Can I Make Direct Deposit Mandatory?

A question we frequently encounter from New York employers is straightforward: "As an employer, can I make it mandatory that my employees use direct deposit?"

It is no surprise that nearly 95% of all workers in the US are paid through direct deposit. It is often the most convenient and affordable solution for paying employees. However, as an employer in New York state, you are required to provide a variety of payment options to ensure that you are accommodating your workers' needs. 

The Short Answer is: No, You Cannot Mandate Direct Deposit in New York

In New York, you cannot legally require your employees to accept their wages solely through direct deposit. State law protects your employees' choice in how they receive their pay. This means you must offer alternative payment methods.

Payment Options in New York

To comply with New York State law, you should offer your employees a range of payment methods, including:

• Checks: The traditional paper check remains a compliant and necessary option for employees who prefer it.
• Direct Deposit: You can certainly offer direct deposit as a convenient option. However, it must be voluntary for the majority of your employees. You'll need to obtain their advance written consent, which should specify the financial institution and account details. Employees also have the right to revoke this consent at any time. There is an exception for employees in bona fide executive, administrative, or professional roles who earn more than $1,300 per week.
• Payroll Debit Cards: These can be offered, but with significant regulations in place to protect employees. You must obtain advance written consent at least seven business days before issuing payment via a payroll debit card. Employees must have readily available access to fee-free ATMs, and you must ensure there is at least one method for them to withdraw their full wages each pay period without any charges. New York law strictly prohibits a wide array of fees associated with payroll debit cards.

Key Employer Responsibilities Regarding Wage Payment:

To ensure you're meeting your obligations under New York law, here are some key points to remember these key points:

• Employee Choice is Paramount: You cannot mandate a single form of payment for most employees.
• Written Notice is Required: If offering options beyond cash or check, provide a clear written notice of all choices and the prohibition of mandatory direct deposit or payroll debit cards.
• Voluntary Consent for Direct Deposit: Obtain advance written consent for direct deposit, ensuring it is freely given and can be revoked.
• Fee-Free Access to Wages: Regardless of the payment method, employees must be able to access their full wages without incurring fees.
• Specific Rules for Payroll Debit Cards: If offering these, adhere to strict regulations regarding consent, fee limitations, and ATM access.

📚 Helpful Resources for Further Guidance

• Complete Payroll's 'Mandatory Direct Deposit by State': Our own, up-to-date guide to states' laws about direct deposit. 
• New York State Department of Labor FAQ:  From the Dept. of Labor's official website, frequently asked questions around direct deposit.