New York State Direct Deposit and Paycard Regulations Invalidated
On February 16, 2017, the New York Industrial Board of Appeals (NYIBA) struck down the New York State Department of Labor’s (NYSDOL) adopted regulations governing electronic wage payment methods (e.g., direct deposit and payroll debit cards), which we had discussed in a previous article entitled, “Changes to Existing Electronic Wage Payment Methods Staying Compliant”. These regulations would have (among other things) required employers to provide detailed notices to employees of all wage payment options and obtain written consent from those employees who elected to receive wages by direct deposit or payroll debit cards. The rules also would have sharply restricted certain fees imposed on employees by card issuers. The regulations were scheduled to take effect on March 7, 2017. However, the NYIBA, an independent review agency with the primary duty of reviewing rules, regulations and orders issued by the New York State Commissioner of Labor, determined that the Commissioner exceeded her authority in adopting the regulations. The determination was due, in part, to the regulations’ prohibition on financial institutions from charging certain fees for banking services to employees using payroll debit cards.
New York employers should consider the effect of the NYIBA’s determination and what payroll practice changes (if any) should be made. For example, employers who had planned to modify their existing payroll practices to comply with the regulations may elect to suspend those plans pending a NYSDOL appeal of the NYIBA’s determination or issuance of revised regulations on this topic. Moreover, New York employers should remain mindful of the existing requirements for making electronic wage payments, such as, for instance, the requirement to obtain an employee’s voluntary written consent for payment of wages via direct deposit or payroll debit cards.
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