Mathew W. Burr, MJ-LEL, MBA, MHRIR, GPHR, SHRM-SCP, SPHR, CPHR-INT, Chartered CIPD Uncategorized

5 Thoughts on Payroll Debit Cards

Original post date: December 10, 2024

Many organizations are moving to a payroll debit card model for employee payments in lieu of cash (yes cash), checks or direct deposit.  Debit cards and direct deposit are two options many organizations are offering and will continue to offer.  We need to be aware of laws that regulate the use of the payroll debit cards and provide alternative options, per federal and state guidelines.  One of the concerns at the federal level with these cards is that an organization cannot mandate where the funds can be redeemed.  This mandate would violate the Electronic Fund Transfer Act (EFTA).  Payroll debit card laws are written and enforced at the state level, some states prohibit employers from using pay cards without consent, place limitations on fees that can be charged and impose disclosure requirements.  New York State is a state that requires consent and there have been recent court cases on this issue. 

Below are 5 considerations on payroll debit cards:

  1. “Do not make their use mandatory.  This is simple advice but necessary, provide options for the workforce to utilize a direct deposit option.  Working with a local bank or credit union is a great way to ensure employees understand direct deposit, checking and savings accounts.
  2. Limit fees.  If it was my money or paycheck, I wouldn’t be happy seeing a fee associated with withdrawals or moving money from one account to another.  Limit or eliminate fees, fees might not be legal in your state.
  3. Disclose every detail.  This doesn’t mean provide a 30-page contract that details everything in legal terms.  Ensure employees can understand the detail and have the option to ask questions.  A frequently asked question list is a great place to start with disclosing details in an easy to understand format.  Work with the debit card company to ensure accuracy and legality. 
  4. Ensure that the full amount can be withdrawn each pay period in multiple withdrawals without fees.  This harkens back to the second suggestion.  If it was my money, I wouldn’t be happy with any fees.  It’s the employee’s money, ensure they can access and move it around as needed.    
  5. Ensure that there is a reasonable number of establishments nearby from which money can be withdrawn.”[i]  Working with a local bank or credit union with easy to access ATM machines and multiple locations is a great option.  Having a map with locations is another solution to assist employees withdraw cash or bank.  Negotiating zero fees with the financial institution is an option, or at least a question to ask.  Again, create a process that assists employees with the money withdrawal.  Provide alternatives and options for employees.

New York State Area’s to Consider:

“Beyond the notice and consent requirements, the additional restrictions applicable to using payroll debit cards included:

  1. Imposition of a seven-business day waiting period from execution of consent to initial payment by means of payroll debit card.
  2. A prohibition on a laundry list of potential fees.
  3. Requiring that wages paid by payroll debit card may not be linked to any form of credit.
  4. A prohibition on employers passing on costs associated with payroll debit card accounts or otherwise receiving kickbacks from third parties associated with payroll debit card programs.
  5. A prohibition on expiration of wages.
  6. An additional notice requirement if there are changes in the terms and conditions of the card accounts or fees charged to employees.
  7. A requirement that union approval be obtained for unionized employees.
  8. Providing a detailed written notice to employees.
  9. Obtaining voluntary consent prior to payment by either of these methods.”[ii]

Additional information on New York State:

New York State Rulemaking Activity

New York State Supreme Court Case Ruling

New York State Notice and Consent Direct Deposit Model Form

New York State Notice and Consent Payroll Debit Cards Model Form

Pennsylvania Regulations:

“The new amendments resolve the uncertainty. Under the new law, the use of payroll debit cards is permitted if, among other things:

  1. The employer does not mandate the use of payroll debit cards.
  2. The employer complies with stringent notice requirements.
  3. The employee is allowed one free withdrawal of all wages earned per pay period.
  4. The employee is provided a free method of checking the balance on the card electronically or by telephone.
  5. There are no fees for using the payroll card.”[iii]

Federal Bulletin on Payroll Debit Cards

The laws and regulations vary on payroll debit cards from state-to-state and will continue to evolve as payment options and technology evolves.  Be aware of the regulations in each state you operate in.  My recommendation is to make this an option for employees, just as direct deposit is an option (but strongly preferred).  Don’t force employees into using a payroll debit card or direct deposit, it could violate the law.  Seek guidance prior to implementing payroll debit cards and work with a reputable company.  SHRM’s vendor directory has four options to choose from and there are multiple websites that rank these organizations, based on service, size and reputation.  This should not be a one size fits all model, benchmark and find a solution that works best for your organization.  Your payroll provider and/or local bank might have suggestions on preferred vendors to consider or suggested alternatives.

New York State Department of Labor Drops Proposal Regarding Call-In Pay

“The New York State Department of Labor announced recently that it does not intend to implement its proposed regulations that would have imposed burdensome requirements on employers to provide call-in pay to employees under a variety of circumstances not currently covered under existing regulations. The regulations were initially proposed in November 2017, and then were revised in December 2018 after public comments were received and reviewed. The NYSDOL now intends to let the regulatory process expire with respect to the proposed regulations and potentially revisit this issue in the future.”[iv]  Continue to watch for the revisit in the future, this will impact most organizations in New York State.

