Mandating direct

Because employee payroll laws vary from state to state, employers with operations in multiple states must be sure to comply with the laws of the particular state in which it is doing business.

Should you have any questions about these recent changes to the Michigan wage payment act or how to implement them, or should you have questions about any other labor or employment-related matter, please contact any member of Warner Norcross & Judd LLP’s Labor & Employment Practice Group.

Direct deposit, where employers pay employees by transferring money directly to employees' bank accounts, is very convenient for small business owners, who save check printing costs and bank check processing fees.

Some states allow employers to require employees to accept direct deposit of wages and bonuses.

In today’s post, Advice and Counsel Team Member John Gupton provides an answer to this common employer question: Yes.

The NC Department of Labor (NCDOL) considers direct deposit as merely another legal form of payment.

An employer can also require that its employees use a particular financial institution so long as that institution is insured by the United States government.

However, from an employee relations perspective, it would be best to allow your employees to use their own financial institution if you are going to require that they be paid by direct deposit.

Any election to receive pay via direct deposit or a payroll debit card must be made freely, without intimidation, coercion or fear of discharge or other reprisal. We would like to require employees to accept pay via direct deposit. The Fair Labor Standards Act does not directly answer this question. As an alternative, the employer may make arrangements for employees to cash a check drawn against the employer’s payroll deposit account, if it is at a place convenient to their employment and without charge to them. (Note – we strongly recommend against paying employees in cash.) Most states also have laws that govern when and how employers must pay employees. Direct deposit is an increasingly common method of paying employees, with numerous advantages for employees (fewer trips to the bank, no worry about losing a check) and employers (reduced cost and administrative hassle). Department of Labor states that the FLSA requires payment “in cash or negotiable instrument payable at par,” except under limited circumstances in which employers are permitted to record a credit for board, lodging, and other facilities. That of course begs the question of whether direct deposit into a bank account qualifies as a “cash equivalent.” The regulations do not address that question, but in Section 30c00(b) of its Field Operations Handbook, the DOL says the following: The payment of wages through direct deposit into an employee’s bank account is an acceptable method of payment, provided employees have the option of receiving payment by cash or check directly from the employer. Department of Labor, employers can pay employees via direct deposit, but have to allow employees the option of receiving payment by cash or check.CAI’s Advice and Counsel Team answers several questions from members daily.One question that the team members often receive deals with employee pay— Can employers in North Carolina mandate that their employees be paid by direct deposit?

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