Debit-Payroll Card Payment and Direct Deposit

Debit/Payroll Card Payment

It is the administrative enforcement position of the North Carolina Department of Labor's Wage and Hour Bureau that the payment of employees by "Debit/Payroll Card" is an acceptable form of payment for North Carolina employers as long as both conditions are met

  • The employee can withdraw all monies due on payday.
  • One-time use of the card by the employee on payday is at no cost to the employee.

More and more employers may elect this form of payment once banks solve the issue of "no-cost withdrawals" on payday.

Here are some Q&As:

  • If the card is optional (not required by the employer) and the fees are disclosed to the employee, may the Bank impose a monthly fee and a withdrawal fee for each withdrawal after the initial "no cost" withdrawal?

Yes, since the employer is not mandating the use of the debit/payroll card. In this context, the cards are used just as any other ATM/Debit Card and bank fees for transactions do not require an employer to obtain written authorizations from employees.

  • Please confirm that the following is correct: If the card is mandatory (required by the employer) an employee must receive his pay without reduction. This rule is satisfied if the bank allows five free withdrawals per month, which can be either ATM and/or teller withdrawals, at the election of the employee. If a monthly card fee is imposed by the bank, the employer must obtain the employee's consent to that fee. If a withdrawal fee is imposed for each withdrawal, the employee must consent to that fee. The amount of the fees need to be agreed to by the employee.

Partially correct. If the employee is provided five free withdrawals each month to coincide with weekly paydays, no employee authorization is required. The bank-imposed monthly fee cannot apply to the "one-time" withdrawal of all monies on payday. Subsequent withdrawals can be subject to "bank-imposed" fees and do not require any authorization from the employee by the employer since this is a contractual issue between the bank and the employee.

  • Compliance with both state and federal minimum wage law is a possible issue. If an employee is only making minimum wage, then it is understood that any bank fees could result in a minimum wage violation. However, if the card is optional, can any bank fees bring the minimum-wage employee below the minimum wage?

Yes. But if the card is not optional (it is a mandatory form of payment by the employer), then any bank fees cannot be passed on to a minimum-wage employee even if the employee pays these fees "out-of-pocket".

Direct Deposit Enforcement Position

The payment of wages by direct deposit is a recognized form of payment as stated in 13 NCAC 12.0309, Form of Payment of Wages:

G.S. 95-25.6 and G.S. 95- 25.7 do not require a specific form of payment. Therefore, the employer may select any legal form of payment, so long as payment is made in full on the designated payday, subject to authorized deductions and legal withholdings. Acceptable forms of payment include cash, money order, negotiable checks, and direct deposit into an institution whose deposits are insured by the United States government or an institution selected by the employee.

It is entirely up to the employer to pay or not to pay some or all of its employees by direct deposit. An employer can make the payment of wages by direct deposit as a condition of employment without violating the Wage and Hour Act. If direct deposit is the only option offered the employee, the employees must be able to choose their own financial institution. If direct deposit is used in conjunction with the use of a payroll card account, an employer can require the payroll card account to be with a particular financial institution as long as deposits in that institution are insured by the U.S. government, and as long as regular direct deposit is offered to any financial institution of the employee's choice.

It is also the enforcement position of the N.C. Department of Labor that if the payment of wages by direct deposit by an employer is mandatory, then its employees must not incur additional costs as a result of participation—such as bank fees—if those costs result in an employee being paid less than the N.C. minimum wage of $7.25 an hour. Conversely, we take the position that if direct deposit is completely optional and an employee elects to be paid by direct deposit, then the costs to this employee can bring the employee's pay below the minimum wage. If your business/employer comes under the federal Fair Labor Standards Act (FLSA), you will need to contact the U.S. Department of Labor Wage and Hour Division concerning the federal minimum wage and their position. Contact the federal wage and hour division in Charlotte at 704-749-3360, in Raleigh at 919-790-2741, or visit the website.

Please keep in mind that an employer cannot discriminate against its employees for reasons based on age, race, sex, religion, national origin, color, disability or pregnancy. For discrimination questions based on these protected categories, contact the Equal Employment Opportunity Commission (EEOC) at 1-800-669-4000 or visit the website. If you feel you are being treated unfairly for reasons other than the protected categories, you should consult with an attorney. You can contact the N.C. Lawyer Referral Service at 919-677-8574 or visit the website.

For more information about workplace rights, please contact our toll free number at 1-800-NC-LABOR (800-625-2267).