USE OF PAYROLL CARDS RAISING LEGAL AND STRATEGIC ISSUES

Many employers have found the use of payroll cards to be extremely advantageous, not only to the employer, but to employees as well. Employers can save around $50.00 per employee per year, due to eliminating the need to physically provide a paycheck, reducing or eliminating bank service fees, and reducing paycheck fraud. Similarly, many employees do not have a bank account and thus no access to a direct-deposit program.

During this past summer, numerous legal issues were exposed in litigation against a McDonald's franchisee claiming that McDonald's restaurants forced employees to receive their wages through payroll debit cards. The plaintiff alleged that the cards used carried associated fees that effectively reduced employees' pay, including charges of $1.50 for ATM withdrawals, $1.00 for balance inquiries, $.75 for online bill payments, and a $10.00 per month inactivity fee if money remains on the card longer than three months. The franchisee defendant thereafter announced that it would allow employees to choose whether to be paid by debit card, direct deposit, or paper check. Later, the Consumer Financial Protection Bureau (CFPB), a federal consumer regulator, announced that employers cannot require workers to receive their paychecks on debit cards. The CFPB said that employers must provide other options as to how employees receive their wages. Holders of the payroll cards are also entitled to disclosures of any fees and access to their account history, the CFPB said.

Many employers have already responded to these issues by automatically enrolling workers in a payroll card program, but allowing them to sign up for other options, such as direct deposit.