The wage payment statutes and regulations in most states were initially written well before paycards were envisioned. Fortunately, this area of law is rapidly evolving and catching up with modern wage payment technologies. To date, 34 states have statutes and/or regulations expressly addressing payroll cards. These states include: Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Vermont, Virginia, Washington, and West Virginia. Additionally, in 18 states, the wage and hour enforcement agency has published guidance expressly addressing payroll cards. Those states include: California, Colorado, Hawaii, Illinois, Iowa, Massachusetts, Michigan, Minnesota, Montana, New Jersey, New York, North Carolina, Oklahoma, Oregon, Texas, Virginia, Washington, and West Virginia. 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. Instead, the FLSA appears to be primarily concerned with the payment of minimum wage, overtime compensation, and child labor. Employers should be aware, however, that a federal regulation known as Regulation E, does expressly address paycard accounts. 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 (CFPB) 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, and whether a paycheck option is required, are governed by state law.