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Can we mandate direct deposit?

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in Human Resources

Q. To cut down on the administrative costs of issuing paychecks, my company would like to pay all its workers through a direct deposit to the bank of their choice. May we require our employees to accept their pay via direct deposit?

A. California Labor Code Section 213 allows employers to pay workers via direct deposit. However, the statute provides that each worker must have “voluntarily authorized such deposit.” Thus, employers should not require workers to receive their pay through direct deposit.

Rather than force mandatory direct deposit, employers may wish to provide workers with incentives to authorize direct deposit—for example, by negotiating an arrangement with a bank to provide free checking to workers who sign an authorization.

Employers with unionized work forces should review labor agreements to determine if the agreement addresses the issue.

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