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Mandatory payroll debit card violates Pennsylvania wage payment law

By Joy P. Waltemath, J.D.

Requiring a mandatory payroll debit card for the payment of wages to hourly employees at 16 McDonalds’ restaurants violated the Pennsylvania Wage Payment and Collection Law’s requirement that “wages shall be paid in lawful money of the United States or check,” a Pennsylvania appeals court ruled. The statutory directive was clear and unambiguous, and language in the banking code approving direct deposit-type arrangements required such arrangements to be voluntary. This was not (Siciliano v. Albert/Carol Mueller t/a McDonalds, October 21, 2016, Lazarus, A.).

Mandatory payroll card. Through their limited partnership, the owners operated 16 McDonalds’ franchises in Pennsylvania. A class consisting of current and former McDonalds’ hourly employees sued the owners alleging violations of the Pennsylvania Wage Payment and Collection Law (WPCL) in paying their wages from November 2010 to July 2013 through a mandatory payroll card rather than by cash or check. (Managerial employees allegedly were paid by direct deposit.) The employees sought compensatory and punitive damages as well as attorneys’ fees and litigation costs.

Question of first impression. After the trial court denied the owners’ motion for summary judgment and noted that the matter involved a controlling question of law that involved a substantial ground for difference of opinion, “the immediate appeal of which might materially advance the ultimate termination of the matter,” the owners appealed. The sole issue on appeal, a question of first impression in Pennsylvania, is whether mandatory payment of wages by payroll debit card meets the requirement of WPCL Section 260.3 that “wages shall be paid in lawful money of the United States or check.” Concluding that it did not, the appeals court affirmed the summary judgment denial.

Interpreting the WPCL. In interpreting the statutory directive that “wages shall be paid in lawful money of the United States or check,” the court began with the state’s Statutory Construction Act, which says when words of a statute are clear and unambiguous, there is no need to look beyond the plain meaning of statute. “The language is clear,” said the court, finding that a debit card is not “lawful money” and not a “check” as contemplated by the drafters of the WPCL back in 1961, when the language was adopted.

Definitions, definitions. The court considered the definition of “check” in the statute, as well as the definition of “draft” (of which a check is the most common example) in Black’s Law Dictionary. Lawful money, also not defined by the WPCL, is defined in Black’s as money that is legal tender, itself defined by Black’s as money (bills and coins) approved in a country for the payment of debts, the purchase of goods, and other exchanges for value.” The court also turned to the dictionary definition of money, which includes “officially coined or stamped metal currency” but does not include a debit card or a payroll debit card.

Functional equivalent? The owners’ argument that a debit card is the “functional equivalent” of a check or lawful money was unavailing, reasoned the court, particularly because the mandatory payroll cards forced users to incur fees, including over-the-counter cash withdrawal fees and inactivity fees, unless the employees complied with the requirements of the bank/company issuing and managing the debit cards. For example, pursuant to the fee schedule in the record, the cardholder was limited to one free withdrawal per deposit; after that, each withdrawal carried a $5.00 fee.

On written request of recipient. Although the American Payroll Association, as amicus, tried to argue that Pennsylvania’s Banking Code Section 6121, which provides that payment made in lawful money or by check “may be made by credit to an account in a bank, credit union or other financial institution authorized to accept deposits or payments designated by the recipient of such payment if the recipient has requested such method of payment in writing, authorized payroll cards. The APA’s argument was that “payroll cards involve the deposit of wages into an employee’s account at a financial institution.” However, what the amicus and owners failed to address was the fact that the statute clearly requires the written request of the recipient, which was not what happened here.

Using a voluntary payroll debit card may be an appropriate method of wage payment, the court stressed, but until state law provides otherwise, the plain language of the WPCL made it clear that the mandatory use of payroll debit cards, which may subject the user to fees, is not.