Q: EVERY pay period, I receive a check from my employer for my wages. Recently, there is news at work that our company will be requiring employees to receive our wages through a payroll debit card. Is this a legal way to be paid our wages?
A: Generally, employers are allowed to fulfill their wage payment obligations to their employees by using “payroll debit cards” or “payroll cards.” However, the use of such cards must comply with California laws on the form of payment of wages to employees.
One such law states that employers must pay their employees in a form that is negotiable and payable in cash. A check, for example, can be taken to a bank and cashed. A check then is a method of payment that is payable in cash. Employers, however, must not issue a form of payment that would cause the employee to incur fees or penalties when they cash it. Therefore, employers cannot issue a check from a bank that will charge a fee for cashing the check.
The same law applies to payroll cards. The payroll cards must be payable in cash, and employees should not incur fees or penalties if they withdraw their wages using the card (at least not during the first transaction).
In addition, employees should not be required to use the payroll card method. They should have a choice of whether to be paid by direct deposit at their own bank or by an actual check instead. Therefore, going back to the inquiry above, if the employer will require its employee to use payroll cards and give the employee no other choices, then this may be a violation of the law.
Finally, the deposit for wages should be made in a bank, savings and loan association or credit union with a place of business in California, and which allows for at least one transaction per pay period without a fee.
And even though employees are paid via payroll cards or direct deposit, they must still receive an itemized paystub with their payment.
A case reported by various news media illustrates what happens when employers do not follow the law in the use of payroll cards.
Jeffrey Lapan and his fellow employees sued their employer, PVH Retail Stores LLC (reportedly the parent company of Calvin Klein, Tommy Hilfiger, Izod and G.H. Bass) in a class action on behalf of themselves and other current and former employees. The employees claimed that their employer paid them through a payroll card program that charged fees when they tried to withdraw their wages. This resulted in the employees not receiving their full wages. Additionally, the employees claimed that because of this, their wages were subjected to unlawful deductions. Some of the employees ended up not being paid the required minimum wage.
The employer denied any wrongdoing, and claimed that its payroll card program was legal but that employees may not have used the payroll card program correctly and that is why they incurred fees. However, rather than continue to litigate the case, parties agreed to settle the class action for $725,000.
Aside from being liable for civil damages, employers or their managers and agents, who violate the form-of-payment law in California may be found guilty of a misdemeanor.
For employees who do not have a bank account, the thought of being paid with a payroll debit card may be a welcome convenience. However, they should be mindful that such convenience may come at a cost – a cost that should have been paid by the employer, and not the employee.
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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com.
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C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully recovered wages and other monetary relief for thousands of employees and consumers. He is named Top Labor & Employment Attorney in California by the Daily Journal, consistently selected as Super Lawyer by the Los Angeles Magazine, and is a member of the Million Dollar-Advocates Forum.
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