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New York State Regulations Governing Payroll Debit Cards (Scheduled to Become Effective March 7) Held Invalid and Revoked

The NYSDOL issued final regulations in September 2016, significantly restricting the use of payroll debit cards and imposing disclosure and consent requirements for direct deposit.  The regulations were to become effective on March 7, 2016.  However, in a February 16, 2017 decision, the New York State Industrial Board of Appeals (IBA) held the regulations “invalid” and “revoked.”  “We find the regulations are invalid because they exceed [the NYS Commissioner’s] rulemaking authority,” the IBA held.   

In striking down the regulations, the IBA noted that at least eight bills on payroll debit cards had been introduced in the New York State legislature in recent years, and none of the bills were enacted.  “The legislature’s failure to amend the statute demonstrates their satisfaction with the current statutory language or their inability to reach consensus on the manner in which payroll debit cards should be regulated under the Labor Law, if at all,” the IBA found.  In addition, the IBA found the regulations infringed on banking regulations that set fees banks may charge and that the NYDOL, by also seeking to regulate such fees, overstepped its jurisdiction. The DOL has 60 days to appeal the decision. 

As noted above, while the IBA’s analysis was focused on the proposed provisions regulating payroll debit cards, the regulations also established new requirements regarding use of direct deposit.  Although the provisions regarding direct deposit were not addressed by the IBA, the IBA Order revokes the entire regulation (12 NYCRR §192).

As set forth in detail in our prior article, the regulations, which were scheduled to go into effect March 7, 2017, would have imposed greater obligations on New York employers if they wished to offer the option of wage payment through payroll debit cards and/or direct deposit including: (i) providing a detailed written notice to employees; and (ii) obtaining voluntary consent prior to payment by either of these methods.

In anticipation of the effective date, the DOL issued two model notice and consent templates, one for payroll debit cardsand the other for direct deposit.

Notably, under the regulation, previously signed direct deposit and payroll debit cards consent forms would remain valid, but employers would still need to provide written notice that complies with the regulation before March 7, 2017, including notification of the right to withdraw consent.

Beyond the notice and consent requirements, the additional restrictions applicable to using payroll debit cards included: (i) imposition of a seven business day waiting period from execution of consent to initial payment by means of payroll debit card; (ii) a prohibition on a laundry list of potential fees; (iii) requiring that wages paid by payroll debit card may not be linked to any form of credit; (iv) a prohibition on employers passing on costs associated with payroll debit card accounts or otherwise receiving kickbacks from third parties associated with payroll debit card programs; (v) a prohibition on expiration of wages; (vi) an additional notice requirement if there are changes in the terms and conditions of the card accounts or fees charged to employees; and (vii) a requirement that union approval be obtained for unionized employees.

Separately, the DOL issued regulations effective February 1, 2017 implementing amendments to the New York equal pay law that made it unlawful for an employer to prohibit employees from inquiring about, discussing or disclosing their wages or the wages of other employees.  For additional information on this subject, please see this wage and hour post.

Jackson Lewis P.C. © 2018

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About this Author

Jeffrey Brecher, Jackson Lewis, Management Arbitration Lawyer, Labor Litigation Attorney
Principal

Jeffrey W. Brecher is a Principal in the Long Island, New York, office of Jackson Lewis, and is Practice Group Leader of the firm's Wage and Hour practice. He has litigated hundreds of cases, defending management at arbitration, before state and federal administrative agencies and at trial.

Mr. Brecher regularly advises clients on compliance with various state and federal laws affecting the workplace, including discrimination and related claims arising under Title VII, Family and Medical Leave Act, Americans with...

631-247-4652
Richard Greenberg, Jackson Lewis, workplace grievances lawyer, arbitrations litigation attorney
Principal

Richard Greenberg is a Principal in the New York City, New York, office of Jackson Lewis P.C. He advises both unionized and union-free clients on a full-range of labor and employee relations matters.

With respect to traditional labor matters, Mr. Greenberg represents clients in collective bargaining negotiations, labor disputes, grievances and arbitrations, proceedings before the National Labor Relations Board, and in state and federal court. Mr. Greenberg also advises clients on the legal aspects of remaining union-free. With respect to employee relations matters, Mr. Greenberg has extensive experience assisting clients in numerous industries with the development and maintenance of personnel policies and personnel infrastructures. In this regard, Mr. Greenberg often works on these issues with clients as business needs and culture change as a result of business transactions, such as mergers and acquisitions.

212-545-4080
Daniel J. Jacobs, Jackson Lewis law firm, Labor Employment Attorney
Shareholder

Daniel J. Jacobs is a Shareholder in the New York City, New York, office of Jackson Lewis P.C. He assists both unionized and union-free clients with a full-range of labor and employee relations matters.
With respect to traditional labor matters, Mr. Jacobs represents clients in collective bargaining negotiations, contingency planning, labor disputes, grievances and arbitrations, proceedings before the National Labor Relations Board, and in state and federal court.
Mr. Jacobs also has experience assisting clients in numerous industries with the...

212-545-4000