Paperless Payday

Definition

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.

Description

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.

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Paperless Payday

State	Paperless pay permitted?
Alabama	Yes
Alaska	No
Arizona	Yes
Arkansas	No
California	No
Colorado	Yes
Connecticut	No
Delaware	Yes
District of Columbia	No
Florida	Partially 1
Georgia	No
Hawaii	No
Idaho	No
Illinois	No
Indiana	Yes
Iowa	Partially 2
Kansas	Yes
Kentucky	Yes
Louisiana	Yes
Maine	Yes
Maryland	No
Massachusetts	Yes
Michigan	Yes
Minnesota	No
Mississippi	Yes
Missouri	Yes
Montana	No
Nebraska	Yes
Nevada	No
New Hampshire	No
New Jersey	No
New Mexico	No
New York	No
North Carolina	Yes
North Dakota	Yes
Ohio	Yes
Oklahoma	Yes
Oregon	No
Pennsylvania	No
Rhode Island	No
South Carolina	Yes
South Dakota	Yes
Tennessee	Yes
Texas	Yes
Utah	Yes
Vermont	No
Virginia	Partially 3
Washington	Yes
West Virginia	No
Wisconsin	Yes
Wyoming	No

Source

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.