Payroll debit cards can be a useful way for employers like franchisees to pay wages to employees. They are convenient for both employers and employees and, especially for unbanked employees, a way of having ready access to earnings. A recent decision from the Pennsylvania Superior Court in Siciliano, et al., v. Mueller, et al., 2016 PA Super 229, clarifies that mandatory use of payroll debit cards is presently barred by the Pennsylvania Wage Payment and Collection Law (the "WPCL").
The Siciliano case involved a franchisee who operated 16 McDonalds franchises in Pennsylvania. The litigation case was brought as a class action by employees against the franchisee, alleging that mandatory payment of wages via a payroll debit card violated the WPCL. After the trial court denied the franchisee's motion for summary judgment, the court certified that the issue of whether the mandatory use of debit cards for payment of wages was legal under the WPCL was a controlling issue of law previously undecided in the Commonwealth's jurisprudence. The Superior Court, one of Pennsylvania's intermediate appellate courts, agreed and accepted the case on an immediate, interlocutory basis.
The Superior Court began its opinion by looking at the plain language of the WPCL, which states:
Wages shall be paid in lawful money of the United States or check.
Based on the definition of a "check" given in the statute itself, the Superior Court quickly concluded that a debit card was not a check or a other bank draft payable on demand. The Court spent a little more time explaining "lawful money". While the term is not defined in the statute, the Court reviewed other Pennsylvania statutes where it is defined. The definition of lawful money did not include a debit card in any of them. Consequently, the Court held that the payment of wages by debit card is not lawful under the WPCL.
In particular, the Court seemed very concerned that the debit card chosen by the franchisee only permitted one free withdrawal, and that the bank charged $5.00 per withdrawal thereafter. Similarly, the Court rejected the amicus arguments of the American Payroll Association. The Association cited to the Pennsylvania Banking Code for the proposition that "lawful money" may be paid by deposit to an account at a financial institution and that a deposit to a check card was by necessity a deposit to such an account. The Court rejected this argument because the Banking Code permits such deposits only upon the request of the recipient. It reasoned that the mandatory use of debit cards for the payment of wages could not reasonably be considered to be done at the request of the employee.
Bottom line: At this point in time, it is illegal for an employer to pay wages in Pennsylvania via debit card. Importantly, the Superior Court made it clear its decision applies to both mandatory and voluntary use of debit cards. Help might, however, be on the way for employers. There is legislation under consideration in the Pennsylvania legislature that would amend the WPCL permit the voluntary use of debit cards for the payment of wages. The proposed changes include "payroll card" in the definition of how wages may be paid so long as those payroll cards carry no fees.
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