Legality of Employer Pay Policy

[Balthisar]

@dalej42

Here is a good article on the “unbanked.”

Wow, good article. Now I wonder if banks should offer something via “marketing” that’s not a savings account, not a checking account, but is something that for all purposes is identical to a checking account but doesn’t let you write checks. The linked article, for example, says that the number one reason for not having a checking account is not writing enough checks.

Sure, it’s obvious to us that you don’t have to write checks if you have a checking account. The only checks I ever write are to the State of Michigan*, and my checks still bear the name of a bank that hasn’t existed in two generations of being purchased and sold. The bank makes a ton from me then, since they never have to process my checks. They get a commission when I use my debit card. They keep their float when I use online bill pay. They make a fortune when I use foreign ATM’s. They could market to people that don’t need checks!
(1) Every, single year I owe a dollar in income tax, five years running.
(2) The Secretary of State (our “DMV”) still requires some transactions in person, and they still don’t take credit cards at their branch office.

[MsRobyn]

@Balthisar

What about poor credit? Banks don’t look at credit history, otherwise no one would be able to have a bank account. I got my first checking account when I was in high school without any credit history whatsoever. They do look, though, to see if you have a negative history of owing banks money. That can happen if the “evil man is out to get you,” but more often than not it’s because you overdrafted and didn’t pay your fees. One time while at my bank waiting for free notarization at the customer service desk, I overheard the representative telling someone that they owed Comerica some quantity of money, and that as soon as they paid off Comerica, then BankOne’d be happy to open an account for them. Sounds pretty liberal to me; you don’t even need to have a good history, just a paid off, clean history. So these people with negative banking histories really have no one to blame but themselves. If they can’t get a bank account in order to secure a job, then possibly it’s in the employers’ best interests to hire someone else anyway.

Banks most certainly do check credit. They use a system called ChexSystems that lists account closures. Say I move and forget to close my checking account. That gets reported to ChexSystems, who, in turn, reports it to the bank in the new city. The bank may refuse to open a new checking account until my old one is squared away. Even an innocent mistake can reflect negatively. Furthermore, even if I settle up with the old bank, there’s no guarantee that a new bank will let me open an account, or if they do, it can be one with fees and restrictions attached.

Robin

[saoirse]

I used to get paid in cash when I worked at KMart many years ago. We got a stub in our packets.

Incidentally, a company cannpt pay you in Pokemon cards or copper ingots, because these are not legal tender for all debts, public and private. A check is, of course, an instruction to a bank to disburse the stated amount of US currency to the individual listed.

[Random]

@saoirse

Incidentally, a company cannpt pay you in Pokemon cards or copper ingots, because these are not legal tender for all debts, public and private.

Wrong. US currency may be legal tender for all debts. That concept doesn’t mean that currency is the only legal way of paying a debt. That’s just nonsense.

If copper ingot wages are illegal, it’s because of tax withholding, minimum wage, state wage-and-hour statutes, or similar impediments, not because a $20 bill (and a corresponding Federal statute) states that “This note is legal tender for all debts, public or private.”

[Harriet_the_Spry]

@Balthisar

Now I wonder if banks should offer something via “marketing” that’s not a savings account, not a checking account, but is something that for all purposes is identical to a checking account but doesn’t let you write checks. The linked article, for example, says that the number one reason for not having a checking account is not writing enough checks.

Something has been developed to meet this need. Some employers, primarily of low-wage workers, pay their employees directly onto what is essentially a debit card.

Here’s a link optimumpay.com - This website is for sale! - optimumpay Resources and Information.

Or google “payroll debit card” for more than you probably wanted to know.

[Balthisar]

@MsRobyn

Banks most certainly do check credit. They use a system called ChexSystems that lists account closures. Say I move and forget to close my checking account. That gets reported to ChexSystems, who, in turn, reports it to the bank in the new city. The bank may refuse to open a new checking account until my old one is squared away. Even an innocent mistake can reflect negatively. Furthermore, even if I settle up with the old bank, there’s no guarantee that a new bank will let me open an account, or if they do, it can be one with fees and restrictions attached.

Well, that’s exactly the system I described without naming ChexSystems or others. But it’s not a credit report. It only reports accounts closed for cause. It has no affect on your credit, and your credit has no affect on your ChexSystems record. So, no, banks don’t check your credit.

[Gfactor]

The states that don’t permit employers to require direct deposit do so because some employees either can’t or don’t want to open a checking account.

Some can’t open a checking account because of Chexsystems. It is easier for them to open a savings account.

Also Paychex , a major payroll adminstration company, offers accounts for those who do not have them, complete with debit card access.

This undermines the argument that requiring direct deposit is unfair to those who don’t have accounts.

That said, here is the Michigan statute:

408.476 Wages; payment methods; deposit of employee’s wages in bank, credit union, or savings and loan association; issuance of payroll debit card; consent; fees or costs.

Sec. 6.

(1) An employer or agent of an employer may pay wages to an employee by any of the following methods:

(a) Payment in United States currency.

(b) Payment by a negotiable check or draft payable on presentation at a financial institution or other established place of business without discount in United States currency.

© Direct deposit or electronic transfer to the employee’s account at a financial institution.

(d) Issuance of a payroll debit card to the employee. As used in this section, “payroll debit card” means a stored-value debit card that provides an employee access to his or her wages, for withdrawal or transfer by the employee, through a network of automatic teller machines. The term includes cards commonly known as payroll debit cards, payroll cards, and paycards.

(2) Except as provided in section 283a of the management and budget act, 1984 PA 431, MCL 18.1283a, an employer or agent of an employer shall not deposit an employee’s wages in a bank, credit union, or savings and loan association without the full, free, and written consent of the employee, obtained without intimidation, coercion, or fear of discharge or reprisal for refusal to permit the deposit.

(3) An employer or agent of an employer shall not issue a payroll debit card to an employee under subsection (1)(d) without the full, free, and written consent of the employee, obtained without intimidation, coercion, or fear of discharge or reprisal for refusal to accept the payroll debit card. However, an employer paying wages by payroll debit card to 1 or more of its employees as of January 1, 2005 may pay wages to any of its employees by payroll debit card without obtaining the consent described in this subsection.

(4) An employer shall not require an employee to pay any fees or costs incurred by the employer in connection with paying wages or establishing a process for paying wages under subsection (1)© or (d).

http://www.legislature.mi.gov/mileg.asp?page=getObject&objName=mcl-408-476

[Monty]

When the Army first went to mandatory DDP, I noticed a fair number of individuals misunderstood the term “account at a financial institution.” They thought that the Army was requiring them to have a checking account. It wasn’t. A savings account also sufficed to meet the terms of the policy.

Do banks also check credit if you’re only asking for a savings account?

[Gfactor]

@Monty

Do banks also check credit if you’re only asking for a savings account?

As I understand it, no.