Are Pay Cards Lawful Wage Payments In Virginia?

By: Annemarie Cleary. This was posted Thursday, July 25th, 2013

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It was recently reported that a worker at a Pennsylvania McDonald’s sued her employer, a McDonalds’s franchisee, because she was required to receive her pay in the form of a debit card that carried hefty charges for virtually every transaction, rather than a paper check or electronic deposit.  The debit card at issue was reported to charge $1.50 for use at the issuing bank’s ATM and more for use at another bank’s ATM, $5 for over-the-counter cash, 75 cents per online bill payment, $1 to check the balance and a $10 per month inactivity fee if the card is not used for more than three months.  The employee is seeking class action status for her claim seeking compensatory damages, punitive damages and attorneys’ fees.

Could a Virginia employer use such a fee laden card to pay employees?  No, but the McDonald’s case presents a good opportunity to review Virginia law on the use of debit cards to pay employees.

In Virginia, an employer must pay wages in lawful U.S. currency or a check payable on demand, or with the consent of the employee, payment through direct deposit. A debit, cash, or credit card may be used in lieu of the above forms of payment for employees hired after January 1, 2010, if the employee declines to participate in direct deposit.  However, the law attaches specific conditions for the use of pay cards.  The employee must have the ability to make at least one free withdrawal or transfer per pay period, which withdrawal may be for any sum in such card or card account as the employee may elect, using such card or card account at financial institutions participating in such network system. Virginia Code section 40.1-29.29 (C). The employer may not require employees hired prior to January 1, 2010, to use the pre-paid card, but must have their consent.

If you use prepaid debit cards to pay your employees, it is important to ensure that you are in compliance with the statute because violations carry criminal penalties.  An employer who “willfully and with intent to defraud” fails to pay wages as required is guilty of a Class 1 misdemeanor if the value of the unpaid wages is less than $10,000.  If the value of the unpaid wages is $10,000 or more, the employer is guilty of a Class 6 felony.

If you need additional information concerning this statute or other employment compliance issues, the employment lawyers at Sands Anderson PC are available to assist you. Phyllis Katz is a co-author of this article.

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