers because it’s easier and cheaper to pay employees electronically. They are also good news for employees because electronic wage payment provides workers with a higher level of safety and convenience than paper checks. Look back to Hurricane Harvey and the destruction that it brought to Houston and other parts of Texas. Businesses hit by more than four feet of rainfall faced immense challenges in delivering paper checks.  Mother Nature also created significant obstacles for employees trying to locate and then cash their paper checks.  Electronic payments, however, were delivered on time and with minimal interruption. 

We’ll track the Texas and Georgia bills on our 50 State Payroll Card Compliance Map. Be sure to subscribe to updates and we’ll let you know about the latest developments on these bills and other legislation affecting payroll cards.

New York Introduces Another Payroll Card Bill

Tom Kierner

We promise that our Payroll Card Compliance Map covers all fifty states. However, all the big news has been coming out of New York recently. Last week, we wrote about the introduction of Assembly Bill 88, which would legislatively affirm already existing regulatory obligations on employers to select payroll card programs that satisfy certain choice, consent, and wage access requirements.

Continuing the theme of “All New York, All the Time” is New York Senate Bill 832 (“SB 832”), which was filed on January 9. SB 832 would codify the majority of the requirements in the 2016 NY Department of Labor Wage Payment Rule. Notably absent from SB 832 are several of the more burdensome requirements that have troubled payroll card issuers and employers. SB 832 differs from the DOL regulations in the following ways:

  • No cooling off period. The Wage Payment Rule requires employee consent to be provided seven days before it becomes effective. SB 832 only requires that employees provide their consent.
  • More reasonable language requirements. The Wage Payment Rule requires that employers provide disclosures and obtain consent in the employee’s primary language or in a language the employee understands. SB 832 requires that employers provide disclosures in the language the employer normally uses to communicate employment policies.
  • Some differences on fee restrictions. The Wage Payment Rule prohibits eleven types of fees. SB 832 would, among other differences, allow inactivity fees after 9 months of cardholder inactivity and fees for declined ATM withdrawals.
  • Fewer disclosure requirements. The Wage Payment Rule mandates that employers provide a list of locations where employees can access and withdraw wages at no charge within a reasonable proximity to their place of residence or place of work. SB 832 has no such requirement.
  • A more clearly defined kickback prohibition. The Wage Payment Rule prohibits employers from receiving any financial remuneration from the issuer, card sponsor, or any third party for delivering wages via payroll card. While the Rule’s comments offered some additional clarification, SB 832 seems to simply prohibit kickbacks that vary based on employee utilization & fee revenue.
  • No change of terms requirement. The Wage Payment Rule requires that before any change in terms becomes effective, a notice must be provided to employees with 30 days’ notice. SB 832 does not contain such an obligation.

SB 832 still contains a majority of the consumer protections from the Wage Payment Rule, including requirements for employee consent, in-network ATM access, wage access, choice, fee restrictions, and program requirements.

So, what’s the deal with this bill? Does it signal that the legislature does not support the full extent of the DOL regulations? Or perhaps lawmakers are attempting to preserve some of the consumer protection provisions of the Wage Payment Rule in case Global Cash Card prevails in its legal challenge. If SB 832 passes and the Wage Payment Rule gets struck down, then SB 832 would serve as the sole source of law on payroll cards. If SB 832 passes and the Wage Payment Rule survives, presumably both (to the extent that the Wage Payment Rule doesn’t conflict with SB 832) will regulate employer wage payment behavior.

New York Introduces More Payroll Card Legislation

Stephen T. Middlebrook & Tom Kierner

While it’s still the dead of winter and many beasts are deep in hibernation, state lawmakers are awakening and starting to introduce new legislation.  Even those legislatures that aren’t officially in session yet are showing signs of life with the prefiling of bills.  While bills that were languishing in committee at the end of 2018 are dead, do not be sad, for we expect a flurry of new and recycled initiatives in the coming months.

Kicking off the 2019 “Let’s regulate payroll cards some more” season is New York with Assembly Bill 88 (“AB 88”), which would amend New York law to authorize payment of wages to payroll cards if certain requirements are met regarding employee choice and consent, wage and fund access, and delivery of a statement of deductions.

