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NY Appellate Court Upholds Department of Labor’s Payroll Card Regulations

Is this what closure feels like? A New York appellate court issued a ruling in the Global Cash Card (“GCC”) case last week, potentially bringing to an end to the 3+ year saga surrounding the New York Department of Labor’s (“NY DOL”) regulations of payroll cards. The appellate court ruled in favor of the NY DOL and upheld the regulations.  Unless GCC decides to appeal this to the state’s highest court, this legal odyssey may finally be over.

In September, 2016, the NY DOL issued regulations regarding approved methods of wage payment, which included provisions regulating the use of payroll cards. Since then, Global Cash Card (“GCC”)—a payroll card provider—and the NY DOL have been embroiled in litigation over the legality of the NY DOL regs.  GCC prevailed before the Industrial Board of Appeals, but the NY DOL won at the trial court twice. The appellate court affirmed the trial court’s order, holding that the NY DOL did not exceed the authority granted to it by the legislature. 

For those readers who need a quick refresher, the NY DOL regulations place a number of unusual requirements on payroll card programs in the state:  

  • Seven business day waiting period after employee consents to the card before they can be paid by the card

  • Access one or more free ATMs located “within a reasonable travel distance to the employee’s work location or home”

  • Written notices and consent must be in English and the primary language of the employee (this requirement takes effect only after NY DOL issues templates in various languages, which it has not yet done)

  • Prohibitions on linking the payroll card to any form of credit, including a loan against future pay or a cash advance on future pay 

  • 30 days’ advance notice prior to any change in terms and conditions of a payroll card takes effect (The federal rule in Reg E only requires 21 days)

  • Prohibitions on a wide variety of fees

What do these judicial developments mean for payroll cards in New York?  First and foremost, the regulations are now in effect. Technically, GCC never asked for a stay of the trial court’s ruling and thus the regulations have been in effect and enforceable by the NY DOL during the appeal.  Now, with this legal challenge disposed of, we should expect the NY DOL to begin enforcing the regulations.  Second, GCC could seek further appeal of the most recent ruling.  Absent a stay, the rules would remain in effect during the appeal.  Third, employers and payroll providers could ask the NY legislature to modify the NY DOL regulations. Currently, several bills have been introduced that would establish statutory rules for payroll cards.  Any of these could be a vehicle for establishing more reasonable regulations.

Absent a reversal of this decision by the state’s highest court or the intervention of the state legislature, the NY DOL payroll card regulations are in effect. Employers and payroll card providers would be well advised to review their programs to ensure that they’re in compliance with New York law.  Our 50 State Payroll Card Compliance Map can help. 

Copyright © 2020 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume X, Number 13


About this Author

Stephen Middlebrook Lawyer Womble Bond Dickinson
Of Counsel

Steve advises start-up and established companies on a wide array of legal and business issues arising from the intersection of technological innovation and financial services. He has over more than 20 years of experience helping clients navigate complex regulatory and compliance matters, including licensing, consumer protection, anti-money laundering, data privacy and security. He has helped clients interact with regulators and respond to inquiries at the state and federal level. In addition, he has assisted businesses in negotiating agreements for processing services,...

Tom Kierner Lawyer Womble Bond Dickinson Atlanta Fintech IP Data Privacy Payment Systems

Tom Kierner is a transactional attorney with a background in payment systems and financial regulations.  He is a member of the firm’s FinTech and IP Transaction teams in Atlanta.

Tom advises his clients on the dynamic regulatory and legal landscape for FinTech and payments companies. He also assists his clients in negotiating and drafting agreements with banks, processors, and other service providers.

He has experience handling data privacy matters on behalf of clients, including managing data breach responses. He also has experience responding to inquiries and enforcement actions brought by state and federal agencies, including the Consumer Financial Protection Bureau (CFPB), various state attorneys general, and state banking divisions.  

As former in-house counsel at two financial services companies, Tom provided regulatory guidance to his clients to maintain compliance with state and federal requirements, including advising on planned advertising and promotional activities to ensure compliance with consumer and privacy laws.  He also oversaw his clients’ consumer arbitration process, successfully disposing of the majority of arbitration demands outside the costly arbitration process, and managed a portfolio of state money transmitter licenses, including reporting and responses to regulatory inquiries.  

Tom is a Certified Information Privacy Professional (CIPP/US).