Mandatory Direct Deposit
Someone recently asked me about whether they could require mandatory direct deposit for their employees. Apparently, this was a company with out of state employees. Typically what happens in this scenario is that the payroll is processed centrally and each pay period a pile of checks is mailed to each (typically out-of-state) location. Everything works well until the overnight courier misses the delivery. Payday comes and goes with no paychecks. For the employees who have direct deposit - no problem. For the employees who are waiting for their checks - big problem.
The answer to this question generally is a subject of state law. New York State Labor Law has specific guidance on this issue. While many other state do not prohibit mandatory direct deposit, unfortunately New York limits the ability of employers to mandate direct deposit. Specifically,
S 192. Cash payment of wages. 1. No employer shall without the advance written consent of any employee directly pay or deposit the net wage or salary of such employee in a bank or other financial institution. 2. This section shall not apply to any person employed in a bona fide executive, administrative, or professional capacity whose earnings are in excess of six hundred dollars a week, nor to employees working on a farm not connected with a factory.
For more on New York State's law, go here. For those in other states, be sure to check in with your particular state's law before mandating direct deposit.
Hey Diane,
I have a concern about this mandatory direct deposit thing. I'm in North Carolina and apparently, our Dept of Labor's Wage and Hour Bureau has determined that it doesn't violate our Wage and Hour Act. This seemingly has been construed as the entire Dept of Labor's official position, that position being that mandatory DD is allowed here.
The Wage and Hour Bureau would undoubtedly also find that cutting out an employee's eyeballs wouldn't violate the Wage and Hour Act [Really.]
['Cause, you know, it doesn't.]
On the flip-side, I have found more than one organization who references the Field Handbook of the US Dept of Labor, which says that in enforcement of the Fair Labor Standards Act, employees must always have the right to choose.
Further net-surfing has produced these results:
one HR professional says that FLSA doesn't regulate method of payment [it doesn't, but the subject is addressed in the regs]...
one HR professional association recommends against mandatory...
several sources claim it's strictly a state law issue [including you]...
one HR professional says that the law that gives the employee the most benefit [in this case, choice] would supercede the one that doesn't
Furthermore, isn't forcing someone to sign a contract [like the DD authorization form] still considered 'coercion' [that would void the contract]?
And finally, I know I've read some educated person saying that courts have long held that real persons have more rights than corporate persons. [If a corporate person can say 'we don't accept checks/credit cards/debit cards/EFT, etc.' how can any law forbid an individual person from saying 'I only accept checks'?]
To me it seems like the waters are muddy.
My questions:
Do the federal regs [not the maddeningly-silent FLSA law, itself] supercede state laws?
Do they supercede state regs? [Apparently NC Labor actually told someone on the phone that their decision supercedes federal law.]
Is there any actual case-law out there on the subject?
Any other feedback?
Do you charge for these kinds of questions?
