Pennsylvania employers that pay employee wages by payroll debit card should make sure that this payment method meets new state banking rules under SB 1265, enacted in late 2016.

Effective May 5, 2017, Pennsylvania employers wishing to pay employees by payroll debit card must have an employee's permission to pay by this method. Payment by payroll debit card must not be mandated; instead the employee must be given the option of payment by direct deposit or paper check.

Employees must be allowed one free withdrawal per pay period of up to all the wages paid. In addition, the employer and the payroll card provider cannot charge fees for (1) the application, initiation or privilege of participating in the payroll card program; (2) the issuance of the initial payroll debit card; (3) the issuance of one replacement card per calendar year; and (4) the transfer of wages, salary, commission or other compensation from the employer to the payroll card account.

Prior to obtaining an employee's authorization to be paid by payroll debit card, the employer must provide the employee with a clear and conspicuous notice of the following:

— All of the employee's wage payment options.
— The terms and conditions of the payroll card account option, including the fees that may be deducted from the employee's payroll card account by the card issuer.
— A notice that third parties may assess fees in addition to the fees assessed by the card issuer.
— The methods available to the employee for accessing wages without fees.

The employer's payroll debit card payment issuer must be federally insured and the program must meet the federal Consumer Financial Protection Bureau's Regulation E (12CFR 1005) requirements for electronic funds transfer.

The employer must honor an employee's written or electronic request to change the wage payment method from a payroll debit card account to direct deposit or paper check by the first payday after 14 days from receipt of the employee's request.

Ernst & Young LLP insights

The Pennsylvania Department of Labor & Industry has for a number of years administratively allowed the voluntary payment of wages by payroll debit card.

A recent Pennsylvania appeals court decision determined that the mandatory payment of wages by payroll debit card violates the state's Wage Payment and Collection Law. With the passage of SB 1265 it is now clear that employers may pay wages by payroll debit card only with the permission of the employee.

———————————————

———————————————
ATTACHMENT

EY Payroll News Flash