OLR Bill Analysis
sSB 211 (File 211, as amended by Senate "A")*
AN ACT ALLOWING EMPLOYERS TO PAY WAGES USING PAYROLL CARDS.
This bill allows employers to pay their employees through “payroll cards” under certain conditions. An employee must voluntarily and expressly authorize, in writing or electronically, that he or she wishes to be paid with a card without any intimidation, coercion, or fear of discharge or reprisal from the employer. No employer can require payment through a card as a condition of employment or for receiving any benefits or other type of remuneration. In addition:
1. employers must give employees the option to be paid by check or through direct deposit,
2. the card must be associated with an ATM network that ensures the availability of a substantial number of in-network ATMs in the state,
3. employees must be able to make at least three free withdrawals per pay period, and
4. none of the employer's costs for using payroll cards can be passed on to employees.
Under the bill, a “payroll card” is a stored value card (similar to a bank account debit card) or other device, but not a gift certificate, that allows an employee to access wages from a payroll card account. The employee can choose to redeem it at multiple unaffiliated merchants or service providers, bank branches, or ATMs. A “payroll card account” is a bank or credit union account (1) established through an employer to transfer an employee's wages, salary, or other compensation (pay); (2) accessed through a payroll card; and (3) subject to federal consumer protection regulations on electronic fund transfers.
The bill allows the labor commissioner to (1) adopt regulations to ensure compliance with the bill's payroll card provisions and (2) within available appropriations, study payroll card use and the actual incidence of associated fees. By October 1, 2018, he must determine whether to conduct the study and report his decision and the study's status or results, if applicable, to the Labor and Public Employees Committee.
The bill also allows employers, regardless of how they pay their employees, to provide them with an electronic record of their hours worked, gross earnings, deductions, and net earnings (i.e., pay stub). To do so, the (1) employee must explicitly consent; (2) employer must provide a way for the employee to access and print the record securely, privately, and conveniently; and (3) employer must incorporate reasonable safeguards to protect the confidentiality of the employee's personal information.
Lastly, current law allows employers to pay employees through direct deposit only on an employee's written request. The bill allows an employee's request for direct deposit to also be an electronic request.
*Senate Amendment “A” (1) changes the timeframe in which an employer must switch an employee from a payroll card to direct deposit or check; (2) specifies that the limit on fees or interest charged for the first two declined transactions each month applies to calendar months; and (3) requires the cards to be associated with ATM networks that ensure, rather than assure, the availability of in-network ATMs in the state.
EFFECTIVE DATE: October 1, 2016
PAYROLL CARD CONDITIONS
The bill establishes numerous conditions and requirements for employers using payroll cards. It specifies that none of them preempt or override a collective bargaining agreement's terms on how an employer pays its employees.
Before an employee chooses to be paid through a payroll card, his or her employer must provide the following clear and conspicuous written notice, in the language the employer normally uses to communicate employment-related policies to employees:
1. that being paid through a payroll card is voluntary and the employee can instead choose to be paid by direct deposit or check;
2. the terms and conditions related to using the card, including an itemized list of fees that the card issuer may assess and their amounts;
3. how employees can (a) access their pay in U.S. currency without a transaction fee; (b) avoid or minimize fees for using the cards, including clear and conspicuous notice describing how to access their pay for free at ATMs, depository financial institutions (i.e., banks, savings and loan associations, or credit unions), or other convenient locations; and (c) check their card account balances for free; and
4. a statement indicating that third parties may assess additional fees.
Consumer protections under the federal consumer protection regulations for electronic fund transfers, including transaction histories and advanced notice of changes in terms and conditions, must be provided to all employees who have a payroll card. In addition, employees must have the option to receive free monthly automatic written transaction histories for at least 12 months, or until the employee cancels the option. An employer can require the employee to renew the option at the end of each 12-month term.
All notices provided about payroll cards and their accounts must be clear and conspicuous.
Employers paying with payroll cards must (1) give employees a free way to check their payroll card account balances at any time through an automated phone system, ATM, or electronically and (2) give employees a statement of payroll deductions for each pay period, as required by law.
They must also allow employees who provide timely notice to switch from a payroll card to direct deposit or check without cost, fear of reprisal or discrimination, or any penalty. The switch must occur as soon as practicable, but no later than the first pay day that occurs 14 days after the employer receives the employee's request and, if applicable, the necessary account information.
An employer's obligations to an employee under the bill's payroll card provisions end 60 days after the employer no longer employs the employee.
Card & Account Conditions
Payroll cards and their accounts cannot be linked to any form of credit and, if technologically feasible, must not allow for overdrafts. Employees cannot be charged fees or interest for an overdraft or for the first two declined transactions of each calendar month.
The card must be associated with an ATM network that ensures the availability of a substantial number of in-network ATMs in the state.
A payroll card account must be insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration on a pass-through basis to the employee (i.e., the employee is reimbursed for any losses).
A card may have an expiration date if the (1) funds in the card's account do not expire and (2) employee is given a free replacement card before the expiration date. The requirement to provide a free replacement card applies for 60 days after the employer last transfers pay to the card.
Under the bill, payroll card accounts that receive only employee pay are exempt from executions or attachments by the employer's creditors (legal procedures to collect the employer's debts). They are also exempt from executions against debts due from a financial institution (legal procedures to collect the employee's debts directly from his or her bank account). The law, unchanged by the bill, also allows wage executions against an employee's wages (legal procedures to collect an employee's debts by requiring the employer to deduct payments from the employee's wages and remit them to the creditor).
Access and Usage
Each pay period, but no more than weekly, employees must be able to make at least three free withdrawals from their payroll card account at a depository financial institution or other convenient location. One of the free withdrawals must allow for the withdrawal of the full amount of the employee's net pay for the pay period.
A payroll card account may escheat to the state under the law for determining when property held by banking or financial organizations is presumed abandoned.
Fees and Charges
The bill generally prohibits employers from passing their costs for using payroll cards to employees. Specifically, none of the employer's costs from paying employees with payroll cards or establishing payroll accounts can be deducted from or charged against an employee's pay. In addition, the bill prohibits employers and payroll card issuers from assessing a fee on an employee, regardless of how it is labeled, for:
1. issuing an initial card,
2. transferring pay from the employer to a card account,
3. maintaining a card account,
4. providing one replacement card per calendar year at the employee's request,
5. closing a payroll card account,
6. maintaining a low balance,
7. not using an account for up to 12 months, or
8. point of sale transactions.
The bill specifies that it does not restrict the fees that a payroll card issuer may charge the employer under their payroll card agreement, as long as they are not passed on to an employee.
Labor and Public Employees Committee
Joint Favorable Substitute