Connecticut Employment Law Blog Insight on Labor & Employment Developments for Connecticut Businesses

Legislative Update: Payroll Cards Finally Approved in Connecticut

Posted in Highlight, Human Resources (HR) Compliance, Legislative Developments, Manager & HR Pro’s Resource Center, Wage & Hour

generalassemblyPayroll cards are finally here.

The General Assembly finished their regular session last night with several employment law bills getting passed, including some that have been kicking around for years.

One of them is Senate Bill 211, which authorizes employers to use payroll cards — instead of checks or direct deposit — to pay their employees.

But there are a number of conditions that must be met before this happens and there are a number of restrictions as well.  The bill will become effective October 1, 2016 — assuming the governor signs the measure, which is expected.

The Office of Legislative Research has done a thorough recap, which I’ll liberally borrow from here.

In order to use the card, 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, as noted by the OLR report:

  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.

Another big change, according to the OLR report: 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.

An amendment, which also passed, (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.

Overall, this is a big boost for both employers and employees.  The CBIA had supported the measure and it had received “cautious” support from the AFL-CIO as well.