Q. Our company wants to start using paycards instead of issuing paychecks to employees who do not use direct deposit. Is it legal to use payroll cards in California?
A. Even though California does not have specific laws or regulations addressing payroll debit cards, the California Division of Labor Standards Enforcement (DLSE) has issued opinion letters on the use of payroll debit cards.
The DLSE has noted that payroll debit card programs do not violate the Labor Code if participation in the program is optional. The employee must voluntarily authorize deposit of his or her wage through the program. In other words, employers cannot make using payroll debit cards a condition of employment.
It is also important that there be no fee or other charge to the employee—having one free transaction per pay period is sufficient. And, in case employees do not withdraw their wages immediately, employers must maintain sufficient funds for at least 30 days.
As a reminder, employers must still comply with the requirement of providing an itemized wage statement to the employee as required by Labor Code section 226(a).