AB 88 would place the following obligations on employers paying wages via payroll cards:

  1. Employers must obtain an employee’s consent prior to paying the employee via payroll card. The consent must be obtained without intimidation, coercion, or fear of discharge and may not be a condition of employment.
  2. Employees must be permitted to withdraw, once per pay period, their wages in full without any fee and without difficulty.
  3. Employers must honor an employee’s revocation of consent or request to switch to direct deposit if timely notice is provided.
  4. Employers must furnish statements of deductions for each pay period.
  5. Wages deposited to the payroll card must be subject to withdrawal or other disposition by the employee to the same extent and in the same manner as if such deposit had been made directly by the employee into an account maintained in a financial institution in the name of the employee.

If any of this sounds familiar, it’s because requirements #1, #2, and #3 come from the payroll card regulations published by the New York Department of Labor in 2016  (the “Wage Payment Rule”). The proposed legislation, however, goes beyond the requirements of the NY DOL regulations.  Obligation #4 about furnishing deduction statements appears to be new in New York, but is in line with the majority of states. 

More troubling is the fifth requirement that an employee’s ability to withdraw or spend funds on a payroll card must mirror the capabilities provided by a bank account held in the name of the worker.  It’s nearly impossible to know what this is supposed to mean because accounts at financial institutions offer a wide variety of features. Is the account payroll cards are to be measured against a savings account or a checking account? Does it come with a debit card?  Does it offer bill pay services?  We’re assuming this is merely a first draft of the bill and that in the near future the latter provision will be replaced by one written with precision and clarity.  A compliance officer can dream, can’t she?

The impetus for introducing the bill is also a bit curious. The text largely echoes the core requirements in the Wage Payment Rule which is being challenged in court by Global Cash Card. Is this legislation an attempt to ensure that choice, consent, and wage access requirements are preserved in the event the NY DOL loses the case?

Perhaps, but those core requirements are not new to New York employers. Long-standing opinions of the NY DOL have established consent, choice, and wage access requirements. So, even if the Wage Payment Rule gets struck down, New York law would not suddenly turn into the wild west of wage payment.  So again, the purpose of the bill is a tad obscure.  We’re sure, however, that all will be revealed in future episodes of AB 88.

To find out what happens in the Global Cash Card litigation and with AB 88, subscribe to our updates. We’ll keep you abreast of major legislative and regulatory initiatives in New York and the rest of the country.  

The Saga Continues in New York

Tom Kierner

The saga of New York payroll card regulations continues with a recent court order. The court has agreed to reconsider its prior decision regarding the New York Department of Labor’s payroll card regulations. It’s still unclear if and when the regulations will go into effect.

If you haven’t been following the developments in New York, here’s a quick recap:

  • The New York Department of Labor (“NY DOL”) issued rules regarding the use of payroll cards to pay employees.
  • The rules were challenged by payroll card program manager, Global Cash Card (“GCC”).
  • The Industrial Board of Appeals (the “Board”) sided with GCC and revoked the rules.
  • The NY DOL petitioned a New York court to review the Board’s revocation.
  • The court annulled the Board’s revocation, relying in part on documents that were not part of the administrative record.
  • GCC then moved to renew and reargue its opposition to the NY DOL’s petition.

On October 15, the court granted GCC’s motion in part and permitted GCC to reargue the prior court order annulling the Board’s revocation. GCC is being given the chance to argue that documents that the court relied on when annulling the Board’s revocation were improperly considered and should be stricken from the record.

What does all this mean for the future of New York’s burdensome payroll card rules? It appears that GCC’s quest to get the rules struck down has temporarily been given new life. Stay tuned to payrollcardlaw.com for additional developments. When we hear anything, we’ll let you know.

