APA Asks NY Legislature
to Address Payroll Cards

By William Dunn, CPP

For the past three years, the New York State Department of Labor has been working on regulations that would govern the use of payroll cards in the state. APA opposes those regulations as unduly burdensome and restrictive and was relieved when the New York Industrial Board of Appeals prevented those regulations from going into effect. Now, the fate of the regulations rests in the hands of the New York State Supreme Court. Throughout the process, APA has held onto hope that the state Legislature would enact more reasonable legislation that would make the regulations moot. In early June, APA wrote to the leadership in the New York State Assembly and Senate urging them to support two such bills now before them.

New York currently recognizes payroll cards as a legitimate method of paying wages, over which the general statutes of the Labor Code apply. Assembly bill 6771-A and its Senate companion bill 5208-A "would provide clarity on the use of payroll cards in the State of New York," APA wrote. "While the legislation goes further than the APA would like in a couple of respects, it would ensure employees are provided important consumer protections, including full and free access to their wages, and provide employers with clear guidance regarding their responsibilities under the Labor Law."

The three key provisions of the bills are:

  • Employees would need to consent to the payment method, after being advised of all of their wage payment options
  • Employers would be responsible for ensuring that employees had the ability to receive their full wages without incurring a fee each pay period
  • The fees associated with the cards would be limited and would need to be fully disclosed to employees.
Bills Address Criticism

APA says that the bills directly address claims made by critics of the payment method, including consumer advocates, unions, and the New York Attorney General's office. Critics have complained that employees are not given a true choice over their payment method. The proposed legislation would not only require that employees voluntarily choose to be paid on a payroll card, it would also codify their right to rescind that consent and change the method of payment to something else the employer offers (e.g., direct deposit or paper checks). The bills go even further, APA explained, "by making it abundantly clear that paychecks (or cash) are the default method of paying wages in New York."

Regarding claims that employees cannot obtain their pay without incurring fees, APA pointed out that the options for withdrawing cash from a payroll card for free have never been more profuse. Nearly all payroll cards are branded by either Visa or Mastercard. Visa alone partners with more than 90,000 financial institutions across the country and more than 5,400 in New York, each of which will allow cardholders to withdraw their wages for free at a teller window. Of course, employees who do not withdraw all of their money from their accounts have additional options, including point-of-sale, online, and telephone transactions. Many merchants already provide cash back at the point of sale, without charge, and the proposed legislation would also prohibit issuer fees related to the point-of-sale transactions themselves. Going even further, the proposed legislation acquiesces to those critics who demand that because a payroll card can be used to withdraw cash from an ATM, such use must be provided for free. The bills would require that the cards be associated with an ATM network and provide employees with one free in-network ATM withdrawal each week.

ATM fees aren't the only fees that might apply to a payroll card, and the bills also address those. Fees for participating in a payroll card program, transferring wages from the employer to a payroll card account, or maintaining a payroll card account are all prohibited. Card programs would need to provide employees with two ways to check their account balances, for free, as well as access to their account transaction histories. Specific criticism of "hidden fees" is addressed by requiring that employers disclose not only all of the fees that might be charged by the card issuer, but also notify employees that third parties may charge additional fees. APA noted that, "This is in addition to the fee disclosures that already must be provided by the card issuer under federal banking law."

Perfect Is the Enemy of Good

To be clear, APA supports this legislation and fervently hopes the Legislature will act on it. That said, APA explained that, for the time being, it is setting aside a serious reservation: "The APA has consistently opposed legislative and regulatory proposals requiring free ATM withdrawals or prohibiting inactivity fees on payroll card accounts. The wage and hour laws are designed to provide employees with the full and timely payment of wages. Full access to wages cannot be accomplished at ATMs since they typically permit withdrawals in $10 and $20 increments only. Inactivity fees are easily avoidable and only come into play after wage loads and other activity in the account have stopped. While employers may wish to provide programs that go beyond full and free access to wages, the APA generally opposes requiring employers to provide one group of employees with free discretionary banking services (and be subject to penalties for failing to do so) simply because the employees have chosen to receive their wages through a payroll card account."

New York would become only the second state to require free ATM withdrawals for payroll cards, and it would fail to be consistent with the first state, Pennsylvania. In May, Pennsylvania enacted legislation requiring one free ATM withdrawal each pay period. New York would require a free ATM withdrawal each week.

These bills are not without opposition. Rumor has it that New York Attorney General Eric Schneiderman asked Assembly and Senate leadership to avoid moving ahead on the bills while the regulations are tied up in the courts. APA would prefer the lawmakers to take heed of past court decisions, which have repeatedly held that "it is the province of the people's elected representatives, rather than appointed administrators, to resolve difficult social problems by making choices among competing ends." If the bills were to pass and land on the desk of Governor Andrew Cuomo, he might well be tempted to veto the legislation while his executive branch litigates its case. That is a chance APA would like to see played out and hopes the Legislature will muster the political courage to make it happen.

William Dunn, CPP is Director of Government Relations at APA


Compliance TV - July


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