State-by-State Rules on Payroll Debit Cards, aka Paycards

[From the Thomson Reuters blog.]

There has been much talk and a lot of reports on the use of paycards. Every day, more workers insist on using paycards to receive their wages. I’m often asked if paycards are legal to use in various states. The simple answer is that all states allow paycards — many states, as well as the federal government, do not have any provisions for regulating paycards, thus making the use legal.

As a payroll provider, you may want to gain a competitive edge by offering the service. A few benefits include:

Payroll provider: saves cost on postage
Employer: eliminates the hassle of lost checks
Account Security: has the ability to receive automatic text or email alerts regarding the
employee’s card activity

Starting April 1, 2019, the federal government has specific regulations that will take effect, although none prohibit the use of paycards. Most of the new regulations pertain to how the issuer must respond to paycard holders and set specific disclosure rules. Below is a state-by-state listing of paycards.

In summary, paycards are here to stay and allowed in every state. Here’s the list, current as of April 6, 2018.

Taxing Authority	Allow Paycards?	Additional Information
Federal	No provision.
AK	No provision.	N/A
AL	No provision.	N/A
AR	No provision.	N/A
AZ	Yes.	Employees must first be offered the opportunity to be paid by direct deposit at a financial institution of their choice; if paid by paycard, they must be provided with a written or electronic statement of their earnings and withholdings and must be allowed to make one free withdrawal per each deposit of wages per pay period. They must also be provided with a list of all fees that they might incur. [Ariz. Rev. Stat. Ann. § 23-351]
CA	No.	See the California Division of Labor Standards Enforcement Opinion Letter (dated 7/7/2008) for a ruling that allowed the use of paycards and convenience checks in one particular situation.
CO	Yes.	Electronic payroll card systems must conform to certain state requirements. See Colorado Rev. Stat. § 8-4-102.
CT	No provision.	N/A
DC	No provision.	N/A
DE	Yes.	Employer must follow all the rules in Delaware Code Ann. 19 § 1102.
FL	Yes.	N/A
GA	Yes, eff. May 15, 2015.	Current employees must be provided with a written explanation of fees 30 days prior to when the paycard becomes available. The explanation must be provided to new hires at the time of hire. Employees must also be given a form with the written explanation of fees that allows them to opt out of being paid by paycard. [Ga. Code Ann. § 34-7-2]
HI	Yes.	Payroll cards are permitted if certain requirements are met. [Haw. Rev. Stat. § 388]
IA	Yes.	Employers may pay wages by paycard if the employee agrees in writing and certain other conditions are met.
ID	No provision.	N/A
IL	Yes.	In 2013, the Illinois Department of Labor issued a public advisory that explained the conditions under which wages may be paid by payroll debit/credit cards. Effective January 1, 2015, an employers may not use a payroll card unless certain other requirements are met. [ILCS Chapter 820 § 115/14.5]
IN	No provision.	N/A
KS	Yes.	Employees must be allowed at least one free means of fund access withdrawal per pay period for an amount up to and including the total amount of their net wages. See Kan. Stat. Ann. § 44-314.
KY	Yes, eff. June 28, 2017.	Employees may not be charged an activation fee and must be able to make at least one withdrawal per pay period without charge for up to the full account balance. [Ky. Rev. Stat. Ann. § 337.010]
LA	No provision.	N/A
MA	No provision.	Proposed legislation in this area (SB 1086).
MD	Yes.	Must be authorized by employee. Applicable fees must be disclosed to the employee in writing in at least a 12-point font.
ME	Yes.	Employees must be able to either make an initial withdrawal of the entire net pay without incurring any additional cost, or to choose another means of payment without incurring any additional cost. [Me. Rev. Stat. Ann. 26 § 663(5)]
MI	Yes.	Prior to the issuance of a paycard, the employer must provide employees with certain information in writing. An employer may require employees to receive wages by either direct deposit or payroll debit card if the employer provides a written notice/form that allows the employee to choose between direct deposit or payroll debit card. An employer paying wages by payroll debit card to one or more of its employees may pay wages to any of its employees by payroll debit card without obtaining employee consent. [Mich. Comp. Laws Ann. § 408.476]
MN	Yes.	See Minn. Stat. § 177.255 for requirements.
