On April 17, the New York Department of Labor filed an appeal to the decision made by the New York Industrial Board of Appeals that ruled the Methods of Wage Payment rules were invalid.
In September 2016, the New York Department of Labor issued final rules on the Methods of Wage Payment. The rules prescribed certain responsibilities for employers who paid their workers via direct deposit or prepaid payroll debit cards. However, the rule, which was set to take effect on March 7, 2017, was revoked by the New York Industrial Board of Appeals on February 16, 2017.
The New York Industrial Board of Appeals ruled that the regulations exceeded the New York Department of Labor's authority and went beyond the scope of New York Labor Law §192. The Board of Appeals stated, "We find the regulations are invalid because they exceed [the NYS Commissioner's] rulemaking authority." There were additional concerns that the program, as outlined, could potentially infringe on banking regulations. The Commissioner of Labor had 60 days to appeal the decision, and did so on April 17.
The regulations were likely to generate a significant administrative load for employers, as an estimated 82 percent of Americans are paid via direct deposit. In addition, due to the complexity, some businesses indicated they were considering to eliminate offering payroll cards as a method of pay. The rule would have required employers to:
- Provide written notification to employees including a description of all their options for receiving wages, a statement that the employer cannot require employees to be paid by direct deposit or payroll card, and a statement that the employee cannot be charged fees to access their wages in full. If paying by payroll card, provide a list or link to where they can access or withdraw their pay at no fee, at locations reasonable to work or home. In addition to new employees, the notification would have been required for all current employees being paid by direct deposit or payroll card;
- Obtain written or electronic consent from employees who chose to be paid by direct deposit or payroll card. The written notice and consent must be provided in English and the primary language of the employee (if a template is provided by the DOL), and must be maintained for six years beyond the last time the employee is paid;
- For payroll cards, provide employees with local access to at least one ATM that offered unlimited withdrawals at no cost and at least one option to withdraw the full amount of their pay at no fee. In addition, there could be no fees assessed for a variety of services including participation in the program, point of sale transactions, overdraft, shortage or low balances, or telephone or online customer service;
- Require a “cooling off” period of seven days prior to acting on an employee’s request to be paid via payroll card, and initially provide payment during that period through paper checks.
For the time being, employers who were bracing for the changes are not required to implement them yet. Even though the rule is on hold, current law states that New York employers cannot mandate that employees be paid via direct deposit or payroll cards. Employees must voluntarily consent to these payment methods. It will be important for New York employers to stay abreast of any changes that may come about from this appeal. We are anticipating that it will take several months before a final determination is made. We will continue to monitor the situation and keep you posted on the key details.