Feb 04, 2011

Michigan Electronic Pay Amendment

The Michigan Wages and Fringe Benefits Act (MWFBA) was amended, effective December 21, 2010, to permit Michigan employers to require their Michigan-based employees be paid via direct deposit or a payroll debit card. Previously, Michigan employers had to issue paper checks if the employee did not give his or her “full, free and written” consent to direct deposit.

To require one of the electronic forms of pay, the employer must provide the employee with all of the following:

  • A written form that allows the employee the option to receive wages either by direct deposit or through a payroll debit card.
  • A statement informing the employee that unless he or she is already being paid via direct deposit or payroll debit card, failure to return the form within 30 days with the account information necessary to implement direct deposit will result in the employee being presumed to consent to receiving wages through a payroll debit card.
  • If the employee is currently paid by direct deposit, the payment method will not be changed to payroll debit card without written consent.
  • Written disclosure of all of the following concerning the payroll debit card:
    • The terms and conditions for use, including an itemized list of any and all fees;
    • The methods for accessing wages without charge;
    • A statement that if the payroll debit card is used outside of the specific network of automated teller machines, both the payroll card issuer and the operator of the automatic teller machine may impose charges;
    • The methods to obtain free balance inquiries, and
    • The employee’s right to elect to change the method of receiving wages at any time.

For payroll debit cards, the terms of the agreement between the financial institution and the employer also should be scrutinized to ensure that the agreement complies with Michigan law. For example, financial institutions may offer payroll debit card systems to employers free of charge based on the idea that the financial institution will cover costs and realize a profit from the charges imposed on employees for such events as overdrafts or multiple withdrawals per pay period. However, these charges are limited by the MWFBA.

If you have any questions regarding this topic, contact your employment counsel at Smith, Gambrell & Russell, LLP.

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