Illinois approves the use of pay cards for employee compensation

A recent and controversial trend in employment law is an employer’s use of payroll debit cards to pay their employees’ wages. Previously, the Illinois Wage Payment and Collection Act (“IWPCA”) prohibited such practices, requiring that employers pay their employees with cash, check or by direct deposit. The IWPCA was recently amended so that, starting January 1, 2015, employers may pay their employees’ wages with payroll debit cards, subject to strict requirements detailed in the Act. Such requirements include, but are not limited to: giving the employee the option to elect another method of payment; mandatory disclosures; provision of a method of allowing the employee to withdraw their full net wages from the payroll debit card; provision of balances and transaction history; and a prohibition on charges for point of sale transactions.

There are several other detailed substantive procedures that must be followed by employers electing to use debit cards to pay their employees. Clients are encouraged to seek counsel and advice prior to establishing a practice of paying their employees’ wages with a payroll debit card. Because of the extensive procedural and substantive requirements embodied in the IWPCA, employers are encouraged to discuss their procedures with counsel and weigh the costs of compliance with the statute against the benefits of offering payroll debit cards. 

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client alert authored by: Evan D. Blewett, Esq.