United States: New York State Industrial Board Of Appeals Invalidates New Regulation Governing Payment Of Wages By Direct Deposit Or Debit Card

Last Updated: February 21 2017
Article by Eli Freedberg

On February 16, 2017, the New York State Industrial Board of Appeals ("IBA") issued an order revoking changes to New York State's regulation governing employers that pay their employees by direct deposit or debit card. This regulation was scheduled to take effect on March 7, 2017. The IBA is an independent review agency with the primary duty of reviewing the validity and reasonableness of certain rules, regulations or orders issued by the New York Commissioner of Labor. A summary of the invalidated regulation and the IBA proceeding follows.

Summary of the Invalidated Regulation

On September 7, 2016, the New York State Department of State published a final regulation amending the requirements for paying employees by direct deposit or payroll debit card.

Under existing rules, employees could not be forced to accept wage payments by direct deposit or debit card. However, the new regulation required that employers provide written notice to all employees who elected to receive wages by direct deposit or debit card, even those who had previously agreed to be paid that way. This notice had to: (i) describe, in "plain language," all of the employee's options for receiving wages (i.e., by check, direct deposit, and/or debit card); (ii) expressly provide that the employer cannot compel the employee to accept wages by direct deposit or debit card; (iii) expressly inform the employee that she may not be charged any fees for services that are necessary for the employee to access the wages in full; and (iv) if the employer is offering the employee the option to access wages by debit card, provide a list of locations (that must be in "reasonable proximity" to the workplace or residence of the employee) where the employee can access and withdraw the wages at no charge. The new regulation also mandated onerous record-keeping requirements and required employers to issue notice and direct deposit/paycard consent forms in various languages.

The regulation also placed significant limitations on the terms and conditions of payroll debit cards that employers issued to employees. Specifically, the regulation prohibited certain common fees associated with the use of these cards, such as fees for: (i) application, initiation, loading, participation or other action necessary to receive wages or to hold the payroll debit card; (ii) point-of-sale transactions; (iii) overdraft, shortage, or low balance status; (iv) account inactivity; (v) maintenance; (vi) telephone or online customer service; (vii) accessing balance or other account information online, by interactive voice response through any other automated system offered in conjunction with the payroll debit card, or at any ATM in network made available to the employee; (viii) providing the employee with written statements, transaction histories or the issuer's policies; (ix) replacing the payroll debit card at reasonable intervals; (x) closing an account or issuing payment of the remaining balance by check or other means; or (xi) declined transactions at an ATM that does not provide free balance inquiries.

Summary of the IBA Order

A company called Global Cash Card, Inc. ("GCC") filed a petition before the IBA seeking to invalidate the September 7, 2016 regulation. GCC is a payroll debit card vendor that provides custom payroll debit card programs to employers in New York State. GCC argued that the New York State Department of Labor exceeded its authority by issuing the list of prohibited fees set forth in the regulation, because the New York State Department of Financial Services -- which regulates banks, financial institutions, and the fees they may charge for banking services – has exclusive authority to restrict the fees that financial institutions charge their customers. GCC pointed out that at least eight bills seeking to limit the fees associated with payroll debit cards were introduced but failed to pass in the state legislature. GCC also argued that the proposed regulation and prohibitions on assessing different types of fees constituted a significant departure from the New York State Department of Labor's prior positions as expressed in various opinion letters and from the statute that authorizes payment of wages by pay card.

The IBA agreed with GCC's position, finding that the new regulation exceeded the New York State Department of Labor's rulemaking authority and encroached upon the jurisdiction of banking and financial services regulators. Accordingly, the IBA ruled, "[t]he regulations regarding methods of payment of wages adopted September 7, 2016 to be codified as 12 NYCRR part 192 are revoked."

At the present time, it is not known whether the New York State Department of Labor will appeal this decision, and if it does, what the timeframe of any such appeal will be.


Although GCC primarily challenged the sections of the regulation prohibiting fees and restricting the terms of payroll debit cards, the IBA's decision was expansive and appears to have invalidated the entire September 7, 2016 regulation. The IBA, however, did recognize the "well-founded concern that low wage workers without access to traditional bank accounts will be coerced by their employer to receive their wages by payroll debit card at a significantly lower payroll cost to the employer and that employees paid by payroll debit card may be subject to excessive or hidden fees when accessing their wages." The IBA also stressed that Section 192 of the New York Labor Law makes it illegal for an employer to coerce employees to access wages by direct deposit or payroll debit card and further recognized that Section 193 of the New York Labor Law makes it illegal for an employer to make any direct or indirect charge to an employee to receive her wages. This certainly suggests that the notice and acknowledgment provisions of the regulation, if considered in isolation, might have been found properly within the Department of Labor's bounds, and may encourage the Department to promptly re-issue that portion of the regulation.

Unfortunately, the decision comes only several weeks before the effective date of the new direct deposit/debit card regulation and after many employers have taken steps to comply with it. Based on the foregoing, if possible, New York State employers can freeze plans to modify their policies and practices concerning issuing wages by direct deposit or debit card. Based on the IBA's warnings, however, employers should still ensure that the fees associated with use of payroll debit cards are reasonable and that the use of direct deposit or pay cards is in fact voluntary on the part of employees.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Eli Freedberg
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.