Connecticut Seal

General Assembly

File No. 54

    February Session, 2016

Substitute Senate Bill No. 211

Senate, March 15, 2016

The Committee on Labor and Public Employees reported through SEN. GOMES of the 23rd Dist., Chairperson of the Committee on the part of the Senate, that the substitute bill ought to pass.

AN ACT ALLOWING EMPLOYERS TO PAY WAGES USING PAYROLL CARDS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective October 1, 2016) (a) As used in this section:

(1) "Direct deposit" means the electronic payment of an employee's wages, salary or other compensation that is deposited into such employee's account in any bank, Connecticut credit union or federal credit union that has agreed with the employer to accept such wages, salary or other compensation;

(2) "Payroll card" means a stored value card or other device used by an employee to access wages from a payroll card account and that is redeemable at the employee's election at multiple unaffiliated merchants or service providers, bank branches or automated teller machines. Payroll card does not mean a gift certificate, as defined in section 3-56a of the general statutes; and

(3) "Payroll card account" means an account in any bank, Connecticut credit union or federal credit union that is directly or indirectly established through an employer to which transfers of the employee's wages, salary or other compensation are made and accessed through the use of a payroll card and that is subject to the requirements of Regulation E, 12 CFR Part 1005, as from time to time amended.

(b) An employer may offer the use of payroll cards to deliver wages, salary or other compensation to employees, provided:

(1) Each employee has the option of receiving wages, salary or other compensation by direct deposit and by negotiable check; and

(2) The employee voluntarily and expressly authorizes, in writing or electronically, the payment of wages, salary or other compensation by means of a payroll card account without any intimidation, coercion or fear of discharge or reprisal from the employer for the employee's refusal to accept such payment of wages, salary or other compensation by means of a payroll card account. No employer shall make the payment of wages, salary or other compensation by means of a payroll card account a condition of employment or a condition for the receipt of any benefit or other form of remuneration for any employee.

(c) Prior to an employee electing to receive wages, salary or other compensation by means of a payroll card account, each employer using payroll card accounts to deliver wages, salary or other compensation to an employee shall provide such employee with clear and conspicuous notice, in writing, and in the language the employer normally uses to communicate employment-related polices to his or her employees, of the following:

(1) That payment of wages, salary or other compensation by means of a payroll card account is voluntary and the employee may instead choose to receive wages, salary or other compensation by either direct deposit or by negotiable check;

(2) The terms and conditions relating to the use of the payroll card, including an itemized list of fees that may be assessed by the card issuer and their amounts;

(3) The methods available to employees both for accessing their full wages, salary or other compensation in lawful money of the United States without any transaction fee to the employee for such access and for avoiding or minimizing fees for use of the payroll card, including, but not limited to, a clear and conspicuous notice describing how to access wages, salary or other compensation without cost at automated teller machines, depository financial institutions or other convenient locations;

(4) The methods available to employees for checking their balances in the payroll card account without cost; and

(5) A statement indicating that third parties may assess additional fees.

(d) Each pay period, but not more frequently than each week, an employee with a payroll card shall be allowed to make at least three withdrawals from the payroll card account at no cost to the employee, one of which permits withdrawal of the full amount of the employee's net wages, salary or other compensation for the pay period at a depository financial institution or other convenient location.

(e) None of the employer's costs associated with paying wages, salary or other compensation using a payroll card or establishing the payroll card account shall be deducted from or charged against the wages, salary or other compensation delivered to the employee.

(f) (1) Neither the employer nor the payroll card issuer shall assess a fee to the employee for any of the following, regardless of how such fee is labeled: (A) Issuing the initial payroll card; (B) transferring wages, salary or other compensation from the employer to the payroll card account; (C) maintaining a payroll card account; (D) providing one replacement card per calendar year upon the employee's request; (E) closing the payroll card account; (F) maintaining a low balance; (G) inactivity or dormancy of the payroll card account for the first twelve months of inactivity or dormancy; or (H) point-of-sale transactions.

(2) A payroll card may bear an expiration date, provided (A) the funds in the payroll card account do not expire; and (B) prior to the expiration date, the employee is provided with a replacement card, without charge, during the period when wages, salary or other compensation are applied to the payroll card account by the employer and for sixty days after the last transfer of wages, salary or other compensation is applied to the payroll card account by the employer.

(3) The payroll card account may escheat to the state pursuant to the provisions of section 3-57a of the general statutes.

(g) Each employer shall provide the employee a means of checking his or her payroll card account balance through an automated telephone system, automated teller machine or electronically without cost to the employee twenty-four hours per day and seven days per week.

(h) Neither the payroll card nor the payroll card account shall be linked to any form of credit and, to the extent technologically feasible, the payroll card account shall not allow for overdrafts. No fees or interest may be imposed upon the employee for an overdraft or the first two declined transactions of each month.

(i) The employer shall furnish the employee with a statement of deductions made from his or her wages, salary or other compensation for each pay period in accordance with section 31-13a of the general statutes, as amended by this act.

(j) Each employee with a payroll card shall be permitted, on timely notice to the employer and without cost or fear of reprisal or discrimination or the assessment of any penalty, to receive his or her wages, salary or other compensation by direct deposit into a personal account at any bank, Connecticut credit union or federal credit union that has agreed to accept such deposits or by negotiable check. The employer shall begin payment by direct deposit not later than fourteen days after receiving both the employee's request and the account information necessary to make the deposit, or by check not later than fourteen days after receiving the employee's request.