NYC Mandates Workplace Lactation Room March 18, 2019

“Beginning March 18, 2019, employers in the Big Apple with at least four workers must provide lactation rooms and create a written lactation-accommodation policy that must be given to workers when they are hired. The city’s human rights commission will release a model policy before the effective date.”[v]

[i] https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/pages/employers-payroll-debit-cards-.aspx

[ii] https://www.shrm.org/resourcesandtools/legal-and-compliance/state-and-local-updates/pages/new-york-state-regulations-governing-payroll-debit-cards-revoked.aspx

[iii] https://www.shrm.org/ResourcesAndTools/legal-and-compliance/state-and-local-updates/pages/pennsylvania-law-clarifies-payroll-debit-card-use.aspx

[iv] https://www.bsk.com/news-insights/new-york-state-department-of-labor-drops-proposal-regarding-call-in-pay-for-now

[v] SHRM email

Mathew W. Burr, MJ-LEL, MBA, MHRIR, GPHR, SHRM-SCP, SPHR, CPHR-INT, Chartered CIPD Uncategorized

Daylight-Savings Time FLSA Questions to Consider

Original Posting Date: 11/6/2024

The clocks fell back one hour on Sunday, November 3, 2024, causing confusion and challenges for employers with nonexempt employees who were working during the time the clocks fell back.  How do we pay employees during this time?  What is our legal obligation related to hours worked and paid?

  Below are three wage and hour answers, for daylight savings time change(s):

Pay and Hours Worked:  Employers are required to pay employees for all hours worked.  Nonexempt employees working last night at 2:00 a.m., must be paid one additional hour of pay, “unless the start/end times of their shifts are adjusted in anticipation of the time change.  In essence, such an employee will have worked the hour from 1:00 a.m. to 2:00 a.m. twice.”[i]

Overtime:  The one additional hour must be considered into the overtime compensation/calculation for the entire week.  If the nonexempt employee is scheduled for 40-hours this week, the additional hour would put the employee at 41-hours, one hour of overtime, at least time and one-half the normal hourly rate. 

Overtime Rate: “In addition, employers must take this additional hour of work into account when computing the employee’s regular rate of pay for purposes of calculating the employee’s overtime rate.”[ii]

Additionally, ensure that your payroll systems fall back during the time change on Sunday.  I have seen issues with timekeeping and payroll systems not resetting for the one-hour time change, which will cause additional issues when processing payroll. 

  1. “Does Double Pay Apply for 1:00 a.m. to 2:00 a.m.?

Employers whose nonexempt employees are in the midst of a shift at 2:00 a.m. on November 4, when that time becomes 1:00 a.m., may be required to pay these employees for one additional hour of work—if, in fact, the time change extends the number of hours actually worked. This is because federal law requires employers to pay employees for all hours worked, and these employees will have essentially worked the hour from 1:00 a.m. to 2:00 a.m. twice (and that “extra” hour will carry over throughout the remainder of the shift). To avoid this, employers could alter the start or end times of these nonexempt employees’ shifts on November 5.

  • Employers’ Overtime Obligations

If an employer in the above scenario does pay its nonexempt employees for an additional hour of work, it might be on the hook for overtime compensation as well. That is, the hour from 1:00 a.m. to 2:00 a.m. that equals two hours of work might result in a workweek of over 40 hours or a workday in excess of 8 hours. Employers may need to consider that additional hour of work in determining employees’ overtime compensation for the day and week.

  • Regular Rate of Pay

The Fair Labor Standards Act (FLSA) requires employers to pay employees one-and-one-half times their regular rate of pay for all overtime hours worked. For some employees—those paid on commission, tipped workers, and employees who receive bonuses, to name a few—this regular rate is a bit more difficult to determine. Under federal law, an employee’s regular rate of pay is the employee’s hourly rate for all of his or her non overtime hours worked in a single workweek. When calculating an employee’s regular rate, employers must consider all compensation that the employee received in one workweek, including the additional hour of compensation to which a nonexempt employee may be entitled if he or she is working during the time change. Thus, employers that have workers on the clock at 2:00 a.m. might need to take this into account when computing employees’ regular rate of pay for the week for purposes of calculating an employees’ overtime rate.

  • What About the Beginning of Daylight-Saving Time?

Forward-thinking employers may also want to take the start of daylight-saving time into account. Nonexempt employees who are working on Sunday, March 12, 2023, at 2:00 a.m.—when clocks will “spring forward” to 3:00 a.m.—may be entitled to one fewer hour of pay for their shifts because, essentially, they would not have worked from 2:00 a.m. to 3:00 a.m. For example, if an employee is scheduled to work a shift from 11:00 p.m. to 7:30 a.m., he or she will have worked only seven hours. Once again, employers may adjust their nonexempt employees’ schedules for that day to give them an additional hour of work.

Note, however, that the FLSA does not require employers that decide to pay a worker for a full eight-hour shift even if he or she worked only seven hours to include that extra hour of pay in calculating the employee’s regular rate of pay for overtime purposes. The FLSA also prohibits employers from crediting that extra “non worked” hour of pay toward any overtime compensation due to the employee.” (SHRM)

“Previously, employment law experts told HR Dive that managers should be mindful of giving employees proper break times if shifts encompass daylight saving transitions. So, for example, if supervisors typically rely on computers to automate break times, this would be an instance where manual timekeeping is encouraged.

