Minnesota Employers May Pay Wages Using Payroll Card Accounts
By: MARY M. KRAKOW
September 2005
Minnesota law now allows employers to pay employee wages via payroll card accounts. Employers are not required to use payroll card accounts, however, even if requested by employees.
With a payroll card account, employers electronically transfer an employee's net wages to the employee's account each payday. Upon transfer, the wages are owned by the employee. The employee must be allowed to access the account via a free transaction-typically with a debit, ATM or similar card. The employer will still need to supply the employee a written statement of earnings and deductions made.
Several restrictions apply to payroll card accounts. Employers first must file the required Department of Labor and Industry's registration form found at http://workplace.doli.state.mn.us/paycard/. In addition, before using payroll card accounts, an employer must provide employees written disclosure, in plain language, of all the employee's wage payment options. If an employee uses a language other than English, the employer must provide the notice in the other language.
The disclosure also must state the terms of the payroll card account option including, for example, an itemized list of the dollar amount of all fees that the employer or card issuer may deduct from the employee's payroll card account. The disclosure must tell the employee that third parties also may assess transaction fees.
Use of a payroll card account cannot be a condition of hire or of continued employment, and employers may use the accounts only for those employees who voluntarily consent in writing on the disclosure form. The employer must retain the signed disclosure and provide a copy to the employee.
Employers must not charge employees any initiation, participation, loading, or other fees to receive their wages via payroll card accounts, and payroll card issuers must not impose inactivity or dormancy fees. Also, any allowable fees imposed by the employer or the payroll card issuer that were not disclosed to the employee at the time of providing written consent may not be deducted or charged.
Employees must be allowed to withdraw the wages on their payroll card account by a free transaction on the regular payday and thereafter. Employers must provide one free transaction history each month that includes all deposits, withdrawals, deductions, or charges by any entity from or into the employee's payroll card account. Unless an employee provides written consent, information generated by a payroll card or account may only be used to process transactions and administer the payroll card and account. Payroll card accounts cannot be linked to any form of credit, such as a loan or cash advance against future pay.
Employers may continue to pay employees via cash, paycheck and direct deposit. Employees may opt out of direct deposit by written objection to the employer. Employers must give employees wishing to switch from payroll card accounts to another payment method a written form on which to indicate the change; the employer has 14 days to implement the new requested method.
The new statute automatically expires May 31, 2007. We will need to watch the 2007 legislative session to see if the law is extended beyond that date.
Employers with questions regarding use of payroll card accounts should contact their employment counsel.