Final Rules Released -
Method of Payment of Wages

September 9, 2016
Frank Kerbein

In the September 7th edition of the NYS Register, the Department of Labor published the final rules regarding the Method of Payment of Wages. The final rule contains changes that affect many employers and how they pay their employees – especially those who use refillable payroll debit cards to pay employee wages. These changes are in response to the Cuomo administration’s perception that employees were paying excessive fees to access their wages.

In general:

If paying by check the check must be a negotiable instrument and the employer must not impose any fees in connection with the use of the checks for payment of wages - including a fee for replacement of a lost or stolen check.  

If paying by direct deposit  -- the employer must have the consent of the employee (a copy of which must be given to the employee and retained by the employer for the duration of employment plus six years.  Previous consent for direct deposit will remain in force) provided that employers provide employees, by March 7, 2017, with the newly required written notice that: describes pay options; conveys the employee’s ability to withdraw from the direct deposit option; states that the employer cannot require employees enroll in direct deposit nor charge any fees for this service. The deposit must be made to a financial institution selected by the employee. The Department of Labor has committed to providing employers with templates for these employee notices.

If paying by a payroll debit card -- requires employee consent (at least 7 days prior to payment of wages); and must provide local access to one or more ATM machines that offer withdrawals - up to the total amount of the wages - at no cost to the employee.

In addition, neither the employer nor its agent may charge any fees related to application for the debit card, for point of sale transactions, overdrafts, account inactivity, account maintenance, and other services, if offered as part of the pay card service. In cases where employees are covered by a valid collective bargaining unit, employers must have the approval of the union before paying by pay card. Employers who use pay cards need to become familiar with the details of the new rule.

The Governor’s announcement regarding these changes can be found here. (Note, the press release erroneously states that the final rule mandates that employers provide local, no-cost way for employees to cash their checks.  This provision, included in a prior version of the proposal, was not included in the final rule). These rules take effect March 7, 2017.  Employers who use payroll debit cards should take this time to work with local banks and credit unions to see if arrangements can be made for such fee-free ATM transactions. The Department of Labor will be promulgating employee consent forms for use by employers.

 If you have any questions or require additional information, please contact me at frank.kerbein@bcnys.org or at (800) 332-2117.