Recently, New York’s Industrial Board of Appeals (IBA) revoked regulations issued by the State’s Department of Labor (NYSDOL) governing employee wage payments via direct deposit and payroll debit cards, which were scheduled to go into effect March 7, 2017. The IBA, an independent agency with certain oversight authority over the NYSDOL, held that the proposed regulations exceeded the NYSDOL’s regulatory powers.

New York employers were already prohibited from paying their employees through direct deposit without first obtaining the employees’ advance written consent. The invalidated regulations, published by the NYSDOL September 7, 2016, attempted to impose additional requirements on employers before they could pay employees via direct deposit or payroll debit cards.  A full discussion of those now defunct obligations is available here.

In its decision, the IBA highlighted the prohibitions on payroll debit card insurers from charging an employee fees related to the use of a payroll card. In New York, the Department of Financial Services regulates banks and financial institutions and the fees they may charge for use of banking services.  The IBA determined that the fees associated with the use of payroll debit cards are akin to the fees associated with “checking accounts and licensed check cashers” and, therefore, the NYSDOL overstepped its regulatory authority by prohibiting “otherwise lawful conduct by financial institutions for providing banking services.”

Even though the IBA focused on the portion of the regulation prohibiting fees in relation to payroll debit cards, the decision seemingly invalidates the regulations in their entirety (including the direct-deposit portions). While an appeal of the decision is possible, the more likely course of action for the NYSDOL is to simply re-issue the regulations without the offending fees prohibition.  Accordingly, employers should expect the notice and acknowledgement portions of the NYSDOL’s regulations to reappear, and should consult with counsel about compliance.