Arizona Joins Growing Number of States that Approve Pay Cards

Arizona Gov. Jan Brewer signed HB 2151 into law on April 19, 2011, bringing Arizona into the growing number of states that expressly authorize employers to pay their employees using a payroll card account, in addition to direct deposit and other traditional forms of payment. The list now includes Arizona, Colorado, Connecticut, Delaware, Florida, Kansas, Maine, Maryland, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, North Dakota, Oklahoma, Virginia, and West Virginia.

The Arizona law defines a “payroll card account” as an account that is directly or indirectly established through an employer and to which electronic fund transfers of an employee’s wages are made on a recurring basis. Among the advantages to using a payroll card account system cited in the House Bill Summary is the fact that “the employee does not need to have a traditional bank account – the balance is stored on the card itself. The card can withdraw cash from an ATM, and in some cases can be used to make purchases.”
An Arizona employer may now choose any of the following methods to pay wages to employees: (1) cash; (2) negotiable bank checks; (3) in the case of the State or any of its political subdivisions, warrants payable on demand and bearing even date with the payday; (4) direct deposit to a financial institution of the employee’s choosing (only with employee consent); or (5) deposit on payday into a payroll card account (only if the employee does not consent to direct deposit or fails to specify a preferred financial institution).


Importantly, using a cash pay card is only permitted if the employer has offered the employee the option of receiving a direct deposit to the financial institution of the employee’s choosing, and the employee has either failed to provide consent for direct deposit or has not designated a preferred financial institution. Arizona’s law contrasts with the payroll card account laws in some other states because it does not include a requirement that the employee can always opt out of the system – if the employer decides to go “100 percent electronic,” the employee can be required to either consent to direct deposit or participate in the payroll card system. The law also requires employers to provide a written or electronic pay stub to employees who receive pay through a payroll card account and a list of all fees associated with the use of the payroll card. In addition, the accounts must be structured so that an employee is entitled to “one free withdrawal for each deposit of wages per pay period but not more frequently than once per week.”
Employers interested in implementing a payroll card system should be sure to examine the details, including the fee schedules associated with any vendor they may consider using, which are often subject to negotiation. Because many ATM machines have limits on the amount of a single withdrawal and other limits, a good system will specify that there is no fee for the employee to transfer funds from the card to their own bank account, and may also include other alternatives such as “branded” cards that permit withdrawal of the full amount from any bank that displays the branded card logo.