Tuesday, August 12, 2014

Legislation Allows Employers to Pay Wages With Payroll Card

To streamline efficiency and save money, many employers would like to eliminate issuing “live” payroll checks altogether. And, while many employees enjoy the immediate availability of their paycheck through direct deposit, some employees don’t have bank accounts leaving employers with no option but to issue “live” payroll checks which employees would cash and then risk loss or theft of their pay. Effective January 1, 2015, employers will have the option of paying their employees with a payroll card. P.A. 98-862 amends the Illinois Wage Payment and Collection Act by providing that employers, with the employee’s agreement, can pay wages by way of a payroll card.  Essentially a debit card, payroll cards can potentially eliminate the need to run live payroll for employees.

The amendments include several requirements for employers in order to lawfully use payroll cards, the most fundamental of which is that payment of wages via payroll card cannot be a condition of employment or a condition for the receipt of any benefit or pay. Additionally, an employee must provide a written or electronic consent to receive wages by payroll card. Furthermore, before an employer can pay an employee with a payroll card, the employer must first provide the employee with a written disclosure listing—among other things—the fees and transaction fees that can be deducted from the employee’s payroll card account by the employer or payroll card issuer.

The bill limits the fees employers can impose upon employees who choose to use the card. Employers may not charge an employee for the first withdrawal from his or her payroll card account per pay period, or (if the employee is not paid multiple times during a month), two withdrawals per month.  Similarly, employers can not charge a monthly fee for declined transactions until the employee exceeds two declined transactions in one month. In addition, employers are prohibited from implementing a payroll card program that charges fees for point of sale transactions or for participation in the payroll card program. An employer can, however, charge an employee a fee if the employee’s payroll card account is inactive for a year.

Employers who wish to implement a payroll card program should contact their attorneys to ensure they meet the new statutory requirements. The labor and employment attorneys at Ancel Glink are available for consultation on this and other matters that affect your workplace.