Additionally, HR should look into whether there are any wage and hour provisions in their workers’ collective bargaining agreement that addresses the daylight-saving time change.

Employers should ensure that they are following any provisions in a collective bargaining agreement that addresses wage and hour provisions for time change. Ultimately, the employment attorney who spoke to HR Dive reaffirmed the DOL’s guidance: Timekeeping is about “staying true” to the hours worked.

Another compliance consideration is workplace safety: A 2018 National Safety Council study found that post-daylight saving transition fatigue leads to an annual uptick in accidents, due to “circadian misalignment” or talent fighting to stay awake.” (HR Dive)

FLSA Hours Worked Advisor

Daylight Savings Time

Most states participate in daylight savings time. Those employees working the graveyard shift when Daylight Savings Time begins work one hour less because the clocks are set ahead one hour. Those employees working the graveyard shift when Daylight Savings Time ends work an extra hour because the clocks are set back one hour at 2:00 a.m.

For example:

The scheduled shift starts at 11:00 p.m. and ends at 7:30 a.m. The next day, your employee works an eight- hour shift and receives a 30-minute lunch break.

  • On the Sunday that Daylight Savings Time starts at 2:00 a.m., the employee does not work the hours from 2:00 a.m. to 3:00 a.m. because at 2:00 a.m. all of the clocks are turned forward to 3:00 a.m. Thus, on this day the employee only worked 7 hours, even though the schedule was for 8 hours.
  • On the Sunday that Daylight Savings Time ends at 2:00 a.m., the employee works the hour from 1:00 a.m. to 2:00 a.m. twice because at 2:00 a.m. all of the clocks are turned back to 1:00 a.m. Thus, on this day the employee worked 9 hours, even though the schedule only reflected 8 hours.

The FLSA requires that employees must be credited with all of the hours actually worked. Therefore, if the employee is in a work situation similar to that described in the above example, he or she worked 7 hours on the day that Daylight Savings Time begins and 9 hours on the day that Daylight Savings Time ends. This assumes, of course, that the employee actually worked the scheduled shift as in our example.

https://webapps.dol.gov/elaws/whd/flsa/hoursworked/screener11.asp

“Unanticipated challenges

That extra hour of work can present several unanticipated challenges, in addition to an unpaid hour:

  • Breaks. In states requiring that employees take breaks at a certain point in their shifts, workers may not automatically get that time, says Caroline Brown, of counsel at Fisher Phillips. “For that day, back off of relying on the time keeping computer so much,” Brown suggests, and figure out the time manually.
  • Overtime. If that additional hour puts an employee at more than 40 hours during that workweek, the Fair Labor Standards Act requires the employee be paid overtime. Employees who fall under the “8 and 80” system — or in states that require daily overtime — may be eligible for overtime for that day.
  • Collective Bargaining Agreements. Employers should ensure that they are following any provisions in a collective bargaining agreement that addresses wage and hour provisions for time change.

Making adjustments

Although appropriate tracking for the seasonal time change is frequently forgotten, it can be easily remedied, says Green.

The best approach is to go back to basics, Brown suggests. “There is a tendency for employers to focus on days and shifts when it comes to wage and hour requirements, when it’s really about staying true to the time of how many hours someone did the work.”

Whether timekeeping is manual or automatic, grab a pen and paper if necessary, and figure out the actual hours for that day, Brown says; “Give that payroll a glance to make sure everything lines up.” The same goes when spring rolls around: an employee working 11 p.m. to 7 a.m. when we turn the clocks forward must be paid for only seven hours of work.

It’s worth noting that not all states and regions observe Daylight Saving Time, but if yours is one that does, be prepared so you — and your employees — can avoid any unpleasant wage and hour surprises.” (HR Dive)

States That Deviate from the Daylight Savings Standard

Note that Arizona (with the exception of the Navajo Nation) and Hawaii do not observe daylight saving time. Not to be outdone, Florida and Nevada have passed bills that would ensure that daylight saving time is observed year-round. Though their respective state legislatures approved these bills, and their governors signed them, they are still awaiting federal approval. And, of course, there’s California, which just a few days after the end of daylight-saving time will vote on a proposition to move the state to year-round daylight-saving time as well. Even if that proposition passes, it will require congressional approval for the change to become permanent.” (JDSUPRA)

Additional Considerations

  1. Ensure timeclocks adjusted.
  2. Camera’s need to align with timeclock.
  3. The payroll smartphone app time alignment
  4. Computer system time updates
  5. Communication on pay and policies.

Additional Information

Eighteen states have enacted legislation or passed resolutions to provide for year-round daylight-saving time if Congress were to allow such a change. Will that eventually happen? Only time will tell.

Daylight-saving State Legislation Link

[i] https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/daylight-saving-time-wage-hour-problems.aspx

[ii] https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/daylight-saving-time-wage-hour-problems.aspx