New York's Final Rules on Methods of Wage Payment May Cause Headaches for Employers

Update: On February 16, 2017, the New York Industrial Board of Appeals revoked the Methods of Wage Payment Rule. On April 17, 2017, the Department of Labor appealed the decision. Get more details here.

On September 7, The New York Department of Labor (DOL) issued final rules on the Methods of Wage Payment, which will become effective on March 7, 2017. The NY DOL previously published draft rules on June 15 of this year, as well as two earlier versions in 2015. The finalized rules changed very slightly from the most recent draft published on 6/15/16. The new regulation goes well beyond industry standards and other states’ requirements for payment of wages via payroll cards, and also imposes notice and consent requirements for payment of wages via direct deposit.

On a positive note, perhaps the most burdensome requirement in the draft rules was modified in the final version. NY DOL had previously indicated that in addition to providing disclosure notices, new direct deposit consents would have to be obtained for current non-exempt employees paid by direct deposit or payroll card.

There were no changes made to the payroll card requirements from the June 15draft. Prior to the March 7 effective date, New York employers who pay employees via payroll cards will need to review their program to determine changes that will need to be implemented in order to continue to offer payroll cards as a method of wage payment. Due to the strict new requirements, some employers or payroll card issuers may decide to no longer offer this popular form of pay in the state of New York.

Under the final rules, New York employers will need to:

• If paying by methods other than cash or check, provide workers with a written notice that gives a plain language description for the options for receiving wages, a statement that the employer can’t require employees to accept wages by payroll card or by direct deposit, and a statement that the employee may not be charged any fees for services that are necessary for the employee to access his or her wages in full;
• For payroll cards, include on the notice a list of locations where employees can access and withdraw wages at no charge within a reasonable distance to their place or work or residence, or provide a link to a website that provides this information;
• Obtain written informed consent from employees to accept payment of wages via direct deposit or payroll card. The written notice and consent shall be provided in English and in the primary language of the employee if the DOL provides a template in that language. The notice and consent may be provided and obtained electronically if the employee is able to view and print them at work without cost and is notified of this through the electronic process;
• Wait seven business days before fulfilling an employee’s voluntary request to receive a payroll card, and in the interim, pay those employees with paper paychecks;
• Provide employees paid by payroll card local access to one or more ATMs that offers withdrawals at no cost, and at least one method to withdraw up to the total amount of wages for each pay period or payroll card balance without incurring a fee;

• For payroll cards, make sure programs do not charge employees fees for a number of items prescribed by NY DOL including participation in the payroll card program, point of sale transactions; overdraft, shortage or low balances; account inactivity; maintenance fees; telephone or online customer service; transaction histories;, one replacement card per year; declined transactions at ATMs if the ATM doesn’t provide free balance inquiries; or any fee not identified in the cardholder terms and conditions.

The New York DOL will be issuing notice and consent templates (in English and several other languages) that can be used by employers as a model.

Find more information through Paychex WORX.