DOL Proposed Rule Making - Methods of Payment of Wages, including the use of payroll cards
Michael Paglialonga, Esq.
Department of Labor
Building 12, Room 509
State Office Campus
Albany, New York 12240
Re: Methods of Payment of Wages
Dear Mr. Paglialonga:
The Business Council, New York’s largest statewide employer association, respectfully submits these comments on the Department’s revised rulemaking governing the permissible methods of payment of wages, including the use of payroll cards.
It was disheartening that, in developing this revised rulemaking, the Department chose to address a discrete number of issues that were peripheral in nature and ignore the most substantive concerns that were raised by The Business Council and other stakeholders.
The focus of the rulemaking is to assist the “unbanked” or “underbanked” population – to ensure they have appropriate and adequate means to obtain their full wages without penalty. We believe that the DOL’s restrictive proposal will be seen as unworkable by most employers, and therefore of no value to employees that otherwise would benefit from a payroll card option. The revised rule not only raises conflicts with Federal regulations including Rule E and the Consumer Financial Protection Bureau (CFPB), it attempts to extend its jurisdiction into areas of the Banking Law without any legislative authorization. It could compel employers to consider as the only viable method of payment (absent consent from employees) to distribution by cash – the method least favorable for the individuals the Department aimed to assist.
In short, the Department proposed regulations will not safeguard the unbanked community with the restrictions imposed on the methods of payment available to employers. Rather, this proposal would limit employer’s options to provide a safe and manageable means to pay their employees. The appropriate forum for review and discussion is by engaging the legislature and not by executive mandates.
Our specific concerns are provided below.
§192-2.1 Payment of Wages by Check - For the payment of wages by check, this provision would require an employer to assure “There is at least one means of no-cost local access to the full amount of wages through check cashing or deposit of check at a financial institution or other establishment reasonable accessibly to the employee’s place of employment.”
The origin and basis for this proposal is unclear. The Department seems to rely on an opinion letter (June 29, 2010) based exclusively on the facts presented in that inquiry. Such response, applicable to that discrete situation, contains no basis in law or regulation. The Labor Law requirement for full and timely payment of wages requires the employer to ensure sufficient funds to draw the full amount of wages. It does not mean that the “employer must ensure that the employee has the ability to access his or her wages without fee or cost to the employee.” (NYS DOL RO-10-0028-Revised)
The Business Council has discussed this interpretation with its employer members across the State of New York. The additional administrative burden of notice and consent required by the proposal will add to the already significant burden of DOL compliance for all employers – large, medium and small. The requirement that an employer secure agreement(s) from financial institution(s) within reasonable proximity to the place of employment is a significant problem. The Business Council inquiries found a limited number of financial institutions willing to cash a paycheck for a non-depositor for no fee; while some have indicated that they would do so if a check is written on their bank by an employer that does business with the bank. Likewise, it is unclear how an employer would comply with this free check cashing mandate for their remote employees. In short, this regulatory proposal would impose an additional compliance burden and cost on employers.
§192-2.3 (a) (2) requires that after the employee receives notice and consents to receiving wages by a pay card, the employer must wait at least seven business days prior to issuance. This may cause confusion as companies must initially provide wages under a different method (cash or check) until the waiting period is complete. It is unclear how or why this is necessary.
§192-2.3(b)(1) and (c) A more broadly available payroll card option would be particularly helpful to workers who are without checking accounts – especially the unbanked. However the Department’s proposed rule would eliminate any incentive for employers to offer the pay card option to their employees.
We can support the rule provision requiring that pay card programs provide free access to the full amount of an employee’s wages, such as a onetime, no-fee transaction for each payment of wages. However the prohibition of fees for specific categories of transactions [§192-2.3(c)] is unreasonable, and would make this an excessively expensive pay option for most employers. Currently, many workers utilize a check cashing service that is allowed by law to charge up to 2.01 percent as well as fees for each check or money order the employee uses to pay expenses from those wages. There is certainly a need to amend the law, but it must be done in a manner that fairly treats the employer and the employee.
§192-2.3(c) This provision provides that “An employer or agent shall not charge, directly or indirectly, an employee a fee” for twelve categories of activities. Because of these broad fee restrictions, the cost of these services provided by the bank would be borne by the employer, and will certainly influence decisions on whether pay cards are an economically feasible option for an employer.
§192-2.3(g) provisions of the proposed regulation are subject to federal regulations that already provide guidelines and consumer protections for these services. Specifically, the Department’s notice requirement for change in terms is inconsistent with Federal Regulation E. In early 2016 it is anticipated the CFPB will impose new requirements on payroll card accounts that may duplicate or conflict, but at the very least will require additional coordination of the terms of both the federal and state regulations.
We urge the Department to adopt a final rule that reflects these significant concerns, and provides a more workable approach to both the ongoing use of paychecks and the expanded use of pay cards for unbanked employees.
Catherine M. Tully
Manager, Government Affairs