In the near future, we plan to reintroduce legislation allowing an employer to pay employees exclusively by electronic means through use of direct deposit or a payroll card. Under current law, payroll cards and direct deposit may be offered to employees, but any single employee may request a paper check and the employer is required to provide it. 25 states, including Massachusetts, Washington, Texas, and Alabama, allow employers to pay wages exclusively through electronic means.

Technological advancements have improved and expanded wage payments, making paper checks antiquated and less beneficial for workers than electronic alternatives. Currently, 93% of American workers are paid via direct deposit while less than 5% continue to receive paper checks. Paper checks can be costly and difficult to transact and may leave consumers vulnerable to fraud or theft risks.

Payroll cards offer stronger consumer protections and advantages over paper checks. Employees can get their entire pay in cash without any cost, and have more options to access their money, such as from banks and ATMs, through cash-back at many retailers, through online bill-payment services, or by making purchases over the internet. Payroll cards cannot be over-drafted (resulting in overdraft fees). Lastly, they do not expire and afford other critical consumer protections like fraud protections and dispute resolution.

Our legislation would help ensure that Pennsylvania employers can pay their employees timely during emergencies, such as fires, floods, snowstorms, or disasters. Logistical impacts associated with the COVID-19 pandemic also became a strong factor for enhancing the digitalization of payments. These and other circumstances created challenges for the physical delivery of checks, as well as traveling to a bank or check-casher. For those individuals paid by a paper check that is delivered by postal mail, please be aware that direct deposit and payroll card transactions do not face potentials for delayed delivery.

The legislation further protects employees by a) requiring at least a 45-day notification window prior to converting to payroll cards and b) ensuring no impact on current collective bargaining agreements.

Finally, the bill does not change current consumer protections or safeguards around the use of payroll cards, including:

• Prohibiting a fee for issuing the payroll card or for deposit of wages on the card;
• Allowing at least one free replacement card per year for each employee;
• Allowing at least one fee-free withdraw up to the full amount the employees net wages per pay period;
• Requiring a free method to check the payroll card account balance;
• Prohibiting point-of-sale transaction fees;
• Prohibiting funds on the payroll card from expiring;
• Prohibiting inactivity fees for any period of inactivity of less than one year; and

This bill is a reintroduction of Senate Bill 1026 from the 2023-24 session. Cosponsors included: Gebhard, Fontana, Costa, Cappelletti and Street.

It is our hope you will join in cosponsoring this legislation to modernize Pennsylvania’s payroll methods.

Statutes/Laws affected:
Printer's No. 0588: P.L.604, No.173