Payroll cards are gaining popularity with employers as an option for providing wages. Reloadable debit cards offer a host of benefits to employees, especially those who don’t have a banking relationship. You may be considering a payroll card program for your business, but you’ll need to know the law first. The federal government has rules in place to govern how paycard programs are rolled out and managed, and many states have specific regulations that apply to pay cards.

Federal Paycard Laws

Any employee whose wages are deposited electronically, including to paycards, are protected by The Electronic Funds Transfer Act (EFTA) and Regulation E. Under these laws, employers must offer at least one additional payment method besides pay cards. Employers must also disclose a card’s terms, conditions, and fees. Additionally, payroll card wages are subject to the Fair Labor Standards Act (FLSA), which dictates the federal minimum wage. A pay card’s applicable fees cannot reduce an employee’s pay below minimum wage.

State Paycard Laws

While not all state laws contain language specific to payroll cards, most have enacted legislation that affects how paycard programs are administered.

Alabama

No specific regulations.

Alaska

Employers can only deposit funds with an employee's voluntary authorization.

Arizona

If an employer offers a direct deposit option for an employee's choice of financial institution, but the employee provides neither consent for the direct deposit nor their designated financial institution, then the employer can provide wages via payroll card without the employee's consent. Payment through a payroll card cannot be a condition of employment and employees must be allowed one free withdrawal per pay period. Employers must also disclose any paycard fees and provide statements of employees' earnings and withholdings.

Arkansas

No law specific to paycards, but paycards may fit into the state's requirements for direct deposits. In that case, payment methods must be voluntary (employees can opt out) and they cannot be a condition of employment.

California

Employees can receive pay card wages as long as they have immediate access to their wages in full and that the employee authorizes deposits voluntarily. The employee must also have the option to have pay deposited directly into an account of their choosing. Law also requires one free transaction per pay period.

Colorado

Employees must be able to access the full amount of net pay at least once per pay period OR have the choice of receiving another form of wage payment.

Connecticut

Law requires that employees have a choice of receiving compensation by deposit or check. They must authorize their choice voluntarily, and the payroll card cannot be a condition of employment. Employees must be allowed to make at least three free withdrawals, one being the full amount, per pay period. Any costs an employer incurs as a result of a payroll card can be taken from employee wages. Law prevents fees for issuing the payroll card, transferring to employee card accounts, providing the first replacement card within each calendar year, closing their account, maintaining a low balance, inactivity, or point-of-sale transactions.
Employees must be able to check their card account balance at no cost to them at any time. Cards cannot be linked to credit and cannot allow overdrafts.
Employers must provide clear disclosures, including that payroll cards are a voluntary option, any terms and conditions for use (including fees), and how employees can access their wages and use their cards. Law also requires that employers provide wage and deduction statements to employees.

D.C

No specific regulations, though informal advisories have been made dictating that employees must receive disclosures, authorize deposits voluntarily, and make one free withdrawal per pay period.

Delaware

Paycard systems must allow full payment of wages on regular paydays without cost to the employee. Any electronic wage payment requires an employee's written consent.

Florida

Pay cards must be negotiable and payable in cash, on demand, without discount, at some place of business in the state. The business name and address must appear in the issuing materials. Funds must be available for at least 30 days.

Georgia

Pay cards must be negotiable and payable in cash, on demand, without discount, at some place of business in the state. The business name and address must appear on the card. Funds must be available for at least 30 days. Additionally, employees must be made aware of any fees and how to opt out. Disclosures must be provided in writing.

Hawaii

Before the employee chooses how they are paid, the employer must give them, in writing, the option of choosing to receive wages by pay card, check, or direct deposit. The payroll card cannot be mandatory nor a condition of employment. Employers cannot issue a card without obtaining written, voluntary consent from the employee. Employees can opt out any time, and the employer must coply with written requests within 2 pay periods. The pay card vendor must provide on free replacement card per year. Employees must be able to make three free withdrawals per pay period. Records of an individual's transactions and balances must be made available for them to access 24/7. The pay card cannot leverage fees for overdrafts. Employees cannot be charged for the application, initiation, transfer, loading of wages by the employer, privelege of participation, or distribution or delivery of the initial payroll card.

Idaho

No specific regulations.

Illinois

Employers can issue payroll cards if they are not a condition of employment, they obtain voluntary written consent from the employee, and they provide additional payment options.

Indiana

No specific regulations.

Iowa

Employers must offer additional payment methods and obtain written consent from the employee. Employees must be able to access wages at no cost.

Kansas

Employers cannot retain any interest in wages transferred electronically, including paycards, other than correcting overpayments. Employees must be able to make one withdrawal per pay period at no cost to them. Employees are not responsible for participation fees, but they are responsible for replacement card fees. Employers are required to conduct educational forums on direct deposit or paycard programs OR distribute educational information.

Kentucky

Employees must be able to make one free withdrawal per pay period. Pay card accounts must be convertible into cash on demand without discount. Employers cannot assess an activation fee and must provide account statements.

