States mandating direct deposit
These states allow employers to require all employees to accept direct deposit of wages.But even these states make exceptions for employees who do not have bank accounts, who may receive wages in cash, check or payroll card form. Direct deposit is an increasingly common method of paying employees, with numerous advantages for employees (fewer trips to the bank, no worry about losing a check) and employers (reduced cost and administrative hassle). Department of Labor states that the FLSA requires payment “in cash or negotiable instrument payable at par,” except under limited circumstances in which employers are permitted to record a credit for board, lodging, and other facilities. That of course begs the question of whether direct deposit into a bank account qualifies as a “cash equivalent.” The regulations do not address that question, but in Section 30c00(b) of its Field Operations Handbook, the DOL says the following: The payment of wages through direct deposit into an employee’s bank account is an acceptable method of payment, provided employees have the option of receiving payment by cash or check directly from the employer. Department of Labor, employers can pay employees via direct deposit, but have to allow employees the option of receiving payment by cash or check.While a handful of states permit employers to mandate direct deposit (usually with some restrictions), most, like Illinois, allow direct deposit only with the agreement of the employee.The Society of Human Resources Management has a useful compilation of state laws on wage payments and direct deposit available here.
Requiring employees to use a particular bank for direct deposit would violate certain laws.These states require employees to consent to receiving wages in direct deposit form.Some of these states require specific written permission, which must be retained by the employer.Utah allows employers to require direct deposit only if they are required to pay a minimum of 0,000 in state payroll tax or if two-thirds of the workforce of a firm agree to direct deposit.
Now that we’ve discussed the all the legal aspects of direct deposits, there is one more issue to consider: the potential for disparate impact or unintentional discrimination.
Well, there are not only federal laws businesses need to follow; there are also state laws and the potential for unintentional discrimination (more on that later). Some states allow employers to require employees to accept direct deposit of wages and bonuses.