NYS Payroll Card Act to Protect Workers

June 19, 2014
By Stephanie West

Albany, NY – NYS legislation is proposed regulating the use of payroll cards to increase protections for workers. Payroll cards can provide a convenient method for workers to access their pay.

The Attorney General’s Payroll Card Act, introduced in the Assembly by Majority Leader Morelle, safeguards employees' ability to select an alternative method of payment,  requires clear disclosure of payroll card fees, and restricts certain fees. The legislation is based on recommendations made in a report by the Attorney General’s Labor Bureau.

“Workers should not have to pay in order to get their pay," Attorney General Schneiderman said. “While payroll cards can be helpful for employees without bank accounts, programs often impose fees that chip away at people's hard-earned wages.  The Payroll Card Act will ensure that workers have free and clear access to their wages, while providing clarity to employers about how to offer payroll cards in compliance with the law.”

A payroll card is a prepaid debit card used by employers to pay wages to employees, typically as an alternative to direct deposit or a paper check. Each payday, a cardholder employee’s wages are deposited electronically into an account at a bank selected by the employer or by the payroll card vendor. The employee can obtain access to the funds in the account by using the payroll card. Similar to a bank-issued debit card, the payroll card can be used to withdraw funds from an ATM, make point-of-sale purchases, and electronically transfer funds, among other functions. Use of payroll cards has increased significantly in recent years. Nationally, an estimated 5.8 million workers received their wages from payroll cards in 2013, and that number is expected to increase to 10.8 million by 2017, according to research reported in Forbes.  Often cited benefits of payroll cards include cost savings for employers and lower transactional cost to employees when compared with check-cashing outlets. 

The Attorney General's office began looking into payroll card programs utilized in New York State after receiving complaints from employees that certain payroll card programs were in violation of state labor law, or did not provide adequate disclosures regarding the terms and conditions of the card.  

A range of reforms, which are included in the Payroll Card Act will address problems and ensure that payroll cards can be a convenient and beneficial method of payment for workers to access their pay. Its provisions would protect the rights of workers and prevent the unfair reduction of their wages through fees. The legislation would mandate that employers use payroll card programs where employees would not be charged a fee to use an ATM machine.

June 19, 2014

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