Paying employees with payroll debit cards has become increasingly common in states like Washington that allow this method. However, while these cards can be convenient, they can carry burdensome fees for employees and potential legal pitfalls for employers. For example, Seattle-based KING 5 News reports that a McDonald’s employee has filed a lawsuit claiming that when she complained about fees on her payroll card, she was given no other payment option.
Both employers and employees can avoid issues such as these by understanding the benefits and drawbacks of payroll cards and the Washington laws that control them.
Pros and Cons of Payroll Cards
For some people, payroll cards have earned a bad reputation because of stories (such as this New York Times article) about employees losing much of their paychecks to exorbitant fees. However, payroll cards can benefit both employees and employers in many cases.
-Benefits for Employees: Payroll cards can especially benefit employees who do not have bank accounts. For example, payroll cards can be more convenient than regular paychecks because employees do not have to pick up their paychecks in person or take them to be cashed. In addition, the payroll cards’ fees may be less expensive than a check cashing fee. A payroll card can also be more secure than carrying large sums of cash.
-Drawbacks for Employees: the biggest and most obvious drawback is the fees that are associated with payroll cards. In some cases, employees can be charged a fee every time they use the card. Some cards may charge an inactivity fee to employees who do not use the card enough. In addition, these cards are not subject to the same federal regulations that normal credit and debit cards are.
-Benefits for Employers: Using payroll cards instead of paper checks can reduce costs associated with printing and issuing paychecks. According to the Times article, some companies that issue payroll cards offer financial incentives to employers who use them.
-Drawbacks for Employers: For employers who offer multiple payment options, it may be inconvenient to manage this system. In addition, as illustrated by the lawsuit filed by the McDonald’s employee, employers can face legal problems if they do not understand payroll laws.
Washington Payroll Laws
There is no specific law that controls the use of payroll cards in Washington. However, other payroll laws and regulations govern how they can be used.
-Pay Frequency: employers must pay employees at least once a month, regardless of payment method.
-Payment Methods: employees can be paid by cash, a paycheck that can be cashed for full face value, or an alternate method such as direct deposit or payroll card. If there is a fee or cost associated with the alternate method, then the employee must be offered a choice between the alternate method or a normal paycheck.
In the case of the McDonald’s franchise, knowledge of payroll laws could have helped both the employee and the franchise avoid financial and legal issues. A Washington employment lawyer can help an employer comply with payroll laws and can help employees whose rights have been violated.