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Update: DOL Regulation for Employers Who Use Direct Deposit and Payroll Debit Cards Invalidated

The New York State Industrial Board of Appeals has invalidated and revoked the NYS Department of Labor regulations governing payment of wages by direct deposit or payroll debit card. (We first reported on those regulations on our Employment Matters blog; see our post from October 13, 2016 and an update on February 1, 2017.) The regulations were scheduled to take effect on March 7, 2017.

As we described in detail in our blog posts, the new regulations would have required employers to provide notice to employees and obtain consent from those who elected to receive wages via direct deposit or payroll debit card. In addition, the regulations would have imposed various restrictions on the terms of use and the fees associated with payroll debit cards.

In its decision, the Board determined that the regulations exceeded the scope of the DOL’s authority and imposed prohibitions that are beyond its purview. Specifically, the Board likened the fees associated with payroll debit cards to the fees associated with checking accounts and licensed check cashers, which are not subject to regulation by the DOL. The Board concluded that the regulations “go beyond regulation of the employment relationship and into the area of banking law, which is outside [the DOL’s] competence and expertise in the regulation of employment and occupational safety and health.” Further, the Board noted that the policy concern which the regulation sought to address – namely, that low wage workers without access to traditional bank accounts will be coerced into receiving wages by payroll debit card – is already covered by Section 192 of the Labor Law, which governs the payment of wages and which requires advance consent from an employee before an employer can pay wages via payroll debit card.

The DOL has not yet indicated whether it will appeal this decision, but we will be sure to keep you updated on any new developments. In the meantime, employers who have taken steps to comply with the regulations can press pause on those plans, but should ensure that their procedures for payment of wages are in compliance with all other applicable laws and regulations.

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Michael S. Arnold

Member / Chair, Employment Practice

Michael Arnold is Chair of the firm's Employment Practice. He is an employment lawyer who deftly handles a wide array of matters.