Coming To A Workplace Near You: “Legal” Bi-Weekly Pay, Direct Deposit and Pay Cards

PC_2012-13Annual_510x510-300dpi-CCard enter buttonA prominent portion of Connecticut workplaces provide payment to employees via a bi-weekly pay check, with the weekly pay check almost an anachronism. In addition, many workplaces pay their employees by “direct deposit” of wages into the employees’ bank accounts.  To be blunt, many of these arrangements have been less than legal under Connecticut’s wage-hour laws.  However, the Connecticut General Assembly took some time from its efforts to solve the state’s never ending budget crisis to pass legislation that purports to modernize the laws governing the payment of wages.  We have discussed generally the developments for employers from the recently concluded session of the General Assembly, but it is now a good time to discuss details of those bills that most directly affect our wallets, pocketbooks and/or bank accounts.

  1. Bi weekly pay. The practice of paying employees bi-weekly may be nearly universal, but with certain exceptions (for example, an employer receiving a waiver from the Connecticut Department of Labor, a public school employer varying the wage payment schedule via collective bargaining agreements), such a practice was technically illegal The wage payment statutes had otherwise required that wages be paid weekly. However, the General Assembly, by way of an omnibus bill which purports to make “minor and technical” revisions to laws relating to our Department of Labor, has now amended the wage payment statute to expressly provide that wages may be paid either weekly “or once every two weeks.” See Public Act 16-169, Sections 33 and 34. This new law took effect upon its passage (June 6, 2016).
    If an employer wishes to switch to a biweekly pay period, it must comply with Connecticut General Statutes §31-71f and provide notice (in writing or via posting) to its employees of the change in the payment schedule. In addition, a unionized employer with a collective bargaining agreement (or “past practice”) that expressly provides for weekly paychecks may have to bargain with the applicable union. Please note: the exceptions to the wage payment schedule requirement (as amended) are still in place. As such, an employer may apply for a waiver from the Department of Labor from the (now) bi-weekly payment requirements, provided that its employees are paid in full at least once in each calendar month on a regular schedule. Connecticut General Statutes §31–71i.
  2. Direct deposit. It was not clear as to whether direct deposit of wages was previously permitted for most employers. However, Public Act 16-125, “An Act Allowing Employers To Pay Wages Using Payroll Cards”, which takes effect on October 1, 2016, provides that wages may be paid by direct deposit, but only “upon an employee’s written or electronic request.” While the new law expressly recognizes direct deposit as option for employers to use, it also limits the circumstances that it may be offered to when the employee requests it. A strict reading of the new law would envision that an employer could send a memo to all of its employees notifying them of the option of direct deposit of wages, and indicating that an employee so desiring direct deposit must then make a written request to the employer. Perhaps the employer could include a form for such a request to be returned by the employee. The practice of requiring direct deposit (regardless of employee objection) would still be illegal, and even providing for direct deposit unless an employee opts out is not consistent with the law. Please note: in the unionized workplace, parties will often negotiate an automatic direct deposit provision in the collective bargaining agreement. The parties’ agreement arguably should be sufficient.
  3. Pay cards. This same new law also allows employers to pay wages to employees via “payroll cards”, provided that the employee has also been given the option of payment by check and direct deposit and the employee voluntarily then consents to the payroll card option. A “payroll card” is a stored value card used by an employee to access wages from a payroll card account established at a financial institution by an employer and that is redeemable (at the employee’s election) at merchants or service providers, bank branches or automated teller machines. Fees for such a card may not be charged to the employee.
  4. Pay stubs? Finally, this same new law further permits employers, regardless of how paying their employees, to provide them with an electronic record of the employee’s hours worked, gross earnings, deductions, and net earnings in lieu of the traditional paper pay stub, provided (again) that the employee consents.

Any further lessons?  As an employment lawyer, I am constantly amazed as to how sometimes the law and accepted practices collide, even on the most rudimentary matters.  While it would be a better world if the laws were consistent with existing practices, it is the employers that have the obligation to ensure that existing practices are consistent with the laws.  In light of the sometimes hyper-vigilance of the Connecticut Department of Labor (especially in the wage and hour sector), there are consequences for employers in not complying with the letter of the law.  Finally, in the unionized workplace, it is important to ensure that the implementation of employment practices (even if permitted by law) do not run counter to a need to bargain with the union.