July 4, 2013 in Business

Payroll card systems scrutinized

NY ensuring workers protected against fees
Associated Press
 

NEW YORK – The New York Attorney General’s office is looking at a little more than 20 businesses for their use of ATM-type cards to pay some of their workers.

The office of Attorney General Eric Schneiderman says it sent letters to companies including Wendy’s Co., Costco Wholesale Corp., Dollar Tree Inc., Chipotle Mexican Grill Inc., Home Depot, Inc., Darden Restaurants Inc. and Wal-Mart Stores Inc.

The letters request documents related to the payroll card systems used by each business so that they can ensure the companies comply with laws aimed at protecting workers from fees for using the cards.

Schneiderman’s office requested information such as fee schedules and documents showing that employees being paid via the ATM-type cards gave advance written consent.

The issue came to national attention after employees of a McDonald’s franchise in Pennsylvania sued over being forced to take their pay on such cards.

Many employers are trying to save on the expense of issuing paper checks by turning to direct deposit or payroll debit cards. Depending on the fees they charge, payroll cards can be beneficial for people without bank accounts. But opponents say cards with high fees mean that some workers are essentially making less than minimum wage.

Nearly 4 million U.S. households, or 3.2 percent, have someone receiving wages on a payroll card, according to a 2011 survey by the Federal Deposit Insurance Corp.

Darden, which runs restaurants such as Red Lobster and Olive Garden, said in a statement that it believes its policies comply with New York’s regulations. The company said employees can opt to use a pay card but may choose a check or direct deposit instead.

Wal-Mart Stores spokesman Randy Hargrove said that when the retailer launched its payroll card nationwide in 2009, it met with the New York state Department of Labor and shared full details of the program. He said that there were no issues at the time.

Hargrove said that Wal-Mart also offers workers the option of pay card, direct deposit or being paid by check.

Home Depot doesn’t offer payroll cards as an option in New York, said spokeswoman Paula Drake. In states where it lets employees choose to be paid via payroll card, only “a small percentage” opt for it. Those who do are informed of any fees, Drake said, and the most common transactions do not carry fees.

The Attorney General’s office has asked that the companies it contacted to submit the requested documents no later than July 22.

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