New York Court Decision Makes It Even Harder to Pay Your Employees

Stephen T. Middlebrook

A state court has added a new twist to the long and tortured history of payroll card regulation in New York. Employers who pay workers in the state via payroll cards, along with the banks and program managers that administer those programs, need to be aware that the rules are changing. A recent court decision “annulled” an administrative ruling that had revoked a New York Department of Labor (NYDOL) regulation that had authorized, subject to a number of restrictions, the payment of wages to payroll cards. Confused? You should be. New York has managed to turn the regulation of a fairly simple financial product into a giant mess.

Payroll cards, a type of prepaid debit card, are offered by employers to their employees who don’t have bank accounts. The cards enable employers to pay their workers electronically instead of by check. Employees avoid the hassle and cost of check cashers (up to 2.07% in New York) and are able to access their funds at banks, merchants, and ATMs. The cards are issued by banks and insured by the FDIC.

Federal regulations provide for consumer protections, including comprehensive disclosures, error resolution, and protection from liability for unauthorized transactions. In addition to the federal regulations, many states have updated their wage and hour laws specifically to authorize the payment of wages via payroll cards. States usually place some additional restrictions on the product, typically requiring that employees be able to access all of their wages in cash without a fee.

New York first tried to update its laws in 2007 to confirm that workers may be paid on payroll cards, but the legislature was unable to agree on the details. In 2010, the NYDOL issued an opinion letter that concluded payroll cards were permissible under the existing statutes. Lawmakers got involved again in 2011, introducing but not enacting another bill authorizing payroll cards. Legislators tried again in 2013 and 2014. In 2015 five different payroll card bills were introduced. None passed.

Despite lawmakers’ ongoing efforts to set policy in this area, in May 2015, the NYDOL issued a proposed rule addressing payroll cards. This rulemaking had a number of problems and so a few months later NYDOL issued a revised proposal. The new version placed a number of requirements and restrictions on how payroll cards could operate which caused a group of state senators to complain that NYDOL had overstepped its authority and was, in fact, attempting to regulate the business of banking. NYDOL ignored those concerns and published its rule in final form on September 7, 2016, with an effective date of March 7, 2017.

Shortly after the final regulation was published, Global Cash Card, a payroll card provider with a number of clients in New York, petitioned the New York Industrial Appeals Board (IAB) to review the new payroll card rules. The IAB concluded that the NYDOL had, in fact, exceeded its rulemaking authority and consequently the IAB revoked the regulation. NYDOL appealed that decision to state court and last month a judge concluded the IAB was wrong and annulled its decision. Exactly what this development means for employers and their employees is unclear. NYDOL has not said whether it thinks its September 2016 regulation is now in force. Global Cash has not indicated whether it will appeal. Employers can’t be sure their payroll card programs are legal. It’s a mess.

It’s also a shame. Payroll cards are a good product and provide a number of benefits to employees who choose to use them. They should be subject to appropriate regulations, and luckily those rules already exist. At the federal level, the Consumer Financial Protection Bureau has issued a 450 page regulation that covers just prepaid cards, including payroll cards. It creates a comprehensive framework for consumer protection. Unfortunately, the NYDOL rules conflict with the federal rules, requiring payroll card providers to create unique policies and procedures for New York cardholders that are different from those followed everywhere else.

At the state level, dozens of jurisdictions have enacted statutes that, taken together, create a generally recognized set of standards for payroll cards. The NYDOL could have followed that example, but instead drafted a rule that diverges from existing models, often in ways that are potentially harmful to workers. For example, after an employee signs up for a payroll card, New York prohibits the employer from paying the employee on that card for 7 business days. Depending on payday schedules, that means an employee who has indicated she wants to be paid by payroll card may be forced under the NYDOL rules to receive her first wages by some other method. New York’s decision to override an employee’s choice of payment method is simply perplexing.

Let’s hope the confusion spurred by this court decision motivates the state legislature to fix this problem with a simple, straightforward bill authorizing the payment of wages to payroll cards and overriding the NYDOL regulations. In the meantime, banks and program managers that administer payroll card programs need to review their offerings in light of the new rules. Employers in New York must also take action since many of the compliance obligations under the regulations – like figuring out how to implement the silly 7-day waiting period – will fall to them.