MO	Direct deposit or use of a paycard is mandatory for all permanent State of Missouri executive agency employees.	All temporary executive agency employees are also required to use direct deposit or paycards if their employment duration is anticipated to be greater than three months.
MS	No provision.	N/A
MT	Yes.	The employee must consent to the use of the paycard, have the ability to access the full amount of the wages without incurring a fee for the initial withdrawal, and must receive an itemized list of deductions and withholding.
NC	Yes.	Employees must be able to withdraw all monies due on payday. They must incur no cost for one-time use of the card on payday.
ND	Yes.	A stored value card to pay wages must be issued by a federally insured bank or credit union. See N.D. Cent. Code § 34-14-02 for further information.
NE	Yes.	Effective January 1, 2015, an employer must provide employees with immediate access to their wages, one free funds withdrawal per week up to and including the total amount of the employee’s net wages, and not require employees to pay any fees associated with paycard use. [Neb. Rev. Stat. § 48-1230(3)]
NH	Yes.	Employees must have at least one free means to withdraw up to the full balance on the card during each pay period. They cannot be charged any fees.
NJ	Yes.	Employer must follow all the rules in N.J. Admin. Code § 12:55-2.4(i).
NM	No provision.	N/A
NV	Yes.	See Nev. Admin. Code § 608.135 for requirements.
NY	A 2009 New York Department of Labor opinion letter says that wages may be paid using payroll debit cards under certain circumstances.	Employees must voluntarily consent to the agreement. Participation as a condition of employment is prohibited. Employees must be given cost-free options to access to their funds.
OH	No provision.	N/A
OK	Yes.	A 2009 Oklahoma Attorney General opinion letter says that employers may not require the use of payroll debit cards, but payroll debit cards may be used with the employee’s voluntary consent. Employees may not be charged a fee to receive wages electronically.
OR	Yes.	Wages may be paid by payroll debit card if the employee may, without incurring any fee: (1) make an initial withdrawal of the entire amount of net pay, or (2) choose to use an alternate method of payment.
PA	Yes, eff. May 3, 2017.	Employee must voluntarily consent to be paid by paycard. Employers must post a notice prior to obtaining consent that contains certain information, including all of the employee’s wage payment options, the fees that may be deducted from the payroll card account by the card issuer, and information on how employees can receive their wages without incurring fees. Employees must be able to make at least one free withdrawal each pay period.
RI	Yes.	Effective July 15, 2015, employees may be paid by payroll card if they request it in writing or electronically. [R.I. Gen. Laws § 28-14-10.1]
SC	No provision.	N/A
SD	No provision.	N/A
TN	Yes.	Employees must be given a choice of direct deposit or paycard. If an employee does not designate a financial institution for direct deposit, employer may pay by paycard. Employers must provide written disclosure regarding applicable fees. Employees must be able to make at least one withdrawal per pay period without cost.
TX	Yes.	Requires employee consent in writing.
UT	Yes.	Employees must be able to withdraw the full amount on pay day without incurring a fee and be provided with a statement (either in writing or electronically) of deductions from gross wages.
VA	Yes.	Employers must fully disclose applicable fees; employees cannot be required to accept this method of wage payment. Certain employees may be paid by paycard without written consent. See Va. Code Ann. § 40.1-29(b).
VT	Yes.	Employees must voluntarily consent to the arrangement.
WA	No provision for private employers. Institutions for higher education may mandate payment by paycard for employees who do not designate a financial institution for direct deposit.	Wash. Rev. Code § 41.04.240.
WI	No provision.	N/A
WV	Yes.	Employers are permitted to pay wages using a payroll card if they have the written consent of the employee. See W. Va. Code § 21-5-3.
WY	No provision.	N/A

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James Paille CPP is the Director of Operations for Thomson Reuters myPay Solutions. He has been an executive manager in the payroll service industry for more than 30 years, specializing in managing multi-location offices. Jim is President of the American Payroll Association as well as a member of the National Speakers Bureau and chair of the CPP Certification Review Panel. He holds a Bachelor of Science in Accounting from St. John Fisher College in Rochester, NY.