Tuesday, November 3, 2009

Does Wal-Mart Use of Check Cards for Pay Purposes Violate Wage Payment Laws?

Walmart_1 The Wall Street Journal reported yesterday:

Wal-Mart Stores Inc., the nation's largest private employer, is eliminating paper payroll checks in the U.S., transferring workers' earnings to a debit card if they decline direct deposit to a bank.

Wal-Mart is the biggest company yet to make the move that it said will save paper and money. It estimates the move will save 257,572 pounds of paper a year. It declined to specify the savings but said the shift will reduce its payroll costs . . . .

Some Wal-Mart workers last month received earnings electronically in the form of credit to a MasterCard Inc. debit card. The program will roll out nationally this month, though many of Wal-Mart's 1.4 million U.S. workers will continue to receive paper checks for months while it is fully implemented. About half of its U.S. workers now receive paper checks.

Though the debit cards save companies money by reducing payroll costs, consumer advocates have criticized some card programs, noting that workers are often charged fees to access their money or even check balances.

I understand the consumer adovocates point and I appreciate the environmental angle, but as an employment law professor I wonder (out loud) whether this arrangement could violate a state's wage payment and collection law?

At least in Michigan, under the Michigan Wages and Fringe Benefits Act, the answer appears to be "no."  There, Mich. Comp. Laws Ann. ยง 408.476 (West Supp. 2006) allows Michigan employers to mandate use of a payroll card by employees.  Most of these laws require that employees be paid in cash or check, and not in some other form of payment. 

Do any readers have insights from other states?

Hat Tip:  Hammad Haider-sha



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California's Labor Commissioner issued an opinion letter in 2008 discussing (for 10 pages) payroll cards and the state requirements for the prompt payment of wages without discount, the consent needed for direct deposit, etc. at http://www.dir.ca.gov/dlse/opinions/2008-07-07.pdf online.

Posted by: kent | Nov 3, 2009 2:52:40 PM

Here in PA we run into issues with some employee bases. Some of them have the mentality that paper check = pay. They have some psychological need to physically take the check and get the cash at the bank. In some ways, this is good because I do believe that moving to all this imaginary money that happens with direct deposit makes it very difficult for some people to really manage their money well. In consideration of costs and environmentally friendly choices I am in favor of this kind of move.

I do agree that the fees associated with these cards are unfair. I feel as though the fee base should be gobbled up by the company if they are going to require this type of process.

Posted by: Leslie EGIZIANO | Nov 4, 2009 4:09:00 AM

In Virginia, employers will be authorized to pay wages and salaries to employees hired after January 1, 2010, via credit card to a prepaid debit card or card account, without affirmative employee consent, if an employee fails to designate a financial institution to which payment could be made by electronic automated fund transfer and the employer arranges for an employee to have the ability to make at least one free withdrawal or transfer per pay period using the card at participating financial institutions (Ch. 728 (S. 1264), L. 2008, enacted March 30, 2009).

Posted by: Jen Gero | Nov 4, 2009 2:30:01 PM

I smell class-action lawsuit vs. Wal-Mart soon enough. They are demanding direct deposit in states that do not allow direct deposit by circumventing the law in giving them a "blank check" as a form of check payment. Problem is that you can only get this "blank check" to be written to yourself if you get their payroll card as well. And, I think, this check is written against the paycard balance - not that of Wal-Mart. Hence, skirting the law IMHO.

All it takes is a few employees who are disenchanted with being forced into/onto a product that will end up costing them $$$ and let the lawsuits begin.

I, for one, work for Starbucks and we have the most unique card that I have seen anywhere. I've had it for about 8 months, cashed out on a few occasions for my full amount (mostly just use it as a Visa card but can get cash whenever I want on their large ATM network - always free) and never paid anything to use it.

On the contrary, I used to work at Ruby Tuesday's and their card was your typical "1 free this or that" card...the type you see anywhere.

If employers/companies are going to encourage or force their employees onto a paycard, why not give them something that has their interests at heart? Can't it be good for the goose and the gander (probably wrong expression but I think you get what I mean... a win-win situation)?

Wal-Mart employees: If you care to look up the card I have and get yourself something that will cost substantially less than the one you have, it is the "Money Manager Card". Wal-Mart used to have something called the "Money Card" and it is NOT the same.


Posted by: Joey S | Nov 15, 2009 12:23:50 PM

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