CFED Assets & Opportunity Scorecard
States that either expressly permit or can be interpreted as permitting employers to eliminate paper checks and offer employees a choice between direct deposit and payroll cards, 2012.
Employees who receive their pay through direct deposit are nearly twice as likely to save some portion of their income as individuals who are paid in cash. Direct deposit also helps people avoid check cashing fees and trips to a bank; it guarantees that employees receive their wages automatically each month; it is fast and safe and eliminates the risk of stolen checks; and it saves employers money by avoiding the cost of printing and mailing checks.
Despite the advantages of direct deposit for both employers and employees, employers in some states have been reluctant to move to exclusive payment of wages through electronic options (i.e., to eliminate the option for employees to be paid via paper check) either because state policy is silent on employer obligations or because state policy specifically requires employers to offer a paper check option.
In states where state policy is silent on the issue of electronic wage payment, federal law and guidance should apply. The Federal Reserve Board’s interpretation of federal Electronic Fund Transfers Act states that employers may require direct deposit of wages provided that employees may choose the institution that will receive the deposit. In these states, policymakers should issue guidance affirming that employers may offer employees the choice between receiving their wages via direct deposit or a payroll card without also having to offer a paper paycheck option. In states where electronic wage payment statute specifically requires employers to offer a paper check option, state policy should be amended to remove this requirement.
|State||Paperless pay permitted?|
|District of Columbia||No|
Data provided through email correspondence with the American Payroll Association in November 2012. CFED thanks Cathy Beyda of the American Payroll Association for her assistance in developing and reviewing the data.
1. It is unclear whether employers may eliminate paper checks for all employees. However it does appear that after July 1, 2009, employers may make paperless pay a condition of hire for new employees.
2. Employees hired on or after July 1, 2005 may be required, as a condition of employment, to participate in direct deposit. Accordingly, these employees also can be given the choice between direct deposit and payroll cards without also being offered a paper paycheck option.
3. Employees hired after January 1, 2010 may be given the choice between direct deposit and payroll cards without being offered a paper paycheck.