PA 16-125—sSB 211

Labor and Public Employees Committee

Banking Committee


SUMMARY: This act 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. The authorization must be free of any intimidation, coercion, or fear of discharge or reprisal by 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 allow 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 may be passed on to employees.

Under the act, 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 may 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; (2) accessed through a payroll card; and (3) subject to federal consumer protection regulations on electronic fund transfers.

The act allows the labor commissioner to adopt regulations to ensure compliance with the act's payroll card provisions and, 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, or the study's status or results if it has been started or conducted, to the Labor and Public Employees Committee.

The act 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 and (2) employer must (a) provide a way for the employee to access and print the record securely, privately, and conveniently; and (b) incorporate reasonable safeguards to protect the confidentiality of the employee's personal information.

Lastly, the act allows employers to pay employees through direct deposit at an employee's electronic request. Prior law only allowed them to do so at an employee's written request.

EFFECTIVE DATE: October 1, 2016


The act sets 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 must pay its employees.

Notice Requirements

Before employees choose to be paid through a payroll card, their employers must provide them with a clear and conspicuous written notice, in the language the employer normally uses to communicate employment-related policies to employees, stating:

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 a clear and conspicuous notice describing how to access their pay for free at ATMs, banks, savings and loan associations, credit unions, or other convenient locations; and (c) check their card account balances for free; and

4. 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 be given 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 give employees a (1) free way to check their payroll card account balances at any time through an automated phone system, ATM, or electronically and (2) 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 at no cost, without fear of reprisal or discrimination, or any penalty. The switch must occur as soon as practicable, but no later than the first payday 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 act'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.

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 card expires. The requirement to provide a free replacement card applies while the employee is being paid through the card and for 60 days after the employer last transfers pay to the card's account.

Under the act, payroll card accounts that receive only employee pay are exempt from (1) executions or attachments by the employer's creditors (legal procedures to collect the employer's debts) and (2) 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 act, 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 bank, savings and loan, credit union 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 (revert) to the state under the law for determining when property held by banking or financial organizations is presumed abandoned.

Fees and Charges

The act generally prohibits employers from passing on 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 act prohibits employers and payroll card issuers from charging an employee a fee, 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 act 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.

OLR Tracking: LRH; RP; PF; JM; bs