Virginia Works Newsletter
October 2003

NEW PAY CARDS

In Virginia, the payment of wages for private sector employees is governed by the Virginia Payment of Wage Act which is codified at §40.1-29 of the Code of Virginia. Until recently, only three methods of payment were permissible under §40.1-29: (i) lawful money of the United States, (ii) by check payable at face value upon demand in lawful money of the United States or (iii) by electronic automated funds transfer in lawful money of the United States into an account in the name of the employee at a financial institution designated by the employee. Failure of the employee to designate a financial institution requires the employer to pay wages or salaries in accordance with (i) or (ii) above. In other words, private employers can choose to pay their employees either in cash or by check or, if the employees agreed, by direct deposit.

Recently, however, the General Assembly amended the Payment of Wage Act to now permit pay cards, which are similar to debit cards, as a fourth method of payment. As with direct deposit, employees cannot be required to accept their wages by this method.

Introduced in the 1990's, payroll cards are now used by more than a million people throughout the United States. That number is expected to grow to 3.5 million people by 2006. Companies that produce pay cards cite cost savings to businesses and convenience to employees as reasons for the popularity of the pay cards. Although the new amendment only became effective on July 1, 2003, DOLI is aware that pay cards are being utilized by a number of employers in Virginia.

In order to conform to §40.1-29 pay cards must allow employees at least one free transaction in which they are able to withdraw all or substantially all of their wages. In addition, employees can not be charged fees for establishing the pay card account or monthly service fees on the account. Other fees, such as those associated with debit transactions or ATM transactions after the initial free transaction or off-network ATM transactions are permitted.


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