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NYS Regulations on Wage Payment Methods

On September 7, 2016, the New York State Department of Labor adopted regulations which outline the conditions under which New York State employers can pay wages by debit card or direct deposit. The new regulations become effective March 7, 2017,and will be the most comprehensive payroll debit card protections in the country.

Payroll debit cards along with direct deposit provide several benefits to employers, including reduced check printing and distribution costs as well as elimination of fees associated with replacing lost or stolen checks. Both of these pay methods have become increasingly popular in New York State, with approximately 200,000 workers now using debit cards.

Employers who pay by debit card must comply with the following rules, among others, under the new regulations:

  • There must be access to at least one no-fee ATM near where their employees live or work;
  • The payroll cards must include unlimited free withdrawals from a no-fee ATM;
  • Employers cannot pass on costs associated with a payroll debit card account to an employee and employers are prohibited from receiving a kickback or other financial remuneration from the issuer, card sponsor or any third party for using payroll debit cards;
  • Employees cannot be charged for any costs associated with the debit card including customer service, startup or maintenance, overdraft, inactivity, balance inquiries and account closing, among others; and
  • There can be no expiration date of debit card funds.

The new regulations apply to all existing methods of wage payments as well, namely: cash, check and direct deposit. The regulations codify the existing requirement that employers provide a local, no-cost check cashing alternative for their employees.

The regulations require that employers using methods of payments other than cash or check provide employees with written notice to include:

  • A plain language description of all options for receiving wages;
  • A statement that the employer may not require employees to accept wages by either payroll debit card or direct deposit;
  • A statement that employees may not be charged any services fees to access their wages in full; and 
  • If offering employees the option to receive payment via payroll debit card, a list of locations, within reasonable proximity to the employees’ place of residence or place of work, where employees may access and withdraw wages at no charge.

Written notice and consent may be provided and obtained electronically, so long as an employee is notified of the opportunity to print a copy of the notice and consent for free in the workplace. The notice and consent form must be presented to employees in English and in the employee’s primary language (as long as the NY DOL has issueda sample notice and consent form in that language). Employees must be allowed to withdraw their consent at any time, though employers are given a reasonable time (no longer than two full pay periods) to finalize any changes to the payment method.  Copies of the written consent must be maintained for the duration of the employee’s employment and for six years following the termination of the employment relationship.

Employers cannot mandate that an employee is paid via payroll debit card or direct deposit. An employee’s informed written consent to receive wages by direct deposit or payroll debit card may not be obtained with intimidation, coercion or fear of adverse action for refusing to accept payment of wages by these methods. In addition, payment of wages by either direct deposit or payroll debit card may not be a condition of hire or of continued employment.

Prudent employers who elect to pay their employees through payroll debit cards and direct deposit should:

  • Anticipate their practices being carefully examined by the Department of Labor and other governmental officials;
  • Ensure their payroll companies and debit card issuers are following these regulations since employers will ultimately be responsible for any errors made by third-party vendors; and
  • Re-examine all their new hire paperwork and confirm that their direct deposit forms and payroll debit card enrollment forms comply with existing New York law as well as ensure that all wage statements and other related records are in compliance.

HR Works Virtual Helpline Clients are invited to call or email us with any additional questions or inquiries.

HR Works is not engaged in rendering legal services. If legal advice is required, the services of a competent labor attorney should be sought.

HR Works, headquartered in Upstate New York, is a human resource management outsourcing and consulting firm serving clients throughout the United States for over thirty years. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.