(k) Consumer protections, including transaction histories and advanced notice of changes in terms and conditions, shall be provided to each employee with a payroll card in accordance with Regulation E, 12 CFR Part 1005, as from time to time amended. Notwithstanding the foregoing, employees shall be provided the option to receive, on a monthly basis, automatic written transaction histories at no cost to the employee for a term of at least twelve months or until such option is cancelled by the employee. Renewal of the option to receive written transaction histories at no cost to the employee may be required by the employer upon expiration of the initial twelve-month term, and each twelve-month term thereafter.

(l) The payroll card shall be associated with an automated teller machine network that assures the availability of a substantial number of in-network automated teller machines in the state.

(m) Wages, salary or other compensation paid to an employee using a payroll card shall be deposited in a payroll card account that is insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration on a pass-through basis to the employee.

(n) A payroll card account that is used to receive only employee wages, salary or other compensation shall be exempt from execution or attachment (1) by creditors of the employer, and (2) under section 52-367b of the general statutes.

(o) All notices required by the provisions of this section shall be clear and conspicuous.

(p) Nothing in this section shall be construed to preempt or override the terms of any collective bargaining agreement with respect to the methods by which an employer provides payment of wages, salary or other compensation to employees.

(q) Nothing in this section shall be construed to restrict the fees that a payroll card issuer may charge the employer pursuant to a payroll card agreement between the payroll card issuer and the employer, provided those fees are not charged to or passed on to any employee.

(r) The employer's obligations to the employee pursuant to the provisions of this section shall cease sixty days after the employer-employee relationship has ended.

(s) The Labor Commissioner, within available appropriations, may conduct a study of payroll card usage and the actual incidence of associated fees. Not later than October 1, 2018, the commissioner shall determine whether such a study shall be conducted, and shall report such determination, or the status or results of such a study if such a study has already been initiated or conducted, in accordance with the provisions of section 11-4a of the general statutes, to the joint standing committee of the General Assembly having cognizance of matters relating to labor.

(t) The Labor Commissioner may adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, to ensure compliance with this section.

Sec. 2. Subsection (a) of section 31-71b of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(a) (1) Except as provided in subdivision (2) of this subsection, each employer, or the agent or representative of an employer, shall pay weekly all [moneys] wages, salary or other compensation due each employee on a regular pay day, designated in advance by the employer [, in cash,] using one or more of the following methods: (A) Cash; (B) by negotiable checks; [or, upon an employee's written request, by credit to such employee's account in any bank that has agreed with the employer to accept such wage deposits] (C) upon an employee's written or electronic request, by direct deposit; or (D) by payroll card, provided the requirements of section 1 of this act are satisfied.

(2) Unless otherwise requested by the recipient, the Comptroller shall, as soon as is practicable, pay all wages due each state employee, as defined in section 5-196, by electronic direct deposit to such employee's account in any bank, Connecticut credit union or federal credit union that has agreed with the Comptroller to accept such wage deposits.

Sec. 3. Section 31-13a of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2016):

(a) With each wage payment each employer shall furnish to each employee, in writing or, with the employee's explicit consent, electronically, a record of hours worked, the gross earnings showing straight time and overtime as separate entries, itemized deductions and net earnings, except that the furnishing of a record of hours worked and the separation of straight time and overtime earnings shall not apply in the case of any employee with respect to whom the employer is specifically exempt from the keeping of time records and the payment of overtime under the Connecticut Minimum Wage Act or the Fair Labor Standards Act

(b) If the record of hours is furnished electronically pursuant to subsection (a) of this section, the employer shall provide a means for each employee to securely, privately and conveniently access and print such record. The employer shall incorporate reasonable safeguards regarding any information contained in the record furnished electronically pursuant to subsection (a) of this section to protect the confidentiality of an employee's personal information.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2016

New section

Sec. 2

October 1, 2016

31-71b(a)

Sec. 3

October 1, 2016

31-13a

LAB

Joint Favorable Subst.

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note

State Impact: None

Municipal Impact:

Municipalities

Effect

FY 17 $

FY 18 $

Various Municipalities

Savings

Potential

Potential

Explanation

The bill allows employers to pay their employees via payroll cards under certain conditions. This does not result in any fiscal impact to the state, but does result in a potential savings associated with reduced printing and mailing costs to any municipality that may choose to implement such a program.

The state currently provides electronic access for employees to their itemized earnings summary. In addition, the state does not currently provide wages through payroll cards. As the bill does not require employers to provide wages by payroll card, this provision does not result in a fiscal impact to the state.

The bill also allows the labor commissioner to study payroll card use and the actual incidence of associated fees and report to the legislature. It is anticipated that, should such a study be undertaken, it would be accommodated utilizing existing staff and at no additional cost to the agency.

There is no cost to the Department of Labor to adopt or enforce regulations concerning the bill.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

OLR Bill Analysis

sSB 211

AN ACT ALLOWING EMPLOYERS TO PAY WAGES USING PAYROLL CARDS.

SUMMARY:

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:

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.

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.

Notice Requirements

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:

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.

Employer Requirements

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 within 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 month.

The card must be associated with an ATM network that assures 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 & 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:

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.

COMMITTEE ACTION

Labor and Public Employees Committee

Joint Favorable Substitute

Yea

13

Nay

0

(03/01/2016)

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