When approached about the use of paycards, government regulators often express concern regarding the fees that may be incurred by employees when using their cards. This is because the wage payment statutes in most states require that employees have access to their full wages "without discount," "without any reduction," or "without cost," at least in the context of paychecks. During the era when U.S. employers owned company stores and sometimes entire towns, this pay requirement was established to protect workers from employers that might make deductions from their net paycheck for goods, housing, and/or services provided to them by the employer.
Although this threat to workers is generally nonexistent today, the requirement remains in place. Most paycard statutes require that employees be provided at least one means of accessing their full net wages each pay period without fees. ATM withdrawals alone will not satisfy this requirement due to bank-imposed daily withdrawal limits and the fact that most ATM machines only dispense cash in $5, $10 or $20 increments.
Thus, to satisfy the wage payment statutes paycard programs must provide employees with alternative methods of accessing their full net wages without cost. Most programs offer employees a variety of such alternatives. For example, programs that use branded cards (e.g., Visa, MasterCard or Discover) allow employers to obtain the full amount off the card in cash from the teller at banks that display the card logo.
Some card programs also offer courtesy checks that can be written for the full amount of the employee's net wages, and most card programs permit workers to transfer the amount on the card to a bank account. In addition to these methods of full cash access, employees often are able to receive cash back from purchases without fees.
Employees generally are responsible for fees incurred for discretionary uses of their paycards. Importantly, these fees can be avoided, however, and workers must be apprised of possible fees before they are enrolled in their employer's paycard program. In addition, employers who are considering the use of paycards should consult with potential vendors and ask to see their fee schedules. Fees are often a matter of negotiation between the vendor and the employer. Employers also should remember that while one free withdrawal each pay period satisfies the requirements in most states, this area of law is rapidly changing and differences among state laws do exist. Some states have enacted additional fee prohibitions. Finally, costs incurred by an employer to implement or administer a paycard program cannot be transferred to its employees.