Can you require an employee to receive wages via direct deposit?
New York direct deposit law states that an employer may pay wages by direct deposit, however, it must have the written consent of an employee to do so and the employee must be able to choose the financial institution where their direct deposit is sent.
Does the employee need to consent to receiving their wages on a payroll card?
Employees must consent in writing to receiving their wages on a payroll card in New York.
What if the employee requests a paper check?
New York wage payment laws require that an employer must provide wage via a paper check if requested by the employee.
What are the state requirements for accessing wages?
In New York, employees must be given the option to choose the financial institution to which their wages are deposited. Employees must be paid wages in full on regular agreed paydays.
In New York, employees must be able to make unlimited free withdrawals, up to and including the full amount of their entire net wages at least once per pay period, by a free transaction from the employee’s payroll card account via bank teller and/or ATMs. Employees must have reasonably convenient access to withdraw their wages.
Employees must be provided with a pay stub that includes an explanation of how wages are computed.
What are the state regulations for payroll card fees?
In New York, employers may not charge the employee services that are essential to access full wages (e.g., account maintenance fees, card issuance fees, fees for card replacement at reasonable intervals, and fees for withdrawing wages).
Employers must provide employees with written copies of paycard terms and conditions as well as any fees associated with the paycard.
Employers may not charge fees for services that are essential to access full wages (e.g., account maintenance fees, card issuance fees, fees for card replacement at reasonable intervals, and fees for withdrawing wages).
No employer shall without the advance written consent of any employee directly pay or deposit the net wage or salary of such employee in a bank or other financial institution.
This section shall not apply to any person employed in a bona fide executive, administrative, or professional capacity whose earnings are in excess of nine hundred dollars a week, nor to employees working on a farm not connected with a factory. N.Y. Labor Code § 192.
When paying wages by check, an employer shall ensure that:
(a) the check is a negotiable instrument; and
(b) the employer does not impose any fees in connection with the use of checks for the payment of wages, including a fee for replacement of a lost or stolen check. N.Y. Labor Code § 192-2.1.
When paying wages by direct deposit, an employer shall ensure that:
(a) it has consent from the employee;
(b) a copy of the employee’s consent must be maintained by the employer during the period of the employee’s employment and for six years following the last payment of wages by direct deposit. A copy of the employee’s written consent must be provided to the employee; and
(c) such direct deposit is made to a financial institution selected by the employee. N.Y. Labor Code § 192-2.2.
When paying wages by payroll debit card, an employer shall ensure that:
(1) it has consent from the employee;
(2) it provides the information referenced in section 192-1.3(a) and receives consent at least seven business days prior to taking action to issue the payment of wages by payroll debit card, during such seven business days the employee’s consent shall not take effect. N.Y. Labor Code § 192-2.3.
Advance written consent of the employee should be kept on file by the employer. The consent form should contain the name and location of the bank or financial institution and a description of the account. The consent of the employee must be voluntary and an employer shall not institute an arrangement of direct deposit of wages in a bank or financial institution in the face of employee objection. The consent must be revocable at will. Employees who do not consent to a direct deposit arrangement must receive wages in cash or by check.
An employee shall not be obliged to incur expense in the arrangement whereby the employee’s
wages or salary are directly deposited in a bank or financial institution or in the withdrawal of such wages or salary from the bank or financial institution…
An employee shall not be obliged to lose a substantial amount of uncompensated time in order to withdraw wages from a bank or financial institution. Although the employer is not required to provide employees with paid time in which to withdraw such monies, the Department has held that the employer should provide for the loss of time when the employee requires more than 15 minutes to withdraw wages. Such time includes travel time to and from, as well as actual time spent at the bank or financial institution in withdrawing such monies. Moreover, the withdrawal of wages may not interfere with an employee’s meal period to the extent that it decreases the meal period to less than thirty minutes.
Thus, although the time required for withdrawal of wages may be 15 minutes or less, the loss of even 8 or 10 minutes from a thirty minute meal period curtails it to an unacceptably short duration.
The law requires that an employee be paid wages in full on regular agreed paydays. The direct deposit of wages in a bank or financial institution, therefore, should anticipate that an employee should be able to withdraw such wages in full on the regular agreed payday. The arrangement of direct deposit, therefore, may not include the withholding of any part of the employee’s wages on the regular payday or afterwards. New York Department of Labor, Division of Labor Standards, Guidelines: Direct Deposit of Wages in a Bank or Financial Institution, available at https://www.labor.state.ny.us/formsdocs/wp/ls445.pdf.
Agency Enforcement Position: The Agency takes the position that payroll cards are a form of direct deposit. Accordingly, an employer may pay wages using payroll cards provided:
1. Consent. The employee consents to the program in writing;
· Consent may not be made a condition of employment;
· Consent provided prior to the inception of the employment relationship is ineffective;
· The consent requirement does not apply to employees working in a bona fide executive, administrative or professional capacity earning in excess of $900/week;
· The consent requirement does not apply to employees working on a farm not connected with a factory.
2. Cash Access.
· The Department takes the position that that employees paid by debit card must be provided with an effective means by which to make an unlimited number of withdrawals from the card without incurring fees;
· Withdrawals may be from a bank teller and/or through the use of ATMs;
· The location at which free withdrawals may be made must be within a reasonable distance of the employee’s worksite;
· The employee has full access to his or her wages, to the penny. The employer must take positive steps to ensure that employees can obtain their entire wages from bank branches in close proximity to the employee;
· There are no encumbrances (e.g., minimum balance requirements) that delay or limit the employee’s access to his or her wages.
3. Disclosures. The employee is provided with full notice of the terms and conditions of the payroll card program, including fees.
4. Fee Prohibitions.
· The employee is not charged fees for services that are essential to access his or her full wages (e.g., account maintenance fees, card issuance fees, fees for card replacement at reasonable intervals, and fees for withdrawing wages);
Note: Fees imposed by a bank for incidental services provided to employees (such as the purchase of money orders, electronic bill-pay and the use of the debit card at other institutions) are not prohibited.
5. Timely Payment. Wages are paid in a timely manner (improper delays include holds for “clearance” of funds deposited);
6. Kickbacks. Although fees imposed by a bank for incidental services are not prohibited, no part of the fees may be remitted or otherwise directed to the employer or its subsidiary; and
7. Pay Stubs. The employee continues to receive a wage statement as required by §195(3).
Note: The Agency cautions that adherence to the above requirements does not guarantee compliance in every possible case.
Letters from Counsel for the New York State Department of Labor (October 29, 2009 and January 15, 2010).
Please note that the New York Department of Labor has introduced new regulations regarding pay cards, which have been subject to recent litigation; however, it is unclear as of April 2019 if and when the regulations will take effect.