Compliance and Deployment

The wage payment statutes and regulations in most states were written well before paycards were envisioned. Fortunately, this area of law is rapidly evolving and catching up with modern wage payment technologies. To date, 28 states have statutes and/or regulations expressly addressing payroll cards. These states include: Arizona, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Vermont, Virginia, and West Virginia. In 6 other states the wage and hour enforcement agency has published guidance expressly addressing payroll cards. Those states include: California, Iowa, Montana, North Carolina, Texas, and Washington. View list of States with statutes and/or regulations expressly addressing payroll cards. View map summary: State Approach to Payroll Cards.

Unlike the state wage and hour laws, the federal Fair Labor Standards Act (FLSA), does not expressly address methods of wage payment, although the regulations implementing the FLSA do briefly touch upon the issue. Representatives from the United States Department of Labor have informally confirmed that the Department is primarily concerned with the payment of minimum wage and overtime compensation and not with the method of delivering wages to employees. Employers should be aware, however, that one federal regulation, known as Regulation E, does expressly address paycard accounts. As discussed below, Regulation E implements the Electronic Fund Transfer Act, and provides consumer protections to individuals involved in electronic fund transfer systems. Moreover, Regulation E's compulsory use provision prohibits an employer from requiring its employees to receive their wages by direct deposit to an account at a particular financial institution. If an employer requires direct deposit in a state that permits such a program, the employee must be able to designate the financial institution that will receive the deposit. In 2013, the Consumer Financial Protection Bureau issued a bulletin stating that the compulsory use provision prohibits employers from requiring employees to receive their wages using a paycard. The CFPB made clear, however, that an employer may offer employees the choice between a paycard and receiving wages by some other means (e.g., direct deposit). Permissible alternative methods are governed by state law.

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