NY Regulations on Wage Payment by Direct Deposit / Payroll Debit Cards Have Been Invalidated

The New York State Industrial Board of Appeals (the “IBA” or the “Board”) invalidated regulations scheduled to take effect on March 7, 2017, that would have enhanced the notice and authorization requirements for employers using direct deposit or debit cards to pay wages to their employees. IBA’s Resolution of Decision striking those provisions focused on the parts of the regulations that govern payroll debit cards; however, the practical effect of the Board’s decision is to strike the rule in its entirety. Accordingly, employers need not revise their notice and disclosure forms for compliance with the invalidated rules. Employers are still required, however, to obtain prior written authorization from employees who wish to be paid via direct deposit or payroll debit card.

Employers in New York have the option of paying wages to employees by one of four methods: cash, check, direct deposit or debit card. However, an employer may not require employees to accept payment by either direct deposit or debit card; rather, it may use that method of payment only after making certain disclosures to its employees and obtaining the employees’ written authorization to receive payment by direct deposit or debit card. Under no circumstances may an employer condition employment upon an employee’s consent to receive payment of wages by either direct deposit or debit card.

The New York State Department of Labor’s final regulations would have required employers to provide access to one or more automatic teller machines that offer withdrawals at no cost to the employee, and to ensure that payroll debit card issuers did not charge fees related to the use of payroll debit cards. The Board invalidated these regulations on the grounds that they purported to regulate banking services, which exceeded the Department of Labor’s authority.

Rather than invalidate only those parts of the regulations which concerned payment of wages by debit card, the decision revoked the regulations in their entirety, including the enhanced disclosure obligations for employers who pay wages to their employees via direct deposit.