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State Regulatory Compliance
Are paycards legal in your state?
In the past year, eight states have passed laws or adopted regulations that expressly authorize the use of payroll debit cards. Most other states permit direct deposit and probably allow some form of payroll debit card, but there may be restrictions.
State Rule
Many states as New Hampshire and Kansas allow employers to pay wages via payroll card as long as the payroll cards are provided to the employee at no cost. Additionally, the employer must allow at least one free means to withdraw up to and include full amount of employee’s balance during each pay period.
States that expressly approve use of payroll debit cards are: Delaware, Maine, Maryland, Minnesota, North Dakota, Michigan, Nevada and Virginia. However, employees must accept this option voluntarily and usually are entitled to make at least one free withdrawal up to the full amount.
In certain other states, the agencies responsible for enforcing the state wage and hour laws have posted enforcement positions on their Web sites declaring that voluntary payment by debit card is a lawful method of wage payment under the state’s current wage payment statute provided certain conditions are satisfied. These states include: Colorado, North Carolina, and Oregon.
Iowa and Texas broadly allow employees to agree to forms of payment other than cash or check.
There are eight states that have no law regulating the method of payment: Alabama, Louisiana, Nebraska, Ohio, Oklahoma, Washington and Wisconsin.
The laws of Mississippi, Missouri and Tennessee similarly place no restrictions on electronic payments. On the other hand, laws on the books in Hawaii, Kentucky and the District of Columbia arguably still require payment in cash or by check. Pennsylvania law permits other forms of payment as authorized by regulation, but no such regulation exists.
States, such as New Jersey and New York, have recently proposed legislation concerning the use of paycards. The only state to officially take the position that an employer may not pay wages to their workers using paycards is Vermont.
The remaining nineteen other states authorize some form of electronic funds transfer or direct deposit of employees’ pay. However, nearly all of these statutes stipulate transfer to an employee-designated account at an established bank, savings and loan, credit union or other approved financial institution. Payroll debit cards may be acceptable in these states, if the accounts are set up at a qualifying financial institution. Accounts should take the form of an independent account for each employee.
State Regulatory Compliance
Arkansas
SB 248 (2007) – Arkansas code repealing 11-4-403 and 11-4-404; and for other purposes.
California
www.library.ca.gov/crb/05/03/05-003.pdf
Colorado
Advisory Bulletin on Payroll Debit Cards - Advisory Bulletin No. 1(1) Effective August 2005
Delaware
Adopts Regulations on Payroll Debit Cards – Delaware Department of Labor CDR 65-400-013 Effective June 14, 2004
Kansas
SB 2316 (2007) – Kansas Legislature amendment to KSA 44-314
Maine
Enacts Paycard Law – Maine Legislature Ch. 89; H.P. 673 Effective June 29, 2005
Maryland
Enacts Law Allowing Paycards – Maryland Legislature Ch. 573; H.B. 751 Effective June 1, 2005
Michigan
Adopts Regulations on Payroll Debit Cards - Department of Labor and Economic Growth - Mich. Adm. Code R. 408.9035 Effective July 10, 2006
Enacts Payroll Debit Card Legislation - Pub Acts 2004, No. 534 Effective January 3, 2005
Minnesota
Enacts Payroll Card Legislation - Minnesota Legislature Ch. 158; S.F. 2093 Effective June 3, 2005, to May 31, 2007
http://www.doli.state.mn.us/pdf/payrollcardreport.pdf
Montana
HB 325 (2007) Montana Legislature amendment to section 39-3-204, MCA.
Nevada
Adopted Regulation of the Labor Commissioner – Nevada Office of the Labor Commissioner LCB File No. R115-04 Effective August 25, 2004
New Jersey
Proposed Reg NJAC 12:55-2.4(g) (2007) – New Jersey Department of Labor
North Carolina
Payroll Cards or Debit Cards Are Acceptable – North Carolina Department of Labor Wage and Hour Fact Sheet Effective August 30, 2005
North Dakota
Allows Payment of Wages by Paycard North Dakota Legislature H.B. 1347 Effective August 1, 2005
Oregon
Says Employers Can Pay Wages With Paycards – Oregon Bureau of Labor and Industries Technical Assistance for Employers
HB 2556 (2007) – Oregon Legislature – amendment to ORS 652.110 and 652.200
Vermont
SB 26 (2007) - Vermont Legislature amendment to 21 VSA ?342 and ?343 and allow payment of wages by payroll debit card.
Frequently Asked Questions Wage and Hour Web page – Vermont Department of Labor and Industry Wage and Hour Program
Virginia
Clarifies and Expands Paycard Law – Virginia Legislature 2004 Ch. 358, H.B. 472 Effective July 1, 2004
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