Tuesday, December 22, 2015

APA Makes Case for Payroll Cards in Pennsylvania


In December, the American Payroll Association (APA) submitted a friend-of-the-court brief to provide information that the court might find useful as it debates its decision in Siciliano v. Mueller. In 2012, a worker at a McDonald’s franchise in Pennsylvania sued her employer over the way she was paid. She was paid on a payroll card without being given the choice of direct deposit or a paper check. This became known as Siciliano v. Mueller, a class-action lawsuit that’s still before the court today.

The workers argued that wages paid on a payroll card do not comply with state law because they are not “lawful money of the United States or checks.” Therefore, the act of using payroll cards to pay wages violates Pennsylvania’s Wage Payment and Collection Law. The Court of Common Pleas of Luzerne County agreed, but also decided that there is sufficient difference of opinion on the matter that the defendants could appeal the decision.

In its friend-of-the-court brief, the APA made three points to the court:

  1. Virtually every state recognizes payroll cards to be a permissible method of paying wages, either through legislation or administrative guidance. Some even recognize it as the functional equivalent of direct deposit or a check, including Pennsylvania. Back in 2009, the APA conducted research on how states considered payroll cards. The Office of Chief Counsel for the Pennsylvania Department of Labor and Industry wrote to the APA saying, “Payroll cards are permissible under state law.”
  2. Pennsylvania does actually recognize methods of payment other than “lawful money” and “checks.” The state Banking Code specifically recognizes wage payments by direct deposit. Payment to a payroll card is a form of direct deposit. If the court were to decide that payroll cards don’t qualify as lawful money or check, they should still be legal under Pennsylvania law.
  3. Recognizing payroll cards as a legitimate means of paying wages is good public policy. More than a quarter of households in Pennsylvania are either unbanked or underbanked. That means they either don’t have bank accounts or, if they do, they’re relying on alternative financial services like check cashers.

The Federal Reserve Bank of Philadelphia found that payroll cards are the most cost-effective transaction accounts available to consumers without bank accounts. They are less than one-fifth the cost of check cashing services. The Federal Reserve Bank of Philadelphia confirmed that many employees use payroll cards without ever incurring a fee and those who do incur fees could have avoided them.

Ultimately, the APA is asking the court to consider this: Even if it decides in favor of the plaintiff that payroll cards don’t qualify as lawful money or checks, it should avoid any implication that payroll cards themselves are unlawful in Pennsylvania.

Let us know what you think of payroll cards in the comments section below and check back with Pay News Now as this case develops.