Friday, May 12, 2017

NYSDOL Appeals Decision Invalidating Paycard Regulations

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PNN: NY Paycard Appeal

The New York State Department of Labor (NYSDOL) has filed an appeal of the New York Industrial Board of Appeals’ decision revoking burdensome regulations regarding payment of wages by direct deposit and paycards because they were invalid. The appeal will be heard in state court (not by the Board) [Reardon v. Global Cash Card and New York State Industrial Board of Appeals, Petition No. 02643-17, 4-17-17].

Paycard Provider Challenged Regulations
Global Cash Card (GCC), a national provider of paycards, filed a petition with the New York Industrial Board of Appeals on October 21, 2016, alleging that the regulations were invalid or unreasonable. GCC claimed the regulations:

  • Exceeded the NYSDOL’s authority
  • Violated the separation of powers between the state legislature and the executive branch of state government
  • Were preempted by federal banking law
  • Included vague and unreasonable provisions
Regulations Invalid, Did Not Take Effect
On February 16, 2017, the Board agreed with GCC. It found that the regulations were invalid because they exceed the NYSDOL’s rulemaking authority by regulating banking services. The regulations go beyond New York Labor Law §192, which deals with the relationship between employers and employees, by placing restrictions on financial institutions, the Board said. The regulations were scheduled to take effect on March 7, 2017, but did not take effect due to the Board’s ruling.

The NYSDOL’s Argument
On appeal, the NYSDOL is arguing that GCC did not have standing to challenge the regulations before the Board because GCC is not an employer whose payment of wage practices are regulated by New York labor law. The NYSDOL is also arguing that the regulations do not go beyond the scope of the labor law and do not violate the separation of powers doctrine (meaning that the NYSDOL had the authority to make the regulations and a new or amended law is not needed).

The NYSDOL issued eight opinion letters, beginning in 2001, describing permissible methods of wage payment via paycards under the labor law. According to the NYSDOL, “All the letters made clear both that Labor Law §192 prohibits such payment except to employees who provide advance written consent and, that such consent is not sufficient for the program to be legal.” The NYSDOL argues that no one, including GCC, challenged these letters or the NYSDOL’s power to interpret the labor law to prohibit employers from charging fees that limit their employees’ access to their full wages.

Paycards Remain Permissible in NY
The use of paycards for New York employees remains generally permissible as long as certain conditions are met (see The Payroll Source®, p. 5-23).

So What Happens Next?
The case will next move to state court and will likely not be argued until this summer, at the earliest. The rules will remain revoked pending the outcome of the case. It is also possible that the state legislature could pass a law regulating paycard use before a final decision is issued.

Pay News Now will continue to monitor the New York paycard situation as it unfolds in court this summer.