Employers Paying their Employees with Pre-Paid and “Debit” Cards

A McDonalds worker in Pennsylvania made news lately when she sued the McDonalds franchise owner because employees were paid via a prepaid card that charged fees for almost every transaction. This New York Times article goes into detail about why employers find paying with these cards useful and how the banks that issue the cards offer the employers incentives to pay their employees using the bank’s card.

The plaintiff alleged that she had to pay fees to access her paycheck money on the card. These fees included $1.50 for ATM withdrawals; $5 for over-the-counter cash withdrawals; $1 per balance inquiry; 75 cents for online bill pay and $15 if she lost the card or had it stolen from her.

Her attorney filed a claim under the Pennsylvania Wage Payment and Collection Act saying that paying employees via a prepaid card violates the section of the Act which provides that “Wages shall be paid in lawful money of the United States or check.”

Many other states have similar laws. In Georgia the Official Code of Georgia as Amended §34-7-2 states:

“Every person, firm, or corporation…shall make wage and salary payments to such employees or to their authorized representatives (1) by lawful money of the United States, (2) by check, or (3) with the consent of the employee, by authorization of credit transfer to his account with a bank, trust company, or other financial institution authorized by the United States or one of the several states to receive deposits in the United States.”

part (3) of this section may make it legal for an employer to pay their employee via debit card as long as the employee gives authorization. However, OCGA  §34-7-3(a) says “Any order, check, draft, note, or other instrument issued in payment of wages or salary due or to become due must be negotiable and payable in cash, on demand, without discount, at some established place of business in the United States…” This might mean that the card fees are illegal because they prevent the employee from getting their cash “without discount”. The employers and card companies may argue that because the cards usually allow the employee to withdraw cash for free from certain ATMs there is no fee. However, what if an employee lives in a small town and the closest in network ATM is miles and miles away meaning that they need to pay a fee in order to access their money?

The attorney in the Pennsylvania case also brought a claim under the Fair Labor Standards Act claiming that the fees brought the employees’ wages below the minimum wage. Under the FLSA, employers are allowed to deduct certain expenses from an employee’s paycheck. But the deductions can not cause an employee to make less than minimum wage for the work week.

An example might be a company asking an employee to pay for their uniform. The employee might be able to make the employee pay for the uniform, but if the employee earns $7.25 an hour and works 30 hours in a week they only make $217.5 before taxes. If the employer makes the employe pay $30 for the uniform from the first weeks paycheck then the employee only makes $187.5 that week. $187.5/30 hours = $6.25 so the employer only made $6.25 an hour that week. That arrangement would potentially be illegal because the employee effectively made less than the federal minimum wage of $7.25 an hour for that workweek. In the Pennsylvania case the argument may be that the fees that the employees’ pay are similar to employers making deductions from the employees’ paycheck so the FLSA rule against deductions bringing the hourly rate to under $7.25 an hour should apply.

If you are working a job that requires you to receive your paycheck on a prepaid card then you need to speak with an attorney. It may be that paying you in this fashion is illegal. Even if your damages are small by themselves, when combined with all your coworkers the case might be substantial. If you are in Georgia contact attorney Benjamin Kandy. I’ll be happy to discuss any issues that you may have with wages, hours, and working conditions.

 

UPDATE: The McDonald’s in question is reevaluating its payment practices and New York Attorney General Eric Schneiderman is looking into the practice of paying employees via pre-paid cards.

After Outcry, McDonald’s Franchise Drops Compulsory ‘Payroll Debit Cards’

 

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