On August 6, 2014, Governor Pat Quinn of Illinois signed a law to amend the Illinois Wage Payment and Collection Act and allow Illinois employers to pay their employees with electronic payroll credit or debit cards (also known as “pay cards”). The Illinois Wage Payment and Collection Act previously allowed employers to compensate their employees by check or direct deposit only.  The use of pay cards has become an increasingly popular option for employers who want to reduce paper transactions and the costs of administering payroll.

Pursuant to the new law, Illinois employers may use electronic pay cards to compensate their employees so long as they meet the following requirements governing the use of such cards:

Employers may not require employees to use payroll cards as a condition of employment, and employees retain the right to demand payment of their wages by check or direct deposit.

Employees must give written consent to be enrolled in the employer’s pay card program and can revoke their consent at any time.

Employers who utilize a pay card program must disclose any fees or costs associated with the pay cards to employees in writing, as well as continue to provide an itemized statement to employees of all hours worked, pay rate, and paycheck deductions for each pay period.

The Illinois law limits the fees that may be imposed upon employees who use pay cards by allowing a certain number of declined transactions or cash withdrawals per month before employees may be charged a fee. However, the law does allow pay card programs to charge fees for inactivity once an employee’s pay card has been inactive for a year.

The new amendments to the Illinois Wage Payment and Collection Act will be effective as of January 1, 2015, and the text of the new law may be found here. If you have any questions about these issues, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.