United States: New Rules For New York Employers Who Use Payroll Debit Cards And Direct Deposit

Last Updated: October 17 2016
Article by Michael S. Arnold and Brie Kluytenaar

As the workplace becomes increasingly digitized, both employers and employees can benefit from the conveniences technology provides. Chief among those is the convenience of electronic access to funds, which allows people to bank, pay bills, and transfer money from a computer or mobile device rather than being constrained by the limitations of brick and mortar financial institutions.

In this vein, many employers have taken advantage of new technology that makes life easier for businesses and their employees. In the realm of wages, electronic payment methods such as payroll debit cards and direct deposit would seem to make life easier. However, beginning on March 7, 2017, New York employers who use these methods to pay wages must pay even closer attention when doing so. That's because last month the New York State Department of Labor issued Regulations imposing various additional written notice and consent requirements on employers who use methods other than cash or check to pay employees. We summarize those requirements below.

Employers Must Provide a Written Notice

Employers will be required to provide employees with a written plain language notice identifying all of the employee's options for receiving wages, and advising employees that: (1) the employer may not require the employee to accept wages by payroll debit card or direct deposit; and (2) the employee may not be charged any fees for access to wages. If the employer offers a payroll debit card, the notice must include a list of locations where employees can withdraw wages at no charge within reasonable proximity to their home or workplace.

Employers Must Obtain the Employee's Written Consent

In addition to providing notice, an employer will be required to obtain an employee's written consent at least seven business days before issuing payment via direct deposit or payroll debit card. Such consent may not be the product of intimidation, coercion or fear of adverse action by the employer for refusing to accept this form of payment. Further, employers cannot make payment by direct deposit or debit card a condition of employment.

Employers Should Look out for Notice and Consent Templates from the DOL

The employer must provide the written notice and consent to the employee in English and in the primary language of the employee when a template notice and consent in such language is available from the Labor Commissioner. We'll keep an eye out for templates from the DOL. We hope the DOL publishes them well ahead of the March implementation date. Regardless of when those are released, employers are free to use their own templates as long as they comply with the Department's requirements.

In comments to the rule, the DOL indicated that it will consider adding statements regarding the protections of Regulation E of the Electronic Funds Transfer Act to future guidance and material, including the notice templates contemplated by the rule.

Electronic Distribution is Acceptable

If an employer provides the notice and consent electronically, the employee must have the ability to view and print both the notice and consent while at work and for free, and the employer must notify the employee of his or her right to print the documents.

Special Rules for Payroll Debit Cards

Employers who pay wages via payroll debit card must:

  • Provide local access to one or more ATMs that offer free withdrawals at no cost. A link to a website which provides a list or mechanism by which an employee can access a list of ATM locations which provide local access is sufficient to satisfy the notice requirements in Section 192-1.3(a)(4). Further, this requirement is satisfied if one or more ATMs are located within a reasonable distance to the employee's work or home.
  • Provide a method of withdrawing the total wages without incurring a fee;
  • Not charge employees fees for: receiving wages via payroll debit card; point of sale transactions; overdrafts; account inactivity; maintenance; customer service; accessing account information online; statements or transaction histories; issuing payment or closing an account; or card replacement (at reasonable intervals).

The payroll debit card used to pay wages cannot be linked to any form of credit, including a loan against future pay or a cash advance on future pay; however, the card issuer is not prohibited from covering an occasional inadvertent overdraft transaction if there is no charge to the employee. Employers cannot pass on any of their costs to employees or receive kickbacks from the card issuer or any third party.

The agreement between the employer and the payroll debit card issuer must require that the funds shall not expire; however, this does not preclude an account from being closed for inactivity provided that the issuer gives reasonable notice to the employee and the remaining funds are refunded within seven days.

Employers must provide written notice at least thirty days before any change in the terms and conditions of a payroll debit card takes effect, including any changes in the itemized list of fees. The notice must be in at least 12-point font in the employee's primary language or a language the employee understands.

Finally, employers must obtain the approval of the union before paying wages via payroll debit card if their employees are covered by collective bargaining agreements.

Certain Workers are Generally Excluded From These Rules

These requirements will not apply however, to employees working in a bona fide executive, administrative, or professional capacity who earn in excess of $900 per week or to employees working on a farm not connected with a factory.

Consents that were provided by workers before the regulations' effective date will remain effective so long as they were the product of a notice that expressly notified the employee that they can withdraw their consent to direct deposit or payroll debit card wage payments.

Employers Must Keep Records of the Notices and Consents for Quite Awhile

Employers must keep copies of the employee's notice and consent for the duration of their employment and for a period of six years after the employer makes a final wage payment to the employee.


The adoption of these regulations is consistent with efforts in the past few years by the DOL to ensure that employees have access to their full wages.

It remains to be seen whether the new regulations will discourage employers from using these payroll methods, but we will be watching for early reactions, especially for those in lower wage industries whose workers the regulations were designed to protect.

Employers who currently have these practices in place should review the new regulations and make the necessary preparations to ensure compliance when they take effect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Michael S. Arnold
Brie Kluytenaar
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