Payroll Card Bill Would Slam Workers
By JOHN SEILER
A recent trend in banking is what’s called “stored-value cards.” When used for workers’ pay, they’re also called “payroll cards.”
They act much like debit cards. And they’re similar to prepaid gift cards or a Starbucks value card.
Each card accesses a bank account that holds a certain value, which then can be withdrawn for purchases or cash. The cards reduce banking fees paid by issuers.
And the cards are convenient for those who don’t have bank accounts which they can use for direct deposits, or for cashing checks.
SB 931 would add new regulations to the payroll cards. It’s by state Sen. Noreen Evans, D-Santa Rosa. The bill specifies that the payroll cards only can be issued with the following conditions:
A. The employee is presented with the option of receiving his or her wages by direct deposit, the option of receiving payment by paper check, and the option of receiving payment by payroll card before selecting one of the options;
B. The employer obtains the employee’s written consent to receive wages by payroll card and provides specified information (including a payroll card fee schedule);
C. The employer does not make participation in the payroll card program a condition of hire or continued employment;
D. The employer selects an issuer that offers employees a process for disputing payroll card account fees, as specified;
E. The employer honors a written request by the employee to change the method of receiving wages within two pay periods from the time of the request….
Although payroll cards aren’t outright banned, the new regulations are so onerous that employers likely will just forget it and use the time-tested system of issuing paper paychecks. If the workers don’t have bank accounts on which to cash the checks, then they will have to use the storefront check-cashing outfits that charge high fees, thus effectively reducing the worker’s take-home pay.
No wonder SB 931 is being opposed by major business groups, including the California Chamber of Commerce, the California Bankers Association and the California Retailers Association.
It’s supported by California Teamsters Public Affairs Council, the California School Employees Association, the Utility Workers of America and other labor groups even though the bill would reduce workers’ effective wages.
The legislative analysis explains the reasoning behind the bill: “The bill’s sponsor, the California Labor Federation, states that current California law is silent on the use of payroll cards. Therefore, it is unclear what protections, if any, exist for employees receiving their wages by payroll card; what standards, if any, exist for the use of a payroll card program for an employer; or, if the payroll card method is a legal method for paying employee wages in California.”
According to an analysis the Chamber sent me:
* This bill is a de-facto ban on payroll cards because it will make it cost prohibitive for financial institutions or employers to offer these programs in California. The list of prohibited fees included in this bill by its proponents all but ensures that payroll cards will no longer be a viable method of payment that employees, in both the public and private sectors, enjoy today.
* Payroll cards already are a lawful method of wage payment in California. Labor Code section 213, as interpreted by the DLSE, allows for the use of payroll cards as a valid method of payment so long as employees are provided with at least one means of accessing their full wages each pay period in cash. The state Labor Commissioner has confirmed this in an opinion letter.
* It will establish a de-facto ban on payroll cards and deny employees the benefits of innovative electronic payments. By establishing unworkable standards and making it cost prohibitive to offer payroll cards, SB 931 will force businesses to revert to paying their unbanked employees using paychecks only. The hardest hit will be the one-in-five low-income Californians who do not have a checking account.
* The bill punishes employees by denying them access to the financial mainstream. Payroll cards empower unbanked employees by providing them with an efficient method to pay bills electronically, make reservations, make purchases online, etc. — all things they cannot do when reliant on cash. By making payroll cards unavailable, SB 931 will force unbanked employees to rely on expensive check cashing services and to incur additional costs when purchasing money orders to pay their bills. A recent study shows that employees using check cashing establishments and purchasing money orders pay over three times more in fees than current payroll cardholders pay on an annual basis1. Studies2 have repeatedly shown that payroll cards are one of the least expensive ways for employees to receive their wages. This study confirms that SB 931 is a solution in search of a problem.
Unfortunately, the current California Legislature is expert at creating problems instead of solving them.
SB 931 passed the Assembly on Sept. 8, on partisan lines. Supposedly pro-Labor Democrats backed an anti-worker bill. It awaits action today in the Senate. The Legislature goes into recess at midnight tonight.
SB 931 is another argument in favor of a Texas-style part-time Legislature that meets for six months every two years. By now, the Legislature would have been gone for months and couldn’t engage in any more mischief until 2013.
June 19, 2013