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Going Paperless: Can Wisconsin Employers Require Direct Deposit of Wages?
Published: April 3, 2010
Author: Carol A. Chapman
As more employees have their paychecks deposited directly into bank accounts and most companies end up providing only a paper stub, some Wisconsin employers have inquired about whether they can forgo paper altogether and mandate that em¬ployees accept their wages via electronic transfer only. The answer is yes - and no.
Electronic banking
With ATMs and Internet banking, people are getting accustomed to having access to their money 24/7. As part of this access and convenience, many employees have their paychecks directly deposited into their bank account. This ever-expanding trend, coupled with the recent recession and identity theft issues, has led many employers to require direct deposit of employee wages. Many employers see it as an opportunity to make their payroll activities completely paperless, help the environment, and cut down on printing costs. A win-win, right? Maybe not.
Life and legal obstacles
As many of you know, mandating direct deposit can be a hardship for employees who don’t have a bank account. Often, they don’t have one for personal reasons. Perhaps they have bad credit and can’t afford the bank fees, or they have creditors who would seize their money if it were in a financial institution, or maybe they just don’t trust banks to hold their hard-earned cash.
For employers, there are legal issues. Wisconsin Stat. §§ 103.45 and 109.03 spell out the frequency and form of wage payments. Specifically, § 103.45 requires you to provide wages in a form that is payable:
- In a designated place of business in the county in which the work was performed
- At the office of the person paying the wages if it is within the state
- At any state bank
Additionally, Wis. Stat. §§ 103.455 and 103.457 and Wis. Administrative Code § DWD 272.10 address how deductions from wages must be made and communicated to the affected employee. These statutes and code provisions require you to give employees access to a printout of their wages and the deductions made from their pay (e.g., payroll taxes).
So, what’s an employer to do?
The Wisconsin Department of Workforce Development’s Labor Standards Bureau has provided guidance to employers seeking to mandate direct deposit of wages. In an information series on its website, the bureau specifically states that you may require employees to receive their wages through direct deposit as long as the following conditions are met:
- Employees must be able to collect their wages at a bank or other facility located in Wisconsin
- Employees must be able to collect their wages without incurring any charges to receive them, including moneys required to establish an account solely for the purpose of receiving wages if the employee doesn’t already have a banking account. When that is the case, the employer is responsible for all bank fees related to maintaining the account
The bureau also takes the position that if the conditions are met, you may make participating in a direct deposit pay system a condition of employment, both at the time of hire and as a condition of continued employment. The bureau has applied the same conditions to the issuance of debit cards. In other words, you may deposit employee wages on debit cards as long as you cover all charges incurred, including the cost associated with obtaining a photo identification card if necessary.
So yes, you may institute an electronic payment system via direct deposit or a debit card system if you meet the conditions discussed above. Unfortunately, the answer to whether you can go completely paperless is no.
Under Wisconsin law, you must give employees notice of wages earned and deductions made from those wages. The bureau has interpreted the law as requiring employers to provide employees a paper pay stub setting out the required information. Specifically, it has stated that even when you pay an employee via an electronic funds transfer, the employee must still receive a pay stub showing the rate of pay, the hours worked, and the amount of and reason for each deduction. An exception occurs when the deduction is made at the request of the employee for personal reasons; in that case, the deduction may be listed as “miscellaneous.”
According to a bureau official, however, you can satisfy the “paper pay stub” requirement by providing employees with easy access to a printer to print out their pay stubs. There are some restrictions on this interpretation, and if your company is considering going completely paperless, you should seek advice from an attorney to ensure that you are meeting both the spirit and the letter of the law.
Bottom line
As 24/7 access to money and information becomes easier and expected, issues of convenience, efficiency, and security are running up against laws passed to protect employees’ access to their wages and their right to be informed about how those wages were calculated. This article reflects, in part, the bureau’s interpretation of current law rather than the mandates specifically set forth in the wage statutes and code provisions. The guidance is helpful because it explains the actions the bureau, as the initial reviewer of wage complaints, will consider compliant with the law. However, if your company is considering converting to electronic payment of wages for all employees, you should consult legal counsel to ensure that your payment program meets Wisconsin wage payment laws.
Carol A. Chapman is an attorney at Axley Brynelson, LLP. For more information about converting to electronic payment of wages in the workplace, please contact Ms. Chapman at 608.283.6766 or cchapman@axley.com.
This article was featured in the April 2010 issue of the Wisconsin Employment Law Letter, which is edited by Axley Brynelson Attorney Saul C. Glazer and published by M. Lee Smith Publishers LLC. Reproduced here with the permission of M. Lee Smith Publishers, LLC.
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