An important development for Pennsylvania Employers. Earlier this year, the Pennsylvania Superior Court ruled that employers could not make wage payments to their employees via mandatory payroll debit cards. Partially in response to that decision, the Legislature recently amended the Pennsylvania Wage Payment and Collection Law to now permit Employers to use payroll debit cards as a means by which to pay wages. The new law will become effective May 5, 2017.

For the use of debit cards to be lawful, certain conditions must be met. First, the employee must voluntarily agree to accept wages in that manner. Second, the bank or other financial institution must provide the employee with certain disclosures and account access information along with disclosures required by federal law related to electronic funds transfers. Finally, the account may not be charged any fees for applications, account initiation or participation, or other enumerated reasons. Importantly, no fees may be charged when the card is used at a point of sale, and funds in the account cannot expire due to inactivity.

Use of a payroll debit card may not be a condition of employment or any benefit of employment. Employers who are requested by an employee to change their wage payment method from a debit card to a direct deposit account or check must honor the request as soon as practicable but not later than the first pay day after 14 days following the request. Before obtaining the employee’s consent to receiving wages via a debit card, the employer must notify the employee in writing or electronically of all available payroll options, the terms of the debit card arrangement, including any applicable fees, a notice that third parties might assess fees in addition to the fees assessed by the issuer of the card and all methods by which the employee can access wages without fees. Further, the employee must be able to make at least one withdrawal per pay period (for up to the full amount of the net wages) and one in-network ATM withdrawal per pay period without any fee. The arrangement must provide the employee with a means to obtain a written or electronic statement of earnings and deductions for each pay period, providing the payroll and deduction information required by law.   

A violation of the Act would bring into play the penalties normally associated with its violation, which can include personal liability for those employees of an Employer responsible for the payment of wages.  

The use of payroll debit cards has been on the rise in states that have been ahead of the curve on this issue. It is likely that we will now see an increase in their use in Pennsylvania; however, Employers need to ensure that the system they put in place is compliant in order to avoid both legal sanctions and employee morale issues.

For questions, comments or additional information, please contact Robert Small, Partner in our Employment Practice Group, at rsmall@regerlaw.com or via phone at 215.495.6541.