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Paying Employees with Pre-Paid Debit Cards: Is This Legal? The New York Attorney General Launches an Investigation

In late June, a Pennsylvania McDonald’s franchise came under legal fire for paying employee’s wages through pre-paid debit cards, or payroll cards. Natalie Gunshannon, who brought suit against the franchise owners for violating PA state labor law, alleged that she was unable to check her balance, withdraw money, pay bills online or replace her pre-paid debit card without paying high fees for each transaction. Because Gunshannon was a part time employee earning hourly wages, these card fees also resulted in her earning below the minimum wage required by federal and state labor laws.

Usually payroll cards are offered as an alternative option of wage payment to paper checks, cash or direct deposit. In all cases, employees must be given a choice of payment method. The PA McDonald’s franchise owners, however, issued these pre-paid debit cards as the only option for wage payment. When Gunshannon asked for a check instead of the pre-paid debit card, she claims that her manager denied her request saying they could not pay her if she did not authorize the pre-paid card.

As this lawsuit continues to prompt national attention, the New York Attorney General’s office has decided to investigate twenty plus large corporations that use payroll card systems to ensure that each company is complying with New York State and Federal Labor Laws. Currently, the office is requesting that these companies submit all relevant payroll card system information and documentation by late July.  The Department of Labor is also investigating legal issues relating to payroll cards.

As an employee in New York State, understand that you are required to give prior consent to your employer before you can be paid wages through a payroll card. You are also entitled to receive wages without incurring additional fees.

If you are an employee in New York City or Brooklyn who has been forced to accept wage payment through a payroll card or your payroll card fees subtract from your hourly wages, you should consult an attorney with expertise in wage and hour law. Most plaintiff side attorneys are willing to offer a free initial consultation if you are willing to come forward with the details. 

Christopher Davis is an experienced employment litigator specializing in class actions, overtime wage recovery, discrimination, whistleblower retaliation, and Wall Street bonus disputes. Before entering private practice, Mr. Davis served as an Assistant District Attorney in the Manhattan District Attorney's Office where he prosecuted violent crimes as a member of the Sex Crimes Unit.

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