This June the practice of paying wages using payroll cards gained great attention when Pennsylvania employees filed a class-action lawsuit against their employer, a McDonald’s franchise owner alleging violations of the Pennsylvania Wage Payment and Collection Law (WPCL). The complaint alleges that the fees connected with the use of the payroll card reduced employee pay below minimum wage, and that payroll cards were not “lawful money” as required under the WPCL.
Unfortunately, for employers, the WPCL does not specifically address the use of payroll cards as a form of wage payment. However, in a 2008 letter, the Pennsylvania Department of Labor and Industry stated that it would be wise for employers to obtain employee authorization when using forms of wage payment such as direct deposit and payroll cards. While this letter gives some direction to employers, it still is not clear whether employers in Pennsylvania may mandate electronic wage payment without also offering the option of a paper paycheck.
What is clear is the Consumer Financial Protection Bureau (CFPB) position with payroll cards. In a recent bulletin, the CFPB warned employers that they cannot mandate that their employees receive wages on a payroll card; and for those employees who choose to receive wages on a payroll card, they are entitled to certain federal protections.
While the legality of exclusively using electronic payment to pay employee wages remains in flux, Pennsylvania employers who wish to pay wages in this manner should consider the following recommendations:
- Provide the employee with the option of either being paid by check, direct deposit or a payroll card;
- Obtain signed authorization from the employee for payment via direct deposit or payroll card; and
- Use a debit card provider that levies no fees.
The Association’s Legal Services Division can assist you with a variety of employment law issues. Please contact Tammy Lamary-Toman at 814/833-3200, 800/815-2660 or tlamary@mbausa.org for more information.
