The owners of 16 McDonald’s franchises in Pennsylvania have agreed to pay more than $1 million to settle charges they violated state law when they paid employees with fee-laden debit cards.
The workers argued in state court that the paycards did not meet a state paycheck law’s definition of “lawful money” or “check.” The cards charged fees for withdrawals, online payments and other transactions. In some cases, the fees effectively dragged employee pay below the minimum wage.
The settlement came after a state appeals court upheld a lower court ruling in the employees’ favor.
The fast-food franchisee will pay $1,250 each to eight lead plaintiffs in the case. More than 300 additional plaintiffs will receive $100 each, plus reimbursement of any ATM or bank fees they had to pay when using the cards. (Attorneys pocketed an $858,000 share of the settlement!)
By some estimates, the paycard fees affected some 2,100 additional employees, but only those who registered by a court-established deadline were eligible to collect.
Countless employers successfully pay their employees by giving them debit cards or paycards, but—like otherpractices—their use is often carefully regulated by state law.
In many states, there are strict limits on the fees employees may have to pay to access their wages. Some states bar fees altogether. Almost all prohibit fees that would lower employee pay below minimum wage. Generally, employees cannot be forced to receive their wages via paycards, although employers may require them to use direct deposit instead.
Employers that use or are considering using debit cards should check pertinent state laws to determine what practices are legal in the jurisdictions where employees work. A clue to the pro-employee bias built into many such ordinances: They’re often called “wage-theft laws.”
Advice: Have your attorney review all your payroll practices to ensure they comply with pertinent state and federal laws. Discuss paycard procedures with new hires to make sure they understand how to access their pay.
Learn the ins and outs of electronic pay at www.theHRSpecialist.com/e-pay-options.