Monday, July 25, 2016

New York Updates Wage Payment Regulations

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The New York State Department of Labor is reviewing comments on proposed regulations that are likely to have serious repercussions for thousands of employers and millions of employees. The regulations cover wage payments by check, direct deposit, and payroll card.

New York wants to ensure that employees are aware of their rights with regard to the method by which they receive their pay. By law, employees in New York cannot be forced to receive their pay electronically, either through direct deposit or payroll card. That said, the overwhelming majority of workers in New York and across the country do choose to receive their pay electronically. APA’s most recent survey showed that 88% of workers paid by APA members receive their pay by direct deposit. Nearly 2% of employees receive their pay on a payroll card.

The proposed regulations would require that employers notify their employees about their options for being paid – check, direct deposit, payroll card. The regulations would also require that employees reconfirm in writing the choices that they have already made. Failure to choose will default to a paper check.

The rules will go into effect six months after they are finalized. If the employer fails to provide the required notice and confirm the choice of payment, the employer would, presumably, need to convert employee’s wage payments to paper checks.

The New York Department of Labor seems to have a strong preference for paper checks, widely regarded as the most inefficient and fraud-prone method of payment currently in use. The regulations are intended to protect employees’ rights. The effect, however, will be to kick off a massive paper chase. Failure to comply will inconvenience nearly everyone involved.

Ask anyone you know who is using direct deposit how they’d feel if, come payday, their money didn’t show up in their bank account and instead they were handed a paper check. Many people have automatic payments set up from their bank accounts to pay utilities, rent, child support, all sorts of expenses. When those payments aren’t made, because the money isn’t in the bank account, will they thank the New York State Department of Labor for protecting their rights? More likely, they’ll blame their employer. Payroll and HR departments will take a lot of heat simply because employers will attempt to comply with these regulations.

The rules for payroll cards are even more egregious. The use of payroll cards in New York is voluntary for employees. They have chosen this method of payment. New York is now applying a seven-day waiting period for payroll cards in addition to the notification and written confirmation requirements that apply to direct deposit. This means that once an employee has selected the payroll card, the employer must wait seven days before doing anything related to directing a payment to that card account. For employees paid weekly, this guarantees that they will be receiving a paper check on the next payday. This waiting period would also apply to workers who are already using payroll cards.

The APA believes the solution to this is obvious. New York should go ahead and require that every employer notify their employees about their options for being paid, but they should grandfather in the choices that have already been made. The notification requirements will be expensive and inconvenient for employers. But turning off someone’s electronic payment in favor of a paper check will hurt the very people these regulations are intended to protect.

Let us know what you think about the proposed regulations, direct deposit, payroll cards, and paper checks in our comment section.