Labor and Public Employees Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-211

Title:

AN ACT ALLOWING EMPLOYERS TO PAY WAGES USING PAYROLL CARDS.

Vote Date:

3/1/2016

Vote Action:

Joint Favorable Substitute

PH Date:

2/25/2016

File No.:

54

SPONSORS OF BILL:

Labor and Public Employees Committee

Sen. Martin M. Looney, 11th Dist.

Sen. Edwin A. Gomes, 23rd Dist.

Rep. Kelly J.S. Luxenberg, 12th Dist.

REASONS FOR BILL:

To allow employers to pay wages using payroll cards as long as certain conditions are met.

***Substitute Language (LCO #2524): Removes the requirement that the financial institutions have to be federally insured depository institutions.

RESPONSE FROM ADMINISTRATION/AGENCY:

Sen. Martin M. Looney, President Pro Tempore, 11th Senate District: Supports the bill as it has significant protections for employees and requires that accepting these cards as wages be entirely voluntary.

NATURE AND SOURCES OF SUPPORT:

Cathy Beyda, Chair, American Payroll Association Government Relations Task Force: Payroll cards are now a mainstream method of wage payment. Connecticut appears to be the only state whose wage and hour regulators do not recognize payroll cards to be a permissible method of wage payment. This legislation would remedy this situation and make clear that employers may offer this beneficial payment method to their employees as a voluntary alternative to direct deposit and paper paychecks.

Connecticut Bankers Association: The bill would allow those without regular bank accounts to avoid costly check cashers for their financial needs. The average annual cost of using a check casher exceeds $1,100 per year or $21.15 a week. The average cost annual cost to the employee of using a payroll card is just $78 or just $1.50 a week. Also it will reduce the risk of robbery and injury after cashing their payroll check. A payroll card is a cost effective way to access ATMs, POS devices and purchase goods in stores without having to apply for a tax identification number (TIN) which is necessary to open a bank account.

Eric W. Gjede, Assistant Counsel, Connecticut Business and Industry Association:

In the modern economy, electronic transactions and payments are commonplace and exist in almost every aspect of our lives. Paychecks, tax returns, unemployment benefit checks and scores of other private and government payments are made electronically. Many employers use direct deposit and other automated methods of making employee compensation in order to avoid costs and wastefulness associated with paper checks.

Kimberly Ford, Vice President of Global Government & Public Affairs, First Data:

We believe that the bill will provide clarity in the Connecticut market place that payroll cards are a permissible means of wage payment in the state. We do have some concerns with the administrative cost and operational complexity that some of the provisions of the bill will generate, however, we understand there have been compromises made between the consumer advocacy community and the broader financial services community. Therefore, we would like to see the bill proceed through the legislature.

Legal Assistance Resource Center of Connecticut: The use of the card is voluntary for the employee. The employee must opt in and cannot be required to accept a card without his or her consent. More important, the employee can opt out at any time without fee or penalty on 14 days' notice. This bill prohibits and in some instances limits many of the fees imposed by payroll cards on customers. We have some concerns with the language of the bill such as since all fees are not prohibited, some cards may impose more fees than are fair. There are also questions about the way in which some cards may be able to limit free ATM access.

Lori J. Pelletier, President, Connecticut AFL-CIO: We cautiously support the bill as long as costs don't become a burden to the employees like card replacement fees, and the availability of funds through the card. Protections must be included in the bill so that workers are not taken advantage of.

Paul Russinoff, Senior Director of State and Government Relations, VISA: Connecticut is the only state in the country that does not recognize payroll cards as a permissible method of wage payment. The bill allows employers to offer payroll cards to employees on an entirely voluntary basis and is a good compromise between all parties who have worked for the past five years to craft legislation that would work in Connecticut.

Pete Isberg, Vice President of Government Relations for ADP: For the roughly 20% of households that are unbanked or underbanked, direct deposit many not be a viable option due to the costs of maintaining traditional checking accounts. Employers benefit from greater efficiencies and cost savings associated with electronic payments.

NATURE AND SOURCES OF OPPOSITION:

None Offered

Reported by: Joshua F. Quintana

Date: 3/18/16