Labor costs are usually the largest expense for any company, and employers are always looking for ways to cut back in this area. Payroll processing is one method to lower their fixed overhead costs – and that has been a big factor in the rise of so-called payroll debit cards.
Instead of cutting paper checks or even using direct deposit, employers are issuing workers these payroll debit cards and transferring wages to them on payday.
Payroll Cards, Fees, and the Minimum Wage
The problem is that many of these payroll cards have fees that workers must pay to access the money stored on them – money they have rightfully earned as wages. According to The New York Times, those fees are steep. One such card charges $1.75 each time an employee withdraws cash from an ATM. Another has an “inactivity fee” of $7 if an employee does not use the card often enough.
For a worker earning minimum wage – and perhaps working several jobs just to make ends meet – these fees can quickly add up and eat into their take-home pay. In fact, it might even mean they are actually earning less than minimum wage after paying all of these fees. By using fee-based payroll debit cards, employers are essentially taking money from their employees’ pockets.
Because this is so new, there are not many laws that expressly forbid the practice. However, the federal Fair Labor Standards Act (FLSA) does stipulate that hourly employees must be paid at least a minimum wage – and time-and-a-half if they work overtime – and that is also the case for many state employment statutes. If the fees charged by payroll debit cards mean an employee is taking home less than minimum wage, this could be in violation of the FLSA and state law.
Employee Lawsuits Are Calling Out Payroll Card Issues
Some employees are fighting back against this practice. Some McDonald’s franchises have faced lawsuits from workers. Employees have also sued Dave & Buster’s. In March 2016, a Pennsylvania judge found the practice to be illegal in that state.
There is also evidence that state and local governments, as well as some agencies like the Consumer Finance Protection Bureau (CFPB), are scrutinizing this new practice. There is legislation pending in some states, and the CFPB has also warned employers that they cannot make payroll debit cards mandatory.
If your employer wants to pay you with a fee-based payroll debit card, you should know your rights. Depending on where you live, you may not have to accept this form of compensation. And, the fees charged should not mean you end up receiving less than minimum wage for your work.
You may also be able to bring a lawsuit to recover any fees you may have paid for using a payroll debit card to receive your wages. Your first step should be to consult with an experienced employment litigator who can discuss your situation.