Louisiana

No specific regulations.

Maine

Employees must be able to withdraw their full wages at no cost OR choose another means of payment that incurs no fees.

Maryland

Employees must authorize receiving wages via pay card, and fees must be disclosed in writing.

Massachusetts

Payroll card laws currently only apply to staffing agencies and worksite employers. Employees must be able to access their wages for free, and any fees must be disclosed.

Michigan

Employees must be able to make one withdrawal per pay period at no cost to them. Employers must disclose terms and conditions, including fees, and advance notice of any changes to these terms. Employees can opt out and must have unlimited, charge-free access to balance and transaction records.

Minnesota

Employers must obtain written consent. Consent cannot be a condition of employment and must include disclosures. Any undisclosed fees cannot be taken from an employee's pay, and no dormancy fees can be deducted from pay. Employees can opt out.

Mississippi

No specific regulations. (h3) Missouri

No specific regulations.

Montana

Employees must have the option to receive wages via check or cash. Employers must obtain voluntary consent. Employees must be able to withdraw their full wage without cost to them. Employees can request statements and must receive a written disclosure before agreeing to a pay card.

Nebraska

Payroll cards cannot be a condition of employment. Employers must provide wage statements and at least 1 free withdrawal per pay period. Employers cannot pass costs to the employee.

Nevada

Payments must be immediately accessible to employees and one free transaction per pay period. The paycard must be optional, and any fees must be disclosed and accepted in writing.

New Hampshire

Employees must be offered payment by check, able to change payment methods at any time without penalty, and able to make one free withdrawal per pay period. Employer's fees can't be passed to employees. Options and terms must be disclosed and agreed to in writing. The same goes for any changes to those terms. Undisclosed fee increases are the employer's responsibility.

New Jersey

Paycards follow the same laws at direct deposits. Any deductions must be disclosed. Employees can opt out. Employees must be provided one free withdrawal per pay period. Employers must disclose terms, features, and fees and obtain written consent, which cannot be a condition of employment.

New Mexico

No specific regulations.

New York

Employees cannot be charged, directly or indirectly, any fees for using the card. Employers must obtain written consent from the employee. Employees must have local access to a bank or ATM for withdrawals.

North Carolina

No specific regulations.

North Dakota

Cards must be issued by FDIC-insured institutions. Employers are responsible for all fees. Employers must obtain written consent.

Ohio

No specific regulations.

Oklahoma

Paycards must be voluntary.

Oregon

Employers can offer a pay card only if they provide other options that do not incur fees. Employees must be able to make one free withdrawal of their full wages without cost to them. Agreements must be made in plain language, but the state advises documenting consent.

Pennsylvania

Card issuers must be FDIC or NCUA-insured. Funds cannot expire. Employers must honor requests to change payment methods. Participation fees associated with the card are prohibited, including fees for the first replacement card each year. Employees must be provided one free withdrawal per pay period. Employers must disclose, in writing, an employee's payment options, terms, conditions, and fees, and how to access wages without incurring fees.

Rhode Island

Employees must authorize receiving wages by pay card, be able to check balances any number of times for free, and be able to make one free withdrawal per pay period.

South Carolina

Employers must provide at least one withdrawal per pay period at no cost to the employee.

South Dakota

No specific regulations.

Tennessee

Employers must also provide a direct deposit option. If an employee does not designate an institution for deposit, then they may be paid by payroll card without consent. Employees must be provided one free, full-amount withdrawal per pay period at no cost to them. Any fees must be disclosed in writing.

Texas

Per a new law enacted September 1, 2019, employers are required to disclose, in writing, details of their payroll card plan and any fees associated with it. Disclosures must be made at least 60 days before the first transfer of funds. Employers must provide forms for employees to request alternative forms of wage payment.

Utah

Employees must have immediate access to their full wages on payday. Deduction statements must be made accessible at no cost. These statements can be electronic if the employee is given clear instructions for accessing them. Employees must be provided one free, full-amount withdrawal per pay period.

Vermont

Pay card issuers must be federally insured. Pay cards must be optional. Cards must be branded, usable at points of sale, and feature overdraft protections. Non-branded cards can only be issued for 60 days. Cards cannot be linked to credit. Employees must be able to access 1 free transaction statement per month upon written request.

Virginia

Employers distribute wages via payroll cards without the employee’s consent for those hired after January 1, 2010 if the employee does not designate a financial institution for direct deposit. Employees must be provided one free, full-amount withdrawal per pay period. Fees must be disclosed in writing, and employers must obtain consent unless an employee has not designated a financial institution for deposits.

Washington

Employees must provide alternatives that allow employees to access wages for free if the offered payroll card has associated fees.

West Virginia

Pay card issues must be FDIC insured. Employees may not be charged excessive fees for receiving their cards, and use of pay cards must be agreed upon in writing.

Wisconsin

No specific regulations.

Wyoming

No specific regulations. For more specific information on your state’s payroll laws, contact your state’s department of labor. The information included in this article has been compiled as of November 15, 2019 and is not intended